.Solve the following questions.

5. On May 1, 2002, the City Museum purchases an original Picasso drawing for 100,000 Euro, payable in 30 days. On May 1 the spot rate is Euro 6.2315 and the 30 day forward rate is Euro 6.1825 per dollar. On May 30, when the bill is paid, the spot rate is Euro 6.2500=$1. The cost of the drawing should be recorded at:

a. $16,000

b. $16,048

c. $16,175

d. $623,150

6. On July 1, 2005, Sweet Tooth Company purchases 1,000 pounds of Swiss chocolate for 50,000 Swiss francs, payable in 60 days. On July 1, a Swiss franc is worth $.6498, by August 30, the day of payment, one Swiss franc is worth $.6256. The 60-day forward rate on July 1 is SFr 1=$.6612. Sweet Tooth should record the cost of the chocolate at:

a. $31,280

b. $31,885

c. $32,490

d. $33,060

7. Ball Corp. had the following foreign currency transactions during 2009: ? Merchandise was purchased from a foreign supplier on January 20, 2009, for the U.S. dollar equivalent of $90,000. The invoice was paid on March 20, 2009 at the U.S. dollar equivalent of $96,000 ? On July 1, 2009, Ball borrowed the U.S. dollar equivalent of $500,000, evidenced by a note that was payable in the lender's local currency on July 1, 2011, On December 31, 2009, the U.S. dollar equivalents of the principal amount and accrued interest were $520,000 and $26,000, respectively. Interest on the note is 10 percent per annum. In Ball's 2009 income statement, what amount should be included as foreign exchange loss?

a. $0

b. $6,000

c. $21,000

d. $27,000

8. Lindy, a U.S. corporation, bought inventory items from a supplier in Germany on November 5, 2007 for 100,000 Euro when the spot rate was $.4295. At Lindy's December 31, 2007 year-end, the spot rate was $.4245. On January 15, 2008, Lindy bought 100,000 Euro at the spot rate of $.4345 and paid the invoice. How much should Lindy report in its income statements for 2007 and 2008 as foreign exchange gain or loss?

2007 2008

a. $500 ($1,000)

b. $0 ($500)

c. ($500) $0

d. ($1,000) $500

9. On September 1, 2007, Bain Corp. received an order for equipment from a foreign customer for 300,000 local currency units (LCU) when the U.S. dollar

equivalent was $96,000. Bain shipped the equipment on October 15, 2007, and billed the customer for 300,000 LCU when the U.S. dollar equivalent was $100,000. Bain received the customer's remittance in full on November 16, 2007, and sold the 300,000 LCU for $105,000. In its income statement for the year ended December 31, 2007, Bian should report a foreign exchange gain of:

a. $0

b. $4,000

c. $5,000

d. $9000

The current world production of oil is 170 million barrels per day and the current world price of oil is N$1162.98 per barrel. The price elasticity of demand () is -0.7 and the elasticity of supply (n) is 0.25. Muruti Investment is planning to enter the world oil market with a daily production of 10 million barrels of oil per day. For simplicity, assume that the supply and demand curves are linear a Use a well labelled diagram to analyse the effect of Muruti Investment production on the world price and quantity. [5 marks] b Use the information provided above to determine the long-run demand and supply functions that are consistent with pre-Muruti Investment world output and price. [10 marks] c Determine the post-Muruti Investment long-run linear supply function. [5 marks] d Use the demand function and the post-Muruti Investment supply function to calculate new equilibrium price and quantity. [5 marks] e Explain why the equilibrium quantity increases with less than 10 million. [5 marks]1. Suppose that the economy's production function is Y = K.5 (eL).5 , that the saving rate, s, is equal to 10 percent, and the depreciation rate, S, is equal to 3 percent. Suppose further that the number of workers, L, grows at 1 percent a year and that the rate of technological progress, g, is 1 percent per year. Find the steady-state values of the following: a. The capital stock per efficiency units of labor. b. Output per efficiency units of labor. C. The growth rate of output per efficiency units of labor. d The growth rate of output per worker. e. The growth rate of output