BL lives in the US and has $800,000 surplus funds that he wants to invest for one year in any currency. He receives the following quotes from a commercial bank:
Spot rate= 1 British Pound: $50-55
One-year forward rate= 1 British Pound: $58-64
One-year US interest rate= 6%
One year UK interest rate= 1%
(i) With supporting calculations, advise BL whether covered interest arbitrage is worthwhile.
(ii) Would your advice differ, if transaction costs in respect of the covered interest arbitrage amount to $5,000?
(iii) Using the interest rate parity model, calculate the interest differential between the two countries.
In: Finance
BL lives in the US and has $800,000 surplus funds that he wants to invest for one year in any currency. He receives the following quotes from a commercial bank:
Spot rate= 1 British Pound: $50-55
One-year forward rate= 1 British Pound: $58-64
One-year US interest rate= 6%
One year UK interest rate= 1%
(i) With supporting calculations, advise BL whether covered interest arbitrage is worthwhile.
(ii) Would your advice differ, if transaction costs in respect of the covered interest arbitrage amount to $5,000?
(iii) Using the interest rate parity model, calculate the interest differential between the two countries.
In: Finance
Boeing imported a Rolls-Royce jet engine for £5 mil payable in
one year
• The US interest rate 6.00% per annum
• The UK interest rate 6.50% per annum
• The Spot exchange rate $ 1.80/£ today
A. The company decides to use options to hedge the risk of pound
exchange one year later. What kind of options should the company
buy? Put or Call?
B. Assume the strike price of the option is $1.82/£ with a
premium of $.02/£ paid today. What is the dollar cost one year
later if the spot rate then is 1.60, 1.80 and 2.00
respectively?
C. How could Boeing use money market to hedge the risk? Please
provide all details (7 points)
In: Accounting
Boeing imported a Rolls-Royce jet engine for £5 mil payable in
one year
• The US interest rate 6.00% per annum
• The UK interest rate 6.50% per annum
• The Spot exchange rate $ 1.80/£ today
A. The company decides to use options to hedge the risk of pound
exchange one year later. What kind of options should the company
buy? Put or Call?
B. Assume the strike price of the option is $1.82/£ with a
premium of $.02/£ paid today. What is the dollar cost one year
later if the spot rate then is 1.60, 1.80 and 2.00
respectively?
C. How could Boeing use money market to hedge the risk? Please
provide all details (7 points)
In: Accounting
List some of the changes that can occur late in life, which affect living arrangements. How many are positive changes? How many are negative changes? In what way?
In: Nursing
If we want to assess changes in the real economic activity in an economy, why do we use changes in real GDP for finding an answer, instead of changes in nominal GDP?
In: Economics
The following selected transactions were completed by Capers Company during October of the current year:
| Oct. | 1 | Purchased merchandise from UK Imports Co., $13,322, terms FOB destination, n/30. |
| 3 | Purchased merchandise from Hoagie Co., $10,650, terms FOB shipping point, 2/10, n/eom. Prepaid freight of $240 was added to the invoice. | |
| 4 | Purchased merchandise from Taco Co., $13,700, terms FOB destination, 2/10, n/30. | |
| 6 | Issued debit memo to Taco Co. for $4,850 of merchandise returned from purchase on October 4. | |
| 13 | Paid Hoagie Co. for invoice of October 3. | |
| 14 | Paid Taco Co. for invoice of October 4 less debit memo of October 6. | |
| 19 | Purchased merchandise from Veggie Co., $29,840, terms FOB shipping point, n/eom. | |
| 19 | Paid freight of $410 on October 19 purchase from Veggie Co. | |
| 20 | Purchased merchandise from Caesar Salad Co., $22,200, terms FOB destination, 1/10, n/30. | |
| 30 | Paid Caesar Salad Co. for invoice of October 20. | |
| 31 | Paid UK Imports Co. for invoice of October 1. | |
| 31 | Paid Veggie Co. for invoice of October 19. |
Journalize the entries to record the transactions of Capers Company for October. Refer to the Chart of Accounts for exact wording of account titles.
JOURNAL
ACCOUNTING EQUATION
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In: Accounting
Miltons Ltd is a company based in Germany and is specialised in the production of a wide range of mobility scooters. Miltons Ltd exports its production to a retailer in the UK. The Management Board of Miltons Ltd is considering the budget for the coming year. The table below provides the original budget:
|
Original Budget |
|
|
Expected volume of sales |
10,000 units |
|
Selling price |
€200 per scooter |
|
Costs |
|
|
Total Variable Cost |
€600,000 |
|
Fixed Cost |
€400,000 |
However, Benjamin Hans the Director of Sales suggests that if the price of the scooters were reduced by 20%, then he estimates that sales volume would go up by 25%.
