A firm is supplied with plastic chips for their plastic injection molding manufacturing process. Their supplier offers financing terms of a 2% discount if the accounts payable are paid in 10 days or less with the full balance due in 45 days. Short-term financing available to Sunny Manufacturing is available at an annual rate of 9.6%. The firm has just purchased $400,000 of plastic chips from its supplier.

What is the amount of money the will save on accounts payable if they accept the discount?

$400,000 $8,000 $33,333 $20,000

A firm has just made a UK pounds bid on a major project located in UK. It won't find out for 45 days whether it has won the contract. There will be a 10% signing bonus payable to the winner in pounds. The best way to protect against currency risk on its bid is for the firm to

purchase a pound futures contract. sell a pound call option. sell a pound futures contract. purchase a pound put option.

Let's assume it is May 2015 and the current spot rate for the Swiss Franc is $0.5925. The call premium on a call option with an exercise price of $0.5675 is $0.0473. What is the time value of one SF 62,500 call option?

$2,331.25 $1,562.50 $1,393.75

$768.75

Suppose a U.S. corporation wants to secure fixed?rate funds in euros in order to reduce its pound exposure, but is hampered in doing so because it is a relatively unknown credit in the German financial market. In contrast, a German company that is well established in its own country may desire floating?rate dollar financing, but is relatively unknown in the U.S. financial market. What is the most appropriate form of swap for these two parties?

interest rate/currency swap currency swap interest rate swap debt/equity swap

Let's assume the current spot rate for the euro is $1.3527. A call option with an exercise price of $1.3650 is said to be

in?the?money out?of?the?money at?the?money past breakeven