Business Law Questions And Answers

1. Compute the NPV of Ariel-Mexico's recycling equipment in pesos by discounting incremental peso cash flows at a peso discount rate. How this NPV should be translated into Euros? Assume expected future inflation for France is 3% per year.

Rate = Canadian rate Mexican pesos? Japanese Yen ? French Francs ?

3. A 2 – year Treasury security currently earns 5.13%. Over the next 2 years, the real

10. Find the value of one U.S. dollar in a foreign currency. You might choose the Euro, the Japanese Yen, the Canadian dollar, or another currency. List the type of currency and the current value of the U.S. dollar in that country. (1.0 points) TIP: http://www.google.com/finance/converter is a good resource for foreign currency information.

Give the interest rate is 1 and a half times that of prime lending rate,

NPV calculated for this scenario comes out to be 231,507 Euros. The first thing required for calculating NPV in Euro is the forward premium. It is calculated by adding 1 to the inflation rates of France and Mexico respectively, and then by taking their ratio. This ratio comes out to be 1.0388. This ratio is then

We analyzed assumptions required to adopt each of proposed approaches. Approach (b) - $US cash flow discounted at $US rate - assumes that:

B. Suppose an American exporter has just received a payment of € 100,000, how many dollars will result upon conversion?

RJR needs yen cash flows in years 1-5 given above. To convert these at a 7.1% swap rate into dollar cash flows at 10.92% :

That rate was determined by the rating of the bond. Bond ratings are derived from a

Back to the case, the coupon rate of Swiss Franc is much lower than other currencies. But it is not the standard of evaluating which currency should be borrowed. We will use forward rates computed from the parity to evaluate the borrowing cost of each currency and the currency has the lowest cost should be chosen. The basic known information is listed as following:

Per contra, the Belgian Francs is in SHORT position: the company will loose money if Belgian Francs appreciate.

Through this method, we obtained theoretical yields of the 4.25% coupon bond and 10.625% coupon bond to be 2.899% and 2.639% respectively. The corresponding theoretical prices of the bonds are $108.27 for the 4.25% coupon bond and $149.31 for the 10.625% coupon bond (see Table 1 above).

4.15 On January 1, 1985, the annual inflation rates in the U.S. and France were expected to be 4% and 6%, respectively. If the current spot rate that day was $.1250, then the expected spot rate in two years was

International portfolio diversification gives your investments a passport to added diversification benefits. The international boundaries to investing have collapsed. Fairly recently, foreign securities have become easier to trade due to improved communications and data