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Finance Quiz

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- Question 1 of 9
##### 1. Question

1 pointsSuppose that the yen-denominated interest rate is 2% and the dollar denominated rate is 6%. The current exchange rate is 0.009 dollars per yen. What is the 1-year forward rate?

CorrectIncorrect - Question 2 of 9
##### 2. Question

1 pointsSuppose that the November price of corn is \(\$ 2.50\)/bushel, the effective monthly interst rate is 1%, and storage costs per bushel are \(\$ 0.05\)/month. Assuming that corn is stored from November to February, the February forward price must compensate owners for interest and storage. What is the February forward price?

CorrectIncorrect - Question 3 of 9
##### 3. Question

1 pointsCorrectIncorrect - Question 4 of 9
##### 4. Question

1 pointsWe want to compute the implied forward interest rate from year 2 to year 3 if the 2

^{nd}and 3^{rd}year bond yield are 6.50 and 7.00 respectively?CorrectIncorrect - Question 5 of 9
##### 5. Question

1 pointsSuppose the current \(\$ /€\) exchange rate is 0.9, the dollar-denominated interest rate is 6%, and the euro-denominated interest rate is 4%. By buying a dollar-denominated euro call with a strike of \(\$ 0.92\) and selling a dollar-denominated euro put with the same strike, we construct a position where in 1-year we will buy €1 by paying $0.92 what is the difference between the call premium and put premium

CorrectIncorrect - Question 6 of 9
##### 6. Question

1 pointsIf \(u = \$ 59.954/\$ 41 = 1.4623\) and \(d = \$ 32.903/\$ 41 = 0.8025\) With \(K = \$ 40,\) we have \({C_u} = \$ 59.954 – \$ 40 = \$ 19.954,\) and \({C_d} = 0\) What is the option price?

CorrectIncorrect - Question 7 of 9
##### 7. Question

1 pointsyou have to decide whether to undertake one of two projects. Project

*A*involves buying expensive machinery that produces a better product at a lower cost. The machines for Project*A*cost \(\$ 1000\) and if purchased, you anticipate that the project will produce cash flows of \(\$ 500\) per year for the next 5 years. Project*B’*s machines are cheaper costing \(\$ 800\), but they produce smaller annual cash flows of \(\$ 420\) per year for next 5 years. We’ll assume that the correct discount rate 12% and whyCorrectIncorrect - Question 8 of 9
##### 8. Question

1 pointsSuppose that the end of 1995 you invested \(\$ 1000\) in a security that subsequently paid you \(\$ 150\) at the end of each year from 1996, 1997,…, 2004. At the end of 2005, you sold the security for \(\$ 1.150\). Looking back you realize that the CPI went from 133 in 1995 to 195 in 2004. What was your real rate of return?

CorrectIncorrect - Question 9 of 9
##### 9. Question

1 pointsIt is March 2000, and you are thinking of purchasing a share of XYZ Corp. Here are some facts about the company and its stock: XYZ is a steady payer of dividends; in the past it has paid dividends annually, and these dividends have tended to grow at an annual rate of 7%. The company just paid a dividend of $10 per share. This dividend was paid on March 1, the company’s traditional dividend payment date. You want to value XYZ shares by discounting the stream of future anticipated dividends.

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