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Question
Which of the following statements is true?A) Interest rate parity indicates that the forward premium or discount should be greater than the differences in the national interest rates for securities of the same maturity.
B) Purchasing power parity indicates that, in the long run, exchange rates adjust to reflect international differences in inflation so that the purchasing power of each currency tends to remain the same.
C) The International Fisher Effect indicates that the nominal interest rate should be the same all over the world at all times if the market is efficient.
D) Both B and C.
Answer
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Related questions
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A new forklift under consideration by Home Warehouse requires an initial investment of $100,000 and produces annual cash flows of $50,000, $40,000, and $30,000. Which of the following will not change if the required rate of return is increased from 10% to 12%.
A) The net present value.
B) The internal rate of return.
C) The profitability index.
D) The modified internal rate of return.
Q:
Initial Outlay Cash Flow in Period
1 2 3 4
-$4,000 $1,546.17 $1,546.17 $1,546.17 $1,546.17
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A) 10%.
B) 18%.
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D) 16%.
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Initial outlay = $13,000
Cash flows: Year 1 = $5,000
Year 2 = $3,000
Year 3 = $9,000
If the appropriate discount rate is 15%, compute the NPV of this project.
Q:
The equivalent annual cost method is most appropriate in which of the following situations? In each case, assume that several mutually exclusive options are available.
A) Introducing a new product line
B) Adding another store to a chain of retail stores
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WSU Inc. has various options for replacing a piece of manufacturing equipment. The present value of costs for option Ell is $84,000. Option Ell has a useful life of 5 years; annual operating costs were discounted at 9%. What is the equivalent annual cost?
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The size of capital investments and the difficulty in reversing them once they are made make capital-budgeting decisions very important to the firm.
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B) $15
C) $20
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P/E ratios found in published sources or on the internet are always computed by dividing the next period's expected earnings into the current price of the stock.
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B) 36%.
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D) 5.5%.
Q:
If the ROE on a new investment is less than the firm's required rate of return:
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B) the investment leaves the firm's value unchanged.
C) the effect on the firm's value is unpredictable.
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Q:
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D) there is not enough information.
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B) 14.
C) 2.14.
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Draper Company's common stock paid a dividend last year of $3.70. You believe that the long-term growth in the dividends of the firm will be 8% per year. If your required return for Draper is 14%, how much are you willing to pay for the stock?
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The ________ designates the date on which the stock transfer books are closed in regard to a dividend payment.
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C) date of record
D) payment date
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Five years ago, Mr. Martinez purchased 1000 shares of JPM stock at $50 per share. If Mr. Martinez ' tax rate is 25% would he prefer that the company pay a $5.00 per share dividend or offer to repurchase 100 shares at $50 per share?
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D) All of the above
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