Chapter 8 课后答案
CCNA_ENetwork_Chapter_8_答案(dengwenhui)-ccit
1大多数企业LAN 中的双绞线网络电缆使用哪种连接器？BNCRJ-11RJ-45F 型2以下哪项被视为选择无线介质的优点？主机移动更方便安全风险更低减少干扰的影响环境对有效覆盖面积的影响更小3以下哪些特征描述的是光缆？（选择两项）不受EMI 或RFI 影响。
每对电缆都包裹在金属箔中。
结合取消、屏蔽和绕绞技术来保护数据。
最高速度为100 Mbps。
最昂贵的LAN 电缆类型。
4网络中什么时候使用直通电缆？通过控制台端口连接路由器时连接两台交换机时连接主机与交换机时连接两台路由器时5在网络中传输数据时，物理层的主要作用是什么？创建信号以表示介质上每个帧中的比特为设备提供物理编址确定数据包的网络通路控制数据对介质的访问6数据传输的三种量度标准是什么？（选择三项）实际吞吐量频率幅度吞吐量串扰带宽7OSI 哪一层负责网络通信的二进制传输、电缆规格和物理方面？表示层传输层数据链路层物理层8哪种电缆通常与光缆相关联？主干电缆水平电缆跳线电缆工作区域电缆9以下哪项是单模光缆的特征？一般使用LED 作为光源因为有多条光通路，核心相对较粗价格比多模低一般使用激光作为光源10哪种信号传输方法使用无线电波传送信号？电光无线声11如果在网络中使用非屏蔽双绞线铜缆，导致线对内串扰的原因是什么？相邻线对周围的磁场使用编织线屏蔽相邻线对从电缆远端反射回来的电波因两个节点尝试同时使用介质而导致的冲突12请参见图示。
哪种 5 类电缆用于在主机 A 和主机 B 之间建立以太网连接？同轴电缆全反电缆交叉电缆直通电缆13在可能存在电气危险或电磁干扰的LAN 安装中，主干布线建议使用哪种类型的介质？同轴光纤5e 类UTP6 类UTPSTP14对网络电缆采用的连接器不正确可能产生什么后果？会将数据转发到错误的节点。
通过该电缆传输的数据可能发生信号丢失。
将对该电缆中传输的数据采用不正确的信号方法。
该电缆中发送的数据所采用的编码方法将更改，用于补偿不当连接。
国际财务管理(英文版) 第11版 马杜拉 答案 Chapter 8
Chapter 8Relationships Among Inflation,Interest Rates, and Exchange Rates Lecture OutlinePurchasing Power Parity (PPP)Interpretations of PPPRationale Behind PPP TheoryDerivation of PPPUsing PPP to Estimate Exchange Rate EffectsGraphic Analysis of PPPTesting the PPP TheoryWhy PPP Does Not OccurPPP in the Long RunInternational Fisher Effect (IFE)Implications of the IFE for Foreign InvestorsDerivation of the IFEGraphic Analysis of the IFETests of the IFEWhy the IFE Does Not OccurComparison of IRP, PPP, and IFE TheoriesChapter ThemeThis chapter discusses the relationship between inflation and exchange rates according to the purchasing power parity (PPP) theory. Since this is one of the most popular subjects in inter-national finance, it is covered thoroughly. While PPP is a relevant theory, it should be emphasized that PPP will not always hold in reality. It does however, provide a foundation in understanding how inflation can affect exchange rates. The international Fisher effect (IFE) is also discussed in this chapter. This theory is also very important. Yet, it should again be emphasized that this theory does not always hold. If the PPP and IFE theories held consistently, decision making by MNCs would be much easier. Because these theories do not hold consistently, an MNC’s decision making is very challenging.Topics to Stimulate Class Discussion1. Provide reasoning for why highly inflated countries such as Brazil tend to have weak homecurrencies.2. Identify the inflation rate of your home country and some well-known foreign country. Thenidentify the percentage change of your home currency with respect to that foreign country.Did the currency change in the direction and by the magnitude that you would have expected according to PPP? If not, offer possible reasons for this discrepancy.3. Identify the quoted one-year interest rates in your home country and in a well-known foreigncountry as of one year ago. Also determine how your home currency changed relative to this foreign currency over the last year. Did the currency change according to the IFE theory? If not, does this information disprove IFE? Elaborate.4. Provide a simple explanation of the difference between interest rate parity (from the previouschapter), PPP (from this chapter), and IFE (from this chapter).Critical debateDoes PPP Eliminate Concerns about Long-Term Exchange Rate Risk?Proposition Yes. Studies have shown that exchange rate movements are related to inflation differentials in the long run. Based on PPP, the currency of a high-inflation country will depreciate against the home currency. A subsidiary in that country should generate inflated revenue from the inflation, which will help offset the adverse exchange effects when its earnings are remitted to the parent. If a firm is focused on long-term performance, the deviations from PPP will offset over time. In some years, the exchange rate effects may exceed the inflation effects, and in other years the inflation effects will exceed the exchange rate effects.Opposing view No. Even if the relationship between inflation and exchange rate effects is consistent, this does not guarantee that the effects on the firm will be offsetting. A subsidiary in a high-inflation country will not necessarily be able to adjust its price level to keep up with the increased costs of doing business there. The effects vary with each MNC’s situation. Even if the subsidiary can raise its prices to match the rising costs, there are short-term deviations from PPP. The investors who invest in an MNC’s stock may be concerned about short-term deviations fromPPP, because they will not necessarily hold the stock for the long term. Thus, investors may prefer that firms manage in a manner that reduces the volatility in their performance in short-run and long-run periods.With whom do you agree? State your reasons Examine the exchange rate policies of the major multinationals by referring to their annual reports. The