Answer:
An unreasonable noncompete clause
Explanation:
A noncompete clause is any provision of a contract that ensures that one party will not compete directly with the other party by starting a similar business or profession that generates competition between them. In the question, there was an example of An unreasonable noncompete clause, which is any clause provided for in a contract that goes beyond the limitations determined to be legally binding, such as the time period and geographic area where an individual cannot to compete.
a. Estimate your exposure b to the exchange risk.
b. Compute the variance of the dollar value of your property that is attributable to the exchange rate uncertainty.
c. Discuss how you can hedge your exchange risk exposure and also examine the consequences of hedging.
Answer and Explanation:
(A) E(P) = (0.6) × ($2800) + (0.4) × ($2250)
= $1680+$900
= $2,580
E(S) = (0.6) × (1.40)+(0.4) × (1.5)
= 0.84 + 0.60
= $1.44
Var(S) = (0.6)(1.40 - 1.44)² + (.4)(1.50 - 1.44)²
= .00096+.00144
= 0.0024.
Cov(P,S) = (0.6)(2800-2580)(1.4-1.44) + (0.4)(2250-2580)(1.5-1.44)
= -5.28-7.92
= -13.20
b = Cov(P,S)/Var(S)
= -13.20/.0024
= -£5,500.
there is a negative exposure. as the pound gets stronger/weaker against the dollar the dollar value of british holding goes higher.
(B) b²Var(S) = (-5500)²(.0024) = 72,600($)²
(C). i would Buy 5,500 forward to hedge exchange risk exposure. By doing this, i can eliminate the volatility of the dollar value of your British asset that is due to the volatility of the exchange rate
The exposure to exchange risk is the difference between the expected dollar value and the current dollar value due to changes in the economy and exchange rate. Variance of the dollar value of the property is calculated factoring in the probabilities of the economic scenarios. Hedging such as use of a forward contract provides certainty by eliminating exchange risk, but it can also limit potential profit.
The exposure to the exchange risk can be estimated by calculating the expected dollar value of the property. If the economy booms, the expected value will be £2,000 * $1.40 = $2800, and if it slows down, it will be £1,500 * $1.50 = $2250. The expected dollar value is then: 0.60 * $2800 + 0.40 * $2250 = $1680 + $900 = $2580. The exchange risk exposure b is the difference between the expected dollar value and the current dollar value of the property.
The variance of the dollar value of your property attributable to the exchange rate uncertainty can be computed as: 0.60 * ($2800 - $2580)² + 0.40 * ($2250 - $2580)².
To hedge your exchange risk exposure, you can enter into a forward contract to sell pounds for dollars at a predetermined rate. This will eliminate exchange rate risk but it could also limit your potential for profit if the pound appreciates more than expected against the dollar. Thus, hedging has the consequence of providing certainty while potentially sacrificing profit.
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Answer: LG needs to be aware of the implications around leasing her property or to selling off out rightly.
whether A sale or lease happens between her and the company /individual who wants to buy over or make use of the property. So she cannot ignore the legal formalities and report the transaction as a lease.
Explanation:
Answer:
Opportunity Cost:
Opportunity cost can be denied as the benefit a person has received but giving up taking another course of action. In other words, it can be defined as the next best alternative.
Given that the Nike women's store earns a profit in excess of $437,000. The owner of the store pays $18,000 per month as rent. A real estate agent approached the owner and informed her that she could add $7,700 per month to her firm's profits by renting out the portion of her store that she uses as a fitness studio.
From the given question the opportunity cost of continuing to operate the fitness studio within the store is $7,700.
A call bond option is termed as the option that implies the bondholder the right to purchase the bonds at the prevailing price in the market. A buyer of a bond call option in the secondary market forecasts a drop in investment substantial rise in bond prices.
The correct option is a. I, II, and III only
Option a. I, II, and III only is correct because The contract value will decline as it reaches maturation because it will become less unpredictable.
The goal of purchasing a call option is to benefit if the price of the underlying stock rises. The attractiveness of the callable bond falls as the price of bitcoin declines, and the worth of the call option reduces as well.
The exercise price is the price where the individual who acquires a call option will be able to acquire the underlying shares. If this price is too high, the benefit from buying the stock at maturity will be too little, diminishing the value of the specified call option.
To know more about the listed call option, refer to the link below:
Answer: a. I, II, and III only
Explanation:
The exercise price refers to the amount that the person who buys the call option will get to buy the underlying stock at. If this price is high, the profit from buying the stock at maturity will be less so the value of the listed call option reduces.
As the contract approaches maturity, the value will decrease because it will be less volatile as it approaches maturity.
The purpose of buying a call option is so that a profit can be made if the underlying stock increases in value. If the stock decreases in value, the allure of the call option decreases so therefore will the value.
Answer:
Explanation:
Year Cash flow PV factor@15% PV@15% PV factor@20% PV@20%
0 (675,000) 1.000 (675,000) 1.000 (675,000)
1 195,000 0.870 169,565 0.833 162,500
2 195,000 0.756 147,448 0.694 135,417
3 195,000 0.658 128,216 0.579 112,847
4 195,000 0.572 111,492 0.482 94,039
5 195,000 0.497 96,949 0.402 78,366
6 195,000 0.432 84,304 0.335 65,305
NPV 62,974 (26,526)
IRR = Lower rate + Difference in rates*(NPV at lower rate)/(Lower rate NPV-Higher rate NPV)
= 15% + 5%*(62974/(62974 + 26526)
= 18.52%
Therefore, The IRR on this project is 18.52%
Answer:
You hold two bonds. One is a 10-year, zero coupon, issue and the other is a 10-year bond that pays a 6% yearly coupon. A similar market rate, 6%, applies to the two securities. In the event that the market rate increases from the present level, the zero coupon security will encounter the bigger rate decay. In this manner, the shorter the opportunity to development, the more prominent the adjustment in the estimation of a security because of a given change in financing costs.