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socrateaser, Attorney
Category: Business Law
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1.Assume that liquid can be invested to yield 12 percent. If

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1.Assume that liquid can be invested to yield 12 percent. If annual remittance checks total $2 billion, what is it worth for th efirm to reduce float by 1 day?
a.54,833   b. 657,534 c.1,000,000 d.25,000,000

2.Which of the following has highest interet rate risk?
a. 20-year U.S. Treasury Bond
b. Bendix Corporation's 6 month commerical paper
c. A six month money market certificate at a federally insured bank
d. A Southwest Airlines bond maturing in 4 years

3. International purchases 30,000 cases of wine at a cost of 3,136,000 Euros. If the current exchanges rate is .7445 euros to the US dollar, what is the purchase price in US dollars?
a. 2,106,111 b.2,3334,752   c.3,333,333   d. 4,212,223

4. Currency exchanges rates throughtout the world trade within very narrow ranges on any given day because of:
a. purchasing power parity
b.the international translation effect
c. arbitrage
d. the law of one price

1. $2,000,000,000 * 12%/365 = $657,534

2. "d," because corporate bonds are unsecured and unguaranteed, and four years is longer than 6 months.

3. 3,136,000 * 1/0.7445 = 4,212,223.

4. This question must be answered according to a particular text. I the real world, all of these answers are incorrect -- currency trades in a narrow range because trades are made using extremely large contracts, which makes the risk on any individual trade equally large.

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