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Takeshi Kamada – CIA Japan. Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $5,000,000 or its yen equivalent, in a covered interest arbitrage between U.S. dollars and Japanese yen. He faced the following exchange rate and interest rate quotes.

Arbitrage funds available $5,000,000

Spot rate (JPY/$) 118.60

180-day forward rate (JPY/$) 117.80

180-day U.S. dollar interest rate 4.800 %

180-day Japanese yen interest rate 3.400 %

A European call option and put option on a stock both have a strike price of $20 and an expiration date in three months. Both sell for $3. The risk-free interest rate is 10% per annum, the current stock price is $19, and a $1 dividend is expected in one month. Is there an arbitrage opportunity? If there is an arbitrage opportunity, clearly state what condition must be satisfied to eliminate the arbitrage opportunity. What is the strategy followed to make a profit from the arbitrage opportunity? What is the profit expressed as a present value?

You buy euros in New York from Deutsche Bank and simultaneously sell them in London to Barclays for a gain. This is an example of

A. position trading.

B. program trading.

C. risk arbitrage.

D. pure arbitrage.

E. hedging.

5% of all men and 0.25% of all women are colour-blind. A person chosen by chance suffers from colour blindness.

What is the probability that this is a man? (It is assumed that there is an equal number of men and women).

You are working for a small business owner selling women’s fitness apparel in a strip mall in a town with a population of 20,000. The space next door will become vacant next year once the lease expires, and the property manager has offered your business the opportunity to lease the space. The apparel company is financially sound, yet not seeing sales growth year over year. The company does not have an online sales platform and depends on repeat customers and foot traffic from the gym nearby. You are tasked with determining if there is a valid opportunity to expand the business to the location next door.

Explain the method you would use to research the viability of the company. What are three potential mistakes to avoid in your research and how can you avoid making those mistakes?

Question 2

Tresla Corporation is experiencing rapid growth. Dividends are expected to double in each of the next two years, grow at 20% per year over three years after that, and then 5% percent per year indefinitely. The required return on this stock is 15%, and the stock currently sells for $730 per share.

1. Tresla just paid the dividend. What was it?

1. “Draw” the time line (a table) showing dividends paid by Tresla over the next 7 years.
2. What would be the price of Tresla be if it did not grow and continued to pay the same dividends as it had just paid.
3. What is the present value of Tresla’s growth opportunities (PVGO)?

I need answer pls

You have $750.000, you will use it with portfolio investments. Describe the assets you would like to keep in your balanced portfolio, along with the reasons for choosing them. Please consider the assets traded in the financial markets in Turkey.

Can you explain in detail step by step, please?

Suppose that your company’s weighted-average cost of capital is 11 percent. Your company is planning to undertake a project with an internal rate of return of 14 percent, but you believe that this project is not a wise investment for the firm. What logical arguments might you use to convince your boss to forego the project despite its high rate of return? Is it possible that making investments with expected returns higher than your company’s cost of capital will destroy value? If so, how?

At the time Lehman Brothers filed for bankruptcy financial institutions serving in California were holding more that 300 billion in debt issued by Lehman. Do you think the municipal pension fund that purchased commercial papers of Lehman Brothers were following a reasonable investment guideline? If a pension fund is taking on too much risk, how should regulation be changed to limit such excessive risk taking?

A Project costs $130,000 and is expected to generate year-end cash inflows of $40, 000, $30,000, $72, 000, $ 91,000 and $ 100,000 in years 1 through 5. The opportunity cost of capital for the company is 15%.

Required:

1. Evaluate the project suitability based on the NPV approach                                                                                                                                                                                                                        
2. Evaluate the project suitability based on the Payback period approach                                                                                                                                           
3. Evaluate the project suitability based on the Profitability Index approach                                                                                                               

Explain how you can use internal rate of return to evaluate a project                      

Identify the pricing strategy which dominos has implemented below and justify your answer.