Use the short-run asset approach to exchange rates. Given the following: expected US dollar/Euro exchange rate is $1.20 in one year; one year US interest rate is 2%; and one year Eurozone interest rate is 0%. a. What is the US dollar/Euro spot exchange rate?
b. If the expected exchange rate falls to $1.25 but interest rates remain the same, what is the US dollar/Euro spot rate?
c. With all other information as in a. If the interest rate in the US falls to 0%, what will be the US dollar/Euro spot exchange rate?
d. If the interest rate in the Eurozone falls to -2% with the US interest rate at 0%, and the expected exchange rate at $1.25, what will the spot exchange rate be?
e. What does the relationship between your answers to b and d tell you about the importance of interest rates in each currency zone?

Which of the following pairs is most similar to each other? a. barter goods and fiat money b. digital money and barter goods c. fiat money and digital money d. commodity money and digital money

73. calculate the weighted average cost of capital (wacc) based on the following information: the equity multiplier is 1.66; the interest rate on debt is 13%; the required return to equity holders is 22%; and the tax rate is 35%. (a) 15.6% (b) 16.0% (c) 15.0% (d) 16.6% (e) none of the above

Burke enterprises is considering a machine costing $30 billion that will result in initial after-tax cash savings of $3.7 billion at the end of the first year, and these savings will grow at a rate of 2 percent per year for 11 years. after 11 years, the company can sell the parts for $5 billion. burke has a target debt/equity ratio of 1.2, a beta of 1.79. you estimate that the return on the market is 7.5% and t-bills are currently yielding 2.5%. burke has two issuances of bonds outstanding. the first has 200,000 bonds trading at 98% of par, with coupons of 5%, face of $1000, and maturity of 5 years. the second has 500,000 bonds trading at par, with coupons of 7.5%, face of $1000, and maturity of 12 years. kate, the ceo, usually applies an adjustment factor to the discount rate of +2 for such highly innovative projects. should the company take on the project?