Corporate Finance (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
11th Edition
ISBN: 9780077861759
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Question
Chapter 28, Problem 1CQ
a.
Summary Introduction
To explain: Sight draft
Credit Instruments:
These are the documents or instruments used in replacement of currency. They are widely accepted nowadays. It is of many types.
a.
Expert Solution
Answer to Problem 1CQ
Sight draft
- It is a type of bill of exchange which is payable immediately.
- It is used in international trade.
Explanation of Solution
- In this bill of exchange, payment cannot be delayed after presenting the draft.
- It is payable as soon as the seller shows the draft to buyer.
- There is no specific date of its maturity.
Conclusion
Sight draft is a type of bill of exchange which is payable immediately.
b.
Summary Introduction
To explain: Time draft
b.
Expert Solution
Answer to Problem 1CQ
Time draft
- It is a type of bill of exchange.
- It is payable after a definite period of time or after happening of a particular situation.
Explanation of Solution
- It is a promise to pay in future.
- It is used with acceptance.
- It is generally used in international trade.
Conclusion
Time draft is payable after a definite period of time
c.
Summary Introduction
To explain: Banker’s acceptance
c.
Expert Solution
Answer to Problem 1CQ
Bankers acceptance
- It is a type of bill of exchange.
- It is a short-term instrument.
Explanation of Solution
- It is a bill of exchange instrument, which is guaranteed by bank.
- It is a safe instrument.
Conclusion
Bankers acceptance is guaranteed by bank.
d.
Summary Introduction
To explain: Promissory Note
d.
Expert Solution
Answer to Problem 1CQ
Promissory Note
- It is a type of financial instrument.
- The maker signs it.
Explanation of Solution
- In this note one party signs and promises to pay in writing a certain amount of money to the other party.
- It is paid in future or under a particular situation.
- The one who signs and writes the note is the maker and other party is payee.
Conclusion
Promissory Note is the one in which one party signs and promises to pay in writing a certain amount of money to the other party.
e.
Summary Introduction
To explain: Trade acceptance
e.
Expert Solution
Answer to Problem 1CQ
Trade acceptance
- It is a type of bill of exchange.
- In this instrument the bank is not involved.
Explanation of Solution
- Purchaser on purchase of goods and services directly accepts this note.
- It is due at future time period.
- It is drawn by the purchaser for purchase of goods.
- Drawer for sale of goods draws it.
Conclusion
The purchaser on purchase of goods and services directly accepts trade acceptance.
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Suppose that you are a U.S.-based importer of goods from the United Kingdom. You expect the value of the pound to increase against the U.S. dollar over the next 30 days. You will be making payment on a shipment of imported goods in 30 days and want to hedge your currency exposure. The U.S. risk-free rate is 5.5 percent, and the U.K. risk-free rate is 4.5 percent. These rates are expected to remain unchanged over the next month. The current spot rate is $1.90.
1.Move forward 10 days. The spot rate is $1.93. Interest rates are unchanged. Calculate the value of your forward position. Do not round intermediate calculations. Round your answer to 4 decimal places.
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Chapter 28 Solutions
Corporate Finance (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 28 - Prob. 1CQCh. 28 - Trade Credit forms In what form is trade credit...Ch. 28 - Prob. 3CQCh. 28 - Five Cs or Credit What arc the five Cs of credit?...Ch. 28 - Credit Period Length What are some of the factors...Ch. 28 - Credit Period Length In each of the following...Ch. 28 - Inventory Types What are the different inventory...Ch. 28 - Just-in-Time Inventory If a company moves to a JIT...Ch. 28 - Inventory Costs If a companys inventory carrying...Ch. 28 - Inventory Period At least part of Dells corporate...
Ch. 28 - Prob. 1QPCh. 28 - Size of Accounts Receivable The Paden Corporation...Ch. 28 - ACP and Accounts Receivable Kyoto Joe, Inc., sells...Ch. 28 - Size of Accounts Receivable Tidwell, Inc., has...Ch. 28 - Terms of Sale A firm offers terms of 1/10, net 30....Ch. 28 - ACP and Receivables Turnover Chen, Inc., bas an...Ch. 28 - Size of Accounts Receivable Essence of Skunk...Ch. 28 - Size of Accounts Receivable The Arizona Bay...Ch. 28 - Evaluating Credit Policy Air Spares is a...Ch. 28 - Credit Policy Evaluation Leeloo, Inc., is...Ch. 28 - EOQ Fhloston Manufacturing uses 1,860 switch...Ch. 28 - EOQ The Trektronics store begins each week with...Ch. 28 - EOQ Derivation Prove that when carrying costs and...Ch. 28 - Credit Policy Evaluation The Harrington...Ch. 28 - Credit Policy Evaluation Happy Times currently has...Ch. 28 - Credit Policy The Silver Spokes Bicycle Shop has...Ch. 28 - Break-Even Quantity In Problem 14, what is the...Ch. 28 - Prob. 18QPCh. 28 - Prob. 19QPCh. 28 - Safety Stocks and Order Points Sach, Inc., expects...Ch. 28 - Evaluating Credit Policy Solar Engines...Ch. 28 - Evaluating Credit Policy In the previous problem,...Ch. 28 - Prob. 1MC
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