Forbes listing of major multinationals on the web is a good starting point. In particular, consult the reports of Renault (France) and Phillips (Holland).ANSWER: It is possible that inflation and exchange rate effects will offset over the long run. However, many investors will not be satisfied because they may invest in the firm for just a few years or even a shorter term. Thus, they will prefer that MNCs assess their exposure to exchange rate risk and attempt to limit the risk.Answers to End of Chapter Questions1. PPP. Explain the theory of purchasing power parity (PPP). Based on this theory, what is ageneral forecast of the values of currencies in countries with high inflation?ANSWER: PPP suggests that the purchasing power of a consumer will be similar when purchasing goods in a foreign country or in the home country. If inflation in a foreign country differs from inflation in the home country, the exchange rate will adjust to maintain equal purchasing power.Currencies in countries with high inflation will be weak according to PPP, causing the purchasing power of goods in the home country versus these countries to be similar.2. Rationale of PPP. Explain the rationale of the PPP theory.ANSWER: When inflation is high in a particular country, foreign demand for goods in that country will decrease. In addition, that country’s demand for foreign goods should increase.Thus, the home currency of that country will weaken; this tendency should continue until the currency has weakened to the extent that a foreign country’s goods are no more attractive than the home country’s goods. Inflation differentials are offset by exchange rate changes. 3. Testing PPP. Explain how you could determine whether PPP exists. Describe a limitation intesting whether PPP holds.ANSWER: One method is to choose two countries and compare the inflation differential to the exchange rate change for several different periods. Then, determine whether the exchange rate changes were similar to what would have been expected under PPP theory.A second method is to choose a variety of countries and compare the inflation differential ofeach foreign country relative to the home country for a given period. Then, determine whether the exchange rate changes of each foreign currency were what would have been expected based on the inflation differentials under PPP theory.A limitation in testing PPP is that the results will vary with the base period chosen. The baseperiod should reflect an equilibrium position, but it is difficult to determine when such a period exists.4. Testing PPP. Inflation differentials between the U.S. and other industrialized countries havetypically been a few percentage points in any given year. Yet, in many years annual exchange rates between the corresponding currencies have changed by 10 percent or more.What does this information suggest about PPP?ANSWER: The information suggests that there are other factors besides inflation differentials that influence exchange rate movements. Thus, the exchange rate movements will not necessarily conform to inflation differentials, and therefore PPP will not necessarily hold.5. Limitations of PPP. Explain why PPP does not hold.ANSWER: PPP does not consistently hold because there are other factors besides inflation that influences exchange rates. Thus, exchange rates will not move in perfect tandem with inflation differentials. In addition, there may not be substitutes for traded goods. Therefore, even when a country’s inflation increases, the foreign demand for its products will not necessarily decrease (in the manner suggested by PPP) if substitutes are not available.6. Implications of IFE. Explain the international Fisher effect (IFE). What is the rationale forthe existence of the IFE? What are the implications of the IFE for firms with excess cash that consistently invest in foreign Treasury bills? Explain why the IFE may not hold.ANSWER: The IFE suggests that a currency’s value will adjust in accordance with the differential in interest rates between two countries.The rationale is that if a particular currency exhibits a high nominal interest rate, this may reflect a high anticipated inflation. Thus, the inflation will place downward pressure on the currency’s value if it occurs.The implications are that a firm that consistently purchases foreign Treasury bills will on average earn a similar return as on domestic Treasury bills.The IFE may not hold because exchange rate movements react to other factors in addition to interest rate differentials. Therefore, an exchange rate will not necessarily adjust in accordance with the nominal interest rate differentials, so that IFE may not hold.7. Implications of IFE. Assume UK interest rates are generally above foreign interest rates.What does this suggest about the future strength or weakness of the pound based on the IFE?Should UK investors