1. Kurt's Music has a line of credit with a local bank that permits it to borrow up to $650,000 at any time. The interest rate is .64 percent per month. The bank charges compound interest and also requires that 2 percent of the amount borrowed be deposited into a non-interest-bearing account. How much interest will the firm pay if it needs $200,000 of cash for three months to pay its operating expenses? $3,943.50 $3,949.21 $4,017.02 $3,864.63 $3,902.11 2. The spot rate between Canada and the U.S. is C$1.1381 = $1, while the one-year forward rate is Can$1.1407 = $1. The risk-free rate in Canada is 2.4 percent. The risk-free rate in the U.S. is 2.1 percent. How much profit can you earn on a loan of $1,000 by utilizing covered interest arbitrage? $.81 $.67 $.36 $.49 $.57 3. Kelsos has projected sales for January through April of $136,000, $148,000, $144,000, and $146,000, respectively. The firm collects 59 percent of sales in the month of sale, 36 percent in the month following the sale, and the remainder in the second month following the sale. Assume all sales are collected. The accounts receivable balance at the end of the beginning of January was $56,050 ($47,643 of which was uncollected December sales). How much did the firm collect in the month of February? $138,539 $141,220 $140,208 $138,615 $142,090 4. Assume the one-year forward rate for the British pound is .6381 = $1. The spot rate is .6392 = $1. The interest rate on a risk-free asset in the UK is 4.4 percent. If interest rate parity exists, what is the one-year risk-free rate in the U.S.? 4.68 percent 4.58 percent 4.77 percent 4.63 percent 4.67 percent