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NEW QUESTION: 1
Click on the Exhibit Button to view the Formula Sheet. You are paying 5% per annum paid semi-annually and receiving 6-month LIBOR on a USD 10 million interest rate swap with exactly two years to maturity. 6-month LIBOR for the next payment date is fixed today at
4.95%. You expect 6-month LIBOR in 6 months to fix at 5.25%, in 12 months at 5.35% and in 18 months at 5.40%. What do you expect the net settlement amounts to be over the next
2 years? Assume 30-day months.
A. receive 2,500, pay 12,500, pay 17,500, pay 20,000
B. pay 250, receive 1,250, receive 1,750, receive 2,000
C. receive 250, pay 1,250, pay 1,750, pay 2,000
D. pay 2,500, receive 12,500, receive 17,500, receive 20,000
Answer: D
NEW QUESTION: 2
Which of the following statements is most correct?
A. If Project A has a higher IRR than Project B, then Project A must also have a higher NPV.
B. If a project's internal rate of return (IRR) exceeds the cost of capital, then the project's net present value (NPV) must be positive.
C. None of the answers are correct.
D. The IRR calculation implicitly assumes that all cash flows are reinvested at a rate of return equal to the cost of capital.
E. All is these answers are correct.
Answer: B
Explanation:
Explanation/Reference:
Explanation:
The IRR on a project is its expected rate of return. If the return exceeds the cost of the funds used to finance the project, a surplus remains after paying for the capital, and this surplus accrues to the firm's stockholders. Therefore, a project whose IRR exceeds its cost of capital increase shareholders' wealth, just as a positive NPV does.
NEW QUESTION: 3
A. Option C
B. Option A
C. Option B
D. Option D
Answer: A
Explanation:
Use one debug version to connect to the development database, and a standard version to connect to the live database.
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