1. "Foreign debt is debt sold in a country other than the one in whose currency the debt is denominated". Do you agree with this statement? Justify your answer.

2. You want to borrow $2,000 from a friend for two years, and you propose to pay her $2,200 at the end of the second year. She agrees to lend you the $2,000, but she wants you to pay her $10 of interest at the end of each month during the two years, plus $2,000 at the end of the 24th month. How much higher is the effective annual rate under your friend's proposal than under your proposal?

3. A firm has a profit margin of 2% and an equity multiplier of 2. Its sales are $100 million, and it has total assets of $50 million. What is its ROE? Interpret this ratio.

4. Elizabeth invested $12,000 four years ago and she wants to withdraw all the money today. If the interest is 3.5% annual rate with monthly compounding, how much Elizabeth will be able to withdraw right away? What is her effective annual rate of return?

5. Rao Construction recently reported $20.50 million of sales, $12.60 million of operating costs other than depreciation, and $3.00 million of depreciation. It had $8.50 million of bonds outstanding that carry a 7.0% interest rate, and its federal-plus-state income tax rate was 40%. What was Rao's return on assets if total assets were $18.77 million? What was the time interest earned ratio (TIE)? Interpret both results.

6. You expect to receive $1,000 at the end of each of the next 4 years. You will deposit these payments into an account which pays 8% compounded quarterly. What is the future value of these payments, that is, the value at the end of the fourth year?