Suppose that the six-month interest rate in the United Kingdom is 0.5% per annum the sixmonth interest rate in Germany is 1.2% per annum. If the spot exchange rate is GBP/EUR 1.1286 and the six-month forward exchange rate is GBP/EUR 1.1312. Assume that the arbitrager can borrow up to EUR 1,000,000 or the equivalent GBP amount, at the spot rate.

a. Can the arbitrager make a covered interest arbitrage (CIA) profit, justify your answer?

b. If yes, determine how much profit can be realised. Show all your calculations.

Suppose that the six-month interest rate in the United Kingdom is 0.5% per annum the sixmonth interest rate in Germany is 1.2% per annum. If the spot exchange rate is GBP/EUR 1.1286 and the six-month forward exchange rate is GBP/EUR 1.1312. Assume that the arbitrager can borrow up to EUR 1,000,000 or the equivalent GBP amount, at the spot rate.

a. Can the arbitrager make a covered interest arbitrage (CIA) profit, justify your answer?

b. If yes, determine how much profit can be realised. Show all your calculations.

Suppose that the six-month interest rate in the United Kingdom is 0.5% per annum the sixmonth interest rate in Germany is 1.2% per annum. If the spot exchange rate is GBP/EUR 1.1286 and the six-month forward exchange rate is GBP/EUR 1.1312.

Assume that the arbitrager can borrow up to EUR 1,000,000 or the equivalent GBP amount, at the spot rate.

a. Can the arbitrager make a covered interest arbitrage (CIA) profit, justify your answer?

b. If yes, determine how much profit can be realised. Show all your calculations.

Brexit has led to the relocation of many multinational companies from the United Kingdom to continental Europe. This has in turn reduced the demand for real estate and many other local goods and services in the country on a long-term basis.

In addition to its impact on demand, Brexit is likely to lower the productivity of tradables in the UK. The reason is that after Brexit, British producers are likely to face hurdles in their access to the EU as their biggest trading partner, and this limits their ability to exploit the division of labor and economies of scale. What is the likely long-run impact of this change on the real exchange of the British pound? Please make sure to explain the mechanism that supports the answer you provided.

In order to meet the rising demand from an increasing global population, the United Nations Food and Agriculture Organization had estimated that food production would have to increase by 70 percent to cope with demand. Given the finite supply of arable land and water, producing higher yields through increased farm productivity was seen by many as the only viable option. Biotechnology (Biotech) crops offered one means to increase productivity by offering greater yields while potentially using fewer natural resources such as land, fertilizers, herbicides, pesticides and water. Driven by these opportunities, in 1996, two different biotech seeds- soybean and cotton- were farmed commercially for the first time. Both were developed by Monsanto, a leading global producer of biotech seeds.
Consider the market for cotton seeds in India. Cotton is a neccessary item having few substitutes especially in the Indian weather. With the increasing denmand for cotton, the cotton farmers were keen to buy the biotech seeds. Monsanto , the biotech seed producing company was a pioneer in cotton seed production. It has been doing business in India since 1949. In 2002, Monsanto, through a joint venture, introduced the first in-the-seed cotton trait biotechnology. This trait served to protect cotton crops against potentially devastating pests, thereby reducing the need for pesticides and improving yields. By 2010, over 40 Indian seed companies had begun to offer similar biotechnology cotton seeds, thereby improving the yield of cotton and making the market competitive. Biotech seeds became very popular and became necessary for cotton production. Suppliers of biotech seeds also became sensitive to changes in price of biotech seeds. By April 2010, the governments of three Indian provinces, collectively accounting for 70 percent of cotton production in the country had established a ceiling price that seed companies could charge farmers for biotech cotton seeds. This was a dramatic departure from the free market mechanisms put in place by the central government since the economic reforms launched in 1991. Companies producing biotech seeds were upset with this decision of the government. They did not understand why the government has to step in and bring down prices in such a competitive market.

1. Consider the market for cotton in India. Draw the demand and supply of cotton production in India and comment on the elasticity.

2. What would be the impact on equilibrium price and quantity of cotton due to the introduction of biotech cotton seeds?

3. Why do you think the biotech cotton seeds producing companies are unhappy with the government's decision of price ceiling on biotech cotton seeds? Explain (with the help of a well-labelled diagram, drawn by hand) how a price ceiling impacts production of a commodity.

4. Suppose, instead of price ceiling, the government announced a subsidy on biotech cotton seeds, to help the farmers producing cotton. Explain (with the help of a well-labelled diagram, drawn by hand) how this would impact the market equilibrium price and quantity?