invest in foreign securities if they believe in the IFE? Should foreign investors invest in UK securities if they believe in the IFE?ANSWER: The IFE would suggest that the pound will depreciate over time if UK interest rates are currently higher than foreign interest rates. Consequently, foreign investors who purchased UK securities would on average receive a similar yield as what they receive in their own country, and UK investors who purchased foreign securities would on average receive a yield similar to UK rates.8. Comparing Parity Theories. Compare and contrast interest rate parity (discussed in theprevious chapter), purchasing power parity (PPP), and the international Fisher effect (IFE).ANSWER: Interest rate parity can be evaluated using data at any one point in time to determine the relationship between the interest rate differential of two countries and the forward premium (or discount). PPP suggests a relationship between the inflation differential of two countries and the percentage change in the spot exchange rate over time. IFE suggestsa relationship between the interest rate differential of two countries and the percentagechange in the spot exchange rate over time. IFE is based on nominal interest rate differentials, which are influenced by expected inflation. Thus, the IFE is closely related to PPP.9. Real Interest Rate. One assumption made in developing the IFE is that all investors in allcountries have the same real interest rate. What does this mean?ANSWER: The real return is the nominal return minus the inflation rate. If all investors require the same real return, then the differentials in nominal interest rates should be solely due to differentials in anticipated inflation among countries.10. Interpreting Inflationary Expectations. If investors in the UK and Canada require the samereal interest rate, and the nominal rate of interest is 2 percent higher in Canada, what does this imply about expectations of UK inflation and Canadian inflation? What do these inflationary expectations suggest about future exchange rates?ANSWER: Expected inflation in Canada is 2 percent above expected inflation in the UK. If these inflationary expectations come true, PPP would suggest that the value of the Canadian dollar should depreciate by 2 percent against the pound.11. PPP Applied to the Euro. Assume that several European countries that use the euro as theircurrency experience higher inflation than the United States, while two other European countries that use the euro as their currency experience lower inflation than the United States.According to PPP, how will the euro’s value against the dollar be affected?ANSWER: The high European inflation overall would reduce the U.S. demand for European products, increase the European demand for U.S. products, and cause the euro to depreciate against the dollar.According to the PPP theory, the euro's value would adjust in response to the weighted inflation rates of the European countries that are represented by the euro relative to the inflation in the U.S. If the European inflation rises, while the U.S. inflation remains low, there would be downward pressure on the euro.12. Source of Weak Currencies. Currencies of some Latin American countries, such as Braziland Venezuela, frequently weaken against most other currencies. What concept in this chapter explains this occurrence? Why don’t all U.S.-based MNCs use forward contracts to hedge their future remittances of funds from Latin American countries to the U.S. even if they expect depreciation of the currencies against the dollar?ANSWER: Latin American countries typically have very high inflation, as much as 200 percent or more. PPP theory would suggest that currencies of these countries will depreciateagainst the U.S. dollar (and other major currencies) in order to retain purchasing power across countries. The high inflation discourages demand for Latin American imports and places downward pressure in their Latin American currencies. Depreciation of the currencies offsets the increased prices on Latin American goods from the perspective of importers in other countries.Interest rate parity forces the forward rates to contain a large discount due to the high interest rates in Latin America, which reflects a disadvantage of hedging these currencies. The decision to hedge makes more sense if the expected degree of depreciation exceeds the degree of the forward discount. Also, keep in mind that some remittances cannot be perfectly hedged anyway because the amount of future remittances is uncertain.13. PPP. Japan has typically had lower inflation than the United States. How would one expectthis to affect the Japanese yen’s value? Why does this expected relationship not always occur?ANSWER: Japan’s low inflation should place upward pressure on the yen’s value. Yet, other factors can sometimes offset this pressure. For