Please show the work for calculation type questions 6) A ________ is the term us
ID: 2781716 • Letter: P
Question
Please show the work for calculation type questions
6) A ________ is the term used to describe a foreign currency agreement between two parties to exchange a given amount of one currency for another, and after a period of time, to give back the original amounts.
A) matched flow
B) currency swap
C) back-to-back loan
D) none of the above
7) The weighted average cost of capital (WACC) is:
A) the required rate of return for all of a firm's capital investment projects.
B) the actual rate of return for a firm's average risk projects.
C) not applicable for use by MNE.
D) None of the above
8) ________ risk is a function of the variability of expected returns of the firm's stock relative to the market index and the measure of correlation between the expected returns of the firm and the market.
A) Accepted
B) Unsystematic
C) Beta Measured
D) Diversifiable
9) The after-tax cost of debt is found by:
A) dividing the before-tax cost of debt by (1 - the corporate tax rate).
B) subtracting (1 - the corporate tax rate) from the before-tax cost of debt.
C) multiplying the before-tax cost of debt by (the corporate tax rate).
D) None of the above
10) A firm whose equity has a beta of 1.0:
A) has greater systematic risk than the market portfolio.
B) stands little chance of surviving in the international financial market place.
C) has same returns as the market.
D) None of the above is true.
Explanation / Answer
Answer 6) B currency swap involves the exchange of interest and sometimes principal in one currency for the same in another currency.The exchange occurs at a prespecified fixed date and during the term of the contract
Answer 7) B WACC is the reuired rate of return on the capital invested. It is calculated as WACC = weight of debt *(1-tax rate)* cost of debt + cost of equity * weight of equity invested
Answer 8) C Beta is the calculated as Covariance of stock and the market) divided by variance of the stock
Answer 9) D none of the above as After tax cost of debt = before tax cost of debt * (1- tax rate)
Answer 10) D. none of the above as the beta of 1 means the firm has the same level of volatility as the market