ANSWER ASAP

In order to meet the rising demand from an increasing global population, the United Nations Food and Agriculture Organization had estimated that food production would have to increase by 70 percent to cope with demand. Given the finite supply of arable land and water, producing higher yields through increased farm productivity was seen by many as the only viable option. Biotechnology (Biotech) crops offered one means to increase productivity by offering greater yields while potentially using fewer natural resources such as land, fertilizers, herbicides, pesticides and water. Driven by these opportunities, in 1996, two different biotech seeds- soybean and cotton- were farmed commercially for the first time. Both were developed by Monsanto, a leading global producer of biotech seeds.

Consider the market for cotton seeds in India. Cotton is a necessary item having few substitutes especially in the Indian weather. With the increasing demand for cotton, the cotton farmers were keen to buy the biotech seeds. Monsanto , the biotech seed producing company was a pioneer in cotton seed production. It has been doing business in India since 1949. In 2002, Monsanto, through a joint venture, introduced the first in-the-seed cotton trait biotechnology. This trait served to protect cotton crops against potentially devastating pests, thereby reducing the need for pesticides and improving yields. By 2010, over 40 Indian seed companies had begun to offer similar biotechnology cotton seeds, thereby improving the yield of cotton and making the market competitive. Biotech seeds became very popular and became necessary for cotton production. Suppliers of biotech seeds also became sensitive to changes in price of biotech seeds. By April 2010, the governments of three Indian provinces, collectively accounting for 70 percent of cotton production in the country had established a ceiling price that seed companies could charge farmers for biotech cotton seeds. This was a dramatic departure from the free market mechanisms put in place by the central government since the economic reforms launched in 1991. Companies producing biotech seeds were upset with this decision of the government. They did not understand why the government has to step in and bring down prices in such a competitive market. (15marks)

1. Consider the market for cotton in India. Draw the demand and supply of cotton production in India and comment on the elasticity.

2. What would be the impact on equilibrium price and quantity of cotton due to the introduction of biotech cotton seeds?

3. Why do you think the biotech cotton seeds producing companies are unhappy with the government's decision of price ceiling on biotech cotton seeds? Explain (with the help of a well-labelled diagram, drawn by hand) how a price ceiling impacts production of a commodity.

4. Suppose, instead of price ceiling, the government announced a subsidy on biotech cotton seeds, to help the farmers producing cotton. Explain (with the help of a well-labelled diagram, drawn by hand) how this would impact the market equilibrium price and quantity?

As you are aware, there has been considerable discussion about the United Kingdom's (UK) decision to leave the European Union. Government representatives of the UK claim that workers in the UK are more highly motivated than those in the EU. To support their claim, they have taken independent samples of 13 groups in the UK and the EU and have collected data on levels of work motivation using a standard testing tool. The data of the samples in the EU and the UK are shown in the table below:

A.) Use hypothesis testing to determine if the sample data indicate that the mean for the UK is greater than that of the EU. Use an alpha of .05.

B.) Test to see if the population variances for the two groups are equal. What does this imply with respect to your hypothesis test above? Use an alpha of .05.

United Oil Company is attempting to develop a reasonably priced unleaded gasoline that will deliver higher gasoline mileages than can be achieved by its current unleaded gasolines. As part of its development process, United Oil wishes to study the effect of two independent variables—x1, amount of gasoline additive RST (0, 1, or 2 units), and x2, amount of gasoline additive XST (0, 1, 2, or 3 units), on gasoline mileage, y. Mileage tests are carried out using equipment that simulates driving under prescribed conditions. The combinations of x1 and x2 used in the experiment, along with the corresponding values of y, are given below. RST XST Gas Mileage Units Units (y, mpg) X1 X2 Y 0 0 27.43 0 0 28.07 0 0 28.46 1 0 29.38 1 0 30 2 0 28.14 2 0 29.5 0 1 32.43 0 1 33.95 1 1 33.96 1 1 34.77 0 2 32.68 0 2 33.84 1 2 34.64 1 2 35.46 1 2 35.96 2 2 33.76 2 2 34.57 2 2 34.79 1 3 33.2 2 3 32.7 2 3 33.41 Using the model, y = β0 + β1x1 + β2x12 + β3x2 + β4x22 + ε, calculate the point estimate. (Moreover, consider the mean mileage obtained by all gallons of the gasoline when it is made with one unit of RST and two units of XST (a combination that the data on the page margin indicates would maximize mean mileage). Do not round intermediate calculations. Round your answer to 4 decimal places.)

Using the information presented in the Financial Statements of United Health Care, a major HMO, compute financial ratios for 2016 and 2017 and discuss some of the primary observations that you would conclude regarding the financial performance of the firm. Provide an overall evaluation of the financial position of this company.

