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vinsu, Professor
Category: Finance
Satisfied Customers: 522
Experience:  MBA in Finance and Marketing
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Financial accounting

Customer Question

9.      If prices in the U.S. rise less rapidly than in Canada, which of the following would be expected according to purchasing power parity?
a.       The value of the Canadian dollar will decline, relative to the U.S. Dollar.
b.      The value of the U.S. dollar will decline, relative to the Canadian dollar.
c.       Inflation will increase in Canada.
d.      The price of gold will decline.
10. What happens to the price of a futures contract as expiration draws closer?
a.       It exceeds the spot price of the asset.
b.      It is exceeded by the spot price of the asset.
c.       It approaches the spot price of the asset.
d.      There is no relationship between futures price and spot price as the contract approaches expiration.
11. What is the net present value of a 20 year project with an opportunity cost of 14% , an initial investment of $10,000 and and cash inflows of $2,000 per year?
a.       $10,000
b.      $20,000
c.       $3,246
d.      $4,167
Submitted: 11 years ago.
Category: Finance
Expert:  vinsu replied 11 years ago.

9a. If inflation is higher is Canada, then the value of canadian Dollar will decline

10d. In a futures contract, the terms are fixed at the start of the contract and there is no relation to the spot price.

11c. Tha cash inflows are annuity and the present value is 2000X PVIFA ( 14%, 20 years) The factor is 6.623 and the PV is 13426. The NPV is 13426-10000=3426