Question
1. A large retailer obtains merchandise under the credit terms of 1/20, net 30, but routinely takes 50 days to pay its bills. (Because the
1. A large retailer obtains merchandise under the credit terms of 1/20, net 30, but routinely takes 50 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.
2. The nominal yield on 6-month T-bills is 7%, while default-free Japanese bonds that mature in 6 months have a nominal rate of 4%. In the spot exchange market, 1 yen equals $0.011. If interest rate parity holds, what is the 6-month forward exchange rate? Round the answer to five decimal places. Do not round intermediate calculations.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started