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Interest Rates and the Cost of Debt

Role of interest rates in establishing commodity prices

19. The following prices are observed. Formulate an arbitrage strategy to profit from the situation. ? Wheat is $2.00 per bushel spot and $2.30 per bushel for 180-day futures. ? U.S. interest rate is 10.00% compounded daily. ? Storage cost in a bonded, insured warehouse is $0.10 per bushel (prepaid) for a 180-day

Eurodollar futures

Today is April 1, you know you will have to pay cash for goods worth $10 million that will be delivered on June 17. You will then sell those goods for a profit but won't receive payment until September 17. You know on June 17 you will have to borrow $10 million for three months. The current 3 month LIBOR is 6.25%. You think the

Computing and Recording Bad Debt Expense - Wishbone Corporation

Need help with the problem attached. During 2006, Wishbone Corporation had a total of $5,000,000 in sales, of which 80% were on credit. At year-end, the Accounts Receivable balance showed a total of $2,300,000, which had been aged as follows: Age Amount Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A firm has debt maturing two years from now with face value $100 million.

A firm has debt maturing two years from now with face value $100 million. The firm can choose one of two strategies, the first offering a 60% chance of total payoff $120 million and a 40% chance of $105 million, either to come in two years. The second strategy offers a payoff in two years that is $160 million with 70% probabilit

Line of Credit: Interest Rates and Compensating Balance

My company has a line of credit with a stated interest rate of 10% and compensating balance of 25% and the compensating balance earns no interest. If my company needs $10,000, how much will I need to borrow? And if the bank offers to forget about the compensating balance requirement if my company pays interest at rate of 12%,

Assume that the forward rate is used to forecast the spot rate. What would be the spot rate forecasted for one year ahead? If you use covered interest arbitrage for a 90 day investment, what will be the amount of U.S. dollars you will have after 90 days? According to the international Fisher effect (IFE), the Cyprus pound should adjust to a new level of.

Assume that the forward rate is used to forecast the spot rate. The forward rate of the Canadian dollar contains a 6% discount. Today's spot rate of the Canadian dollar is $.80. What would be the spot rate forecasted for one year ahead? ) Assume the following information: You have $1,000,000 to invest Current spot r

Bonds: price, current yield

The Walter company issued a 25 year bond 5 years ago with a face value of $1,000. The bond pays interest semiannually at 10% annual rate. a. What is the bond's price today if the interest rate on comparable new issues is 12%? b. What is the price today if the interest rate is 8%? C. What is the price today if the interest

If you were just a beginner in investing which one would you choose?

"It's important to know the CD rate because that is the rate you will be receiving when you put money on a cd for a certain period of time. For example, if you put 10,000 on a cd at a six month rate of 5.5% for six months, you would receive 5.5% of 10,000 which is $550. Sometimes you will see the 12 months rate and then you ha

Real versus Nominal Interest Rates

40. The interest rate on conventional 10-year Treasury bonds is 7% per year and the interest rate on 10-year TIPS (Treasury inflation-protected securities) is 3.5% per year. You have $10,000 to invest in one of them. a. If you expect the average inflation rate to be 4% per year, which bond offers the higher expected rate of r

Calculating Interest Rates and Future Values

I'm stuck on this homework problem. Any help would be greatly appreciated! Problem: In 1985, the first U.S. Open Golf Championship was held. The winner's prize money was $150. In 2006, the winner's check was $1,170,000. What was the percentage increase in the winner's check over this period? If the winner's prize increases

Financial Statements of Coca-Cola Company and PepsiCo

The Coke-Cola Company and PepsiCo, Inc. provide refreshments to every corner of the world. Selected data from the 2004 consolidated financial statements for The Coca-Cola Company and for PepsiCo, Inc., are presented here (in millions). CocaCola

General Mills Ratio Analysis

I need a ratio analysis on General Mills for 2007. Identify your General Mills strengths and weaknesses. Do you feel that this firm's financial ratios depict a strong or weak firm?

Important information about Time to double

Compound Interest. New Savings Bank pays 4 percent interest on its deposits. If you deposit $1,000 in the bank and leave it there, will it take more or less than 25 years for your money to double? You should be able to answer this without a calculator or interest rate tables.

Simple Interest and Compound Interest

If Steve invests $5,000 in an interest bearing security paying 10% per year for 5 years, what will his investment be worth: a. if the security pays simple interest? b. if the security pays interest compounded annually? c. How much simple interest is earned over the life of the investment? d. How much compound int

Simple and compound interest transactions.

Hi please help with the following problems. Over a period of years, an investment in an account which pays 6 percent simple interest will: a. earn the same dollar amount of income as an account returning 7 percent simple interest. b. earn more income than an account paying 6 percent compound interest. c. increase in

Investment banking & potential conflicts of interes

Can I please have a short paragraph to answer the following question? Joe Klein is an analyst for an investment banking firm that offers both underwriting and brokerage services. Joe sends you a highly favorable report on a stock that his firm recently helped go public and for which it currently makes the market. What are t

Interest and the Time Value of Money : Present and Future Values

1. If you borrow $4000 from an online lending company to buy a PC and agree to pay it in 48 equal installments at 0.9% interest per month on the unpaid balance, how much are your monthly payments? (ans= $102.99) And how much total interest will be paid. (ans= $943.52) 2. A business borrows $80,000 at 9.42% interest com

How much did each of them invest at different rates?

Jane invested some amount at the rate of 12% simple interest and some other amount at the rate of 10% simple interest. She recieves yearly interest of $130.00. Randy also invested in the same scheme, but he interchanged the amounts invested and recieved $4.00 more as interest. How much amount did each of the invest at different

Compound Interest and Time Value of Money

I just need to know how to take this equation A=P(1+r/365)^n and solve it for r this is what I came up with ((A/P)^1/n-1)365=r which though was right but when I plugged the numbers from the next part of the question the answers were not coming out right can you tell me if my equation for r is correct. Here is the question:

Finance - A firm needs to borrow $2,000,000 for the next year

A firm needs to borrow $2,000,000 for the next year to finance working capital. It¿s bank as proposed a combination of loan products as follows: 1) $750,000 from a line of credit at 12%; $600,000 at 9% collateralized by inventory; and 3) the remainder at 7% with a second mortgage on the factory building. If the firm accepts

Present and Future Values for Different Interest Rates

Use equations and a financial calculator to find the following values. See the hint for problems 2-1 a. An initial 500 compounded for 10years at 6 percent b. An initial 500 compounded for 10 years at 12 percent c. The present value of $500 due in 10 years at a 6 percent discount rate. d. The present value of $1,552.90 due