United Healthcare Financial Ratios

                                                                         Health Plan Median                          2017       2016       2015      

Liquidity

                Current                                                                  1.32 ? ? .93

                Days in Receivables                                            22.5                                       ?              ?              19.8       

                Days Cash on Hand                                            89.9                                       ?              ?              53.6

Capital Structure

                Equity Financing %                                            48.9                                        ?              ?              60.7%

                Long Term Debt to Equity %                            13.0                                        ?              ?              3.67%

                Cash Flow to Total Debt %                               15.0                                        ?              ?              37.7%

                Times Interest Earned                                        13.1                                       ?              ?              109.5

Activity

                Total Asset Turnover                                          1.55                                        ?              ?              1.74

                Fixed Asset Turnover                                         16.8                                        ?              ?              24.6

                Current Asset Turnover                                      2.88                                        ?              ?              5.07

Profitability

                Total Margin %                                                    3.6                                          ?              ?              6.81

                Return on Equity %                                             11.6                                        ?              ?              19.6

Income Statement (000$)

Fiscal Year Ending                                                              12/31/17                 12/31/16                 12/31/15

Net sales                                                                                5,670,878              3,768,882              3,115,202

Cost of goods                                                                       3,930,933              2,643,107              2,236,588

Gross profit                                                                           1,739,945              1,125,775              878,614

Selling, general and administration                                 1,030,906              555,649               491,635

Income before depreciation and                                       709,039               570,126               386,979

amortization

Depreciation and amortization                                         94,458                 64,079                   50,628

Nonoperating income                                                         -153,796                -35,940                     122

Interest expense                                                                          771                     2,163                    3,046

Income before taxes                                                           460,014                 467,944                 333,427

Provision for income tax                                                   170,205                 177,822                 119,379

Minority interest                                                                      3,845                    1,983                     1,970

Net income before extraordinaries                                   285,964                 288,139                 212,078

Extraordinary items and discounted

Operations                                                                            NA                          1,377,075              NA         

Net income                                                                           285,964                 1,665,214              212,078

United Healthcare Corporation Balance Sheet (Data in Thousands)

Fiscal Year Ending                                              12/31/17                12/31/16                 12/31/15

Assets

Cash                                                                       940,110                 1,519,049              228,260

Marketable securities                                          863,815                 135,287                 172,610

Receivables                                                          550,313                167,369                 169,075

Other current assets                                            512,883               86,510                  44,023

Total current assets                                             2,867,121              1,908,215              613,968

Prop. Plant, Equipment                                      417,166                 273,431                 215,628

Less Accumulated Depreciation                       149,514                 110,834                 88,886

Net Prop and Equipment                                   267,652                 162,597                 126,742

Investment in Subsidiaries                                 1,274,470              1,115,054              768,563

Intangibles                                                            1,751,743              303,613 278,081

Total assets                                                           6,160,986              3,489,479              1,787,354

Liabilities

Accounts payable                                                1,236,217              470,591                 535,863

Accrued expenses                                               566,770               122,993                52,027

Other current liabilities                                     631,009                70,718               70,844

Total current liabilities                                        2,433,996              664,302                 658,734

Noncurrent capital leases                                   38,970                 29,721               39,099

Total Liabilities                                                    2,472,966              694,023                697,833

Preferred stock                                                     500,000                 NA                             NA

Common stock net                                                  1,752                 1,728                      1,691

Capital surplus                                                     822,429                 752,472                 659,359

Retained earnings                                                               2,358,640             2,085,056              424,468

Other equities                                                            5,199               -43,800                 -108

Shareholders equity                                            3,688,020              2,795,456              1,085,410

Total liability and net worth                              6,160,986              3,489,479              1,783,243

Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions): Book-Value Balance Sheet Net working capital $ 45 Debt $ 45 Long-term assets 55 Equity 55 $ 100 $ 100 Market-Value Balance Sheet Net working capital $ 45 Debt $ 45 Long-term assets 200 Equity 200 $ 245 $ 245 Assume that MM’s theory holds except for taxes. There is no growth, and the $45 of debt is expected to be permanent. Assume a 21% corporate tax rate. a. How much of the firm's market value is accounted for by the debt-generated tax shield? (Enter your answer in million rounded to 2 decimal places.) b. What is United Frypan’s after-tax WACC if rDebt = 7.1% and rEquity = 15.9%? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of 5 years. What will be the new value of the firm, other things equal? Assume a borrowing rate of 7.1%. (Do not round intermediate calculations. Enter your answer in million rounded to 2 decimal places.)