Optimal Credit Policy

(1) Why do firms find themselves with idle cash? How might companies take advantage of this cash? (2) In principle, how should we decide the optimal credit policy?

Calculations for an ordinary annuity vs an annuity due

CASE AMOUNT OF ANNUITY INTEREST RATE DEPOSIT PERIOD (YR) A $2,500 8% 10YRS B 500 12 6 C 30,000 20 5 D 11,500 9 ...continues

Prepare an amortization schedule for Jone's business loan

Jones just closed a $10,000 business loan that is to be repaid in three equal, annual, end-of-year payments.The interest rate on the loan is 13%. As part of his firm's detailed financial planning, Jones wishes to determine the annual interest deduction attributable to the loan. a. determine the firm's annual loan payment b ...continues

Investing in an emerging stock market of a developing country

As an investor, what factors would you consider before investing in the emerging stock market of a developing country?

Risk and Return

X comapny is considering the pruchase of one of two microfilm cameras, R and S. Both should provide benefits over a 10-year period, and each requires an initial investment of $4,000. Management has constructed the table of estimates as follows. Camera R Camera S ...continues

Coefficient of variation

Metal Manufacturing has isolated four alternatives for meeting its need for increase production capacity. The following table summarizes data gathered relative to each of these alternatives. Alternative Expected return Standard deviation of return ...continues

Return and Risk: a. For each project, compute 1. the range of possible rates of return 2. the expected value of return 3. the standard deviation of the returns 4. the coefficient of variation of the returns b. Construct the bar chart of each distribution of rates of return c. Which project would you consider less risky? why?

Swift Manufacturing must choose between two asset purchases. The annual rate of return and the related probabilities given in the table. Project 257 Project 432 Rate of return Probability Rate of return Probability -10% 0.01 10% ...continues

Currency Derivatives: swap rate, profitable arbitrage

4. An investor wishes to buy Euros spot (at $0.9080) and sell Euros forward for 180 days (at $0.9146). a. What is the swap rate on Euros? b. What is the forward premium or discount on 180- day Euros? 7. Suppose the euro is quoted at 0.7064–80 in London and the pound sterling is quoted at 1.6244–59 in Frankfurt. a. I ...continues

Standard deviation versus coefficient of variation as measures of risk: Greengage, Inc.

Greengage, Inc., a successful nursery, is considering several expansion projects. All of the alternatives promise to produce an acceptable return. The owners are extremely risk-averse; therefore, they will choose the least risky of the alternatives. Data on four possible projects follow. Project expected return ran ...continues

Basic bond calculations and evaluations for Complex Systems

Complex Systems has an outstanding issue of $1,000-par value bonds with a 12% coupon interest rate. The issue pays interest annually and has 16 years reamining to its maturity date. a. If bond of similar risk are currently earning a 10% rate of return, how much should the Complex Systems bond sell for today? b. Describe th ...continues