Rebecca Eldridge, the Director of Marketing who is based in the UK, has a different opinion. She believes that the best way to increase sales is to find new distributors. She believes that to increase sales by 25% the company needs an additional marketing push costing €200,000.
The board has asked for some figures and advice to help it in deciding which of the three strategies to adopt:
(Each alternative should be considered independently.
Question 1 continues on next page
(i)The profit
(ii)The contribution margin ratio (c/s ratio)
(iii) The breakeven point in €’s
(iv) The margin of safety (as a percentage of sales revenue)
(v) The sales level in number of units that would be required if the company wished to make a profit of €1,200,000
In: Accounting
Purchase-Related Transactions Using Perpetual Inventory System
The following selected transactions were completed by Capers Company during October of the current year:
| Oct. 1. | Purchased merchandise from UK Imports Co., $13,891, terms FOB destination, n/30. |
| 3. | Purchased merchandise from Hoagie Co., $9,600, terms FOB shipping point, 2/10, n/eom. Prepaid freight of $200 was added to the invoice. |
| 4. | Purchased merchandise from Taco Co., $12,350, terms FOB destination, 2/10, n/30. |
| 6. | Issued debit memo to Taco Co. for $4,950 of merchandise returned from purchase on October 4. |
| 13. | Paid Hoagie Co. for invoice of October 3. |
| 14. | Paid Taco Co. for invoice of October 4, less debit memo of October 6 and discount. |
| 19. | Purchased merchandise from Veggie Co., $29,480, terms FOB shipping point, n/eom. |
| 19. | Paid freight of $425 on October 19 purchase from Veggie Co. |
| 20. | Purchased merchandise from Caesar Salad Co., $21,200, terms FOB destination, 1/10, n/30. |
| 30. | Paid Caesar Salad Co. for invoice of October 20. |
| 31. | Paid UK Imports Co. for invoice of October 1. |
| 31. | Paid Veggie Co. for invoice of October 19. |
Required:
Journalize the entries to record the transactions of Capers Company for October.
For a compound transaction, if an amount box does not require an entry, leave it blank.
| Oct. 1 | |||
| Oct. 3 | |||
| Oct. 4 | |||
| Oct. 6 | |||
| Oct. 13 | |||
| Oct. 14 | |||
| Oct. 19 | |||
| Oct. 19 | |||
| Oct. 20 | |||
| Oct. 30 | |||
| Oct. 31 | |||
| Oct. 31 | |||
In: Accounting
Purchase-Related Transactions Using Perpetual Inventory System
The following selected transactions were completed by Capers Company during October of the current year:
| Oct. 1. | Purchased merchandise from UK Imports Co., $13,891, terms FOB destination, n/30. |
| 3. | Purchased merchandise from Hoagie Co., $9,600, terms FOB shipping point, 2/10, n/eom. Prepaid freight of $200 was added to the invoice. |
| 4. | Purchased merchandise from Taco Co., $12,350, terms FOB destination, 2/10, n/30. |
| 6. | Issued debit memo to Taco Co. for $4,950 of merchandise returned from purchase on October 4. |
| 13. | Paid Hoagie Co. for invoice of October 3. |
| 14. | Paid Taco Co. for invoice of October 4, less debit memo of October 6 and discount. |
| 19. | Purchased merchandise from Veggie Co., $29,480, terms FOB shipping point, n/eom. |
| 19. | Paid freight of $425 on October 19 purchase from Veggie Co. |
| 20. | Purchased merchandise from Caesar Salad Co., $21,200, terms FOB destination, 1/10, n/30. |
| 30. | Paid Caesar Salad Co. for invoice of October 20. |
| 31. | Paid UK Imports Co. for invoice of October 1. |
| 31. | Paid Veggie Co. for invoice of October 19. |
Required:
Journalize the entries to record the transactions of Capers Company for October.
For a compound transaction, if an amount box does not require an entry, leave it blank.
| Oct. 1 | |||
| Oct. 3 | |||
| Oct. 4 | |||
| Oct. 6 | |||
| Oct. 13 | |||
| Oct. 14 | |||
| Oct. 19 | |||
| Oct. 19 | |||
| Oct. 20 | |||
| Oct. 30 | |||
| Oct. 31 | |||
| Oct. 31 | |||
In: Accounting