Details of this Paper

BU440 Managerial Finance II




1. Discuss four (4) advantages and four (4) disadvantages accruing to a company that is traded in the public securities markets.;2. Garland Corporation has a bond outstanding with a $90 annual interest payment, a market price of $820, and a maturity date in five years. Find the following;a. The coupon rate;b. The current rate;c. The approximate yield to maturity;3. An investor must choose between two bonds: Bond A pays $92 annual interest, has a market value of $875, and has 10 years to maturity. Bond B pays $82 annual interest, has a market value of $900, and has two years to maturity.;a. Compute the current yield on both bonds.;b. Based on your computations above, which bond should the investor select?;c. A drawback on the current yield is that it does not consider the total life of the bond. For example, the approximate yield to maturity on Bond A is 11.30%. What is the approximate yield to maturity on Bond B?;d. Has your answer changed between parts ?b? and ?c? of this question in terms of which bond to select? Explain.;NOTE: Show all work in arriving at the solutions requested.;1. The Wall Street Journal reported the following spot and forward rates for the Swiss franc;Spot????????. $0.7876;30-day forward???... $0.7918;90-day forward???... $0.7968;180-day forward???. $0.8039;a. Was the Swiss franc selling at a discount or a premium in the forward market?;b. What was the 30-day forward premium (or discount)?;c. What was the 90-day forward premium (or discount)?;d. Suppose you executed a 90-day forward contract to exchange 100,000 Swiss francs into U.S. dollars. How many dollars would you get 90 days hence?;e. Assume a Swiss bank entered into a 180-day forward contract with Citicorp to buy $100,000. How many francs will the Swiss bank deliver in six months to get the U.S. dollars?;2. Explain the functions of the following agencies;a. Overseas Private Investment Corporation (OPIC);b. Export-Import Bank (Eximbank);c. Foreign Credit Insurance Association (FCIA);d. International Finance Corporation (IFC);3. You are the vice-president of finance for Exploratory Resources, headquartered in Houston, Texas. In January 2007, your firm?s Canadian subsidiary obtained a six-month loan of 100,000 Canadian dollars from a bank in Houston to finance the acquisition of a titanium mine in Quebec province. The loan will also be repaid in Canadian dollars. At the time of the loan, the spot exchange rate was U.S. $0.8180/Canadian dollar and the Canadian currency was selling at a discount in the forward market. The June 2007 contract;(Face value = $100,000 per contract) was quoted at U.S. $0.8120/Canadian dollar.;a. Explain how the Houston bank could lose on this transaction assuming no hedging.;b. If the bank does hedge with the forward contract, what is the maximum amount it can lose?


Paper#79883 | Written in 18-Jul-2015

Price : $22