example, Japan heavily invests in U.S.securities, which places downward pressure on the yen’s value.14. IFE. Assume that the nominal interest rate in Mexico is 48 percent and the interest rate in theUnited States is 8 percent for one-year securities that are free from default risk. What does the IFE suggest about the differential in expected inflation in these two countries? Using this information and the PPP theory, describe the expected nominal return to U.S. investors who invest in Mexico.ANSWER: If investors from the U.S. and Mexico required the same real (inflation-adjusted) return, then any difference in nominal interest rates is due to differences in expected inflation. Thus, the inflation rate in Mexico is expected to be about 40 percent above the U.S.inflation rate.According to PPP, the Mexican peso should depreciate by the amount of the differential between U.S. and Mexican inflation rates. Using a 40 percent differential, the Mexican peso should depreciate by about 40 percent. Given a 48 percent nominal interest rate in Mexico and expected depreciation of the peso of 40 percent, U.S. investors will earn about 8 percent.(This answer used the inexact formula, since the concept is stressed here more than precision.)15. IFE. Shouldn’t the IFE discourage investors from attempting to capitalize on higher foreigninterest rates? Why do some investors continue to invest overseas, even when they have no other transactions overseas?ANSWER: According to the IFE, higher foreign interest rates should not attract investors because these rates imply high expected inflation rates, which in turn imply potential depreciation of these currencies. Yet, some investors still invest in foreign countries where nominal interest rates are high. This may suggest that some investors believe that (1) the anticipated inflation rate embedded in a high nominal interest rate is overestimated, or (2) the potentially high inflation will not cause substantial depreciation of the foreign currency (which could occur if adequate substitute products were not available elsewhere), or (3) thereare other factors that can offset the possible impact of inflation on the foreign currency’s value.16. Changes in Inflation. Assume that the inflation rate in Brazil is expected to increasesubstantially. How will this affect Brazil’s nominal interest rates and the value of its currency (called the real)? If the IFE holds, how will the nominal return to UK investors who invest in Brazil be affected by the higher inflation in Brazil? Explain.ANSWER: Brazil’s nominal interest rate would likely increase to maintain the real return required by Brazilian investors. The Brazilian real would be expected to depreciate according to the IFE. If the IFE holds, the return to UK investors who invest in Brazil would not be affected. Even though they now earn a higher nominal interest rate, the expected decline in the Brazilian real offsets the additional interest to be earned.17. Comparing PPP and IFE. How is it possible for PPP to hold if the IFE does not?ANSWER: For the IFE to hold, the following conditions are necessary:(1) investors across countries require the same real returns,(2) the expected inflation rate embedded in the nominal interest rate occurs,(3) the exchange rate adjusts to the inflation rate differential according to PPP.If conditions (1) or (2) do not hold, PPP may still hold, but investors may achieve consistently higher returns when investing in a foreign country’s securities. Thus, IFE would be refuted.18. Estimating Depreciation Due to PPP. Assume that the spot exchange rate of the Britishpound is $1.73. How will this spot rate adjust according to PPP if the United Kingdom experiences an inflation rate of 7 percent while the United States experiences an inflation rate of 2 percent?ANSWER: According to PPP, the exchange rate of the pound will depreciate by 4.7 percent.Therefore, the spot rate would adjust to $1.73 × [1 + (–.047)] = $1.65.19. Forecasting the Future Spot Rate Based on IFE. Assume that the spot exchange rate of theSingapore dollar is £0.35. The one-year interest rate is 11 percent in the United Kingdom and7 percent in Singapore. What will the spot rate be in one year according to the IFE? (Youmay use the approximate formula to answer this question.)ANSWER: £0.35 × (1 + .04) = £0.36420. Deriving Forecasts of the Future Spot Rate. As of today, assume the following informationis available:UK MexicoReal rate of interest requiredinvestors 2% 2%byNominal interest rate 11% 15%Spot rate — £0.05One-year forward rate — £0.049a. Use the forward rate to forecast the percentage change in the Mexican peso over the nextyear.ANSWER: (£0.049– £0.05)/£0.05 = –.02, or –2%b. Use the differential in expected inflation to forecast the percentage change in theMexican peso over the next year.ANSWER: 11% – 15% = –4%; the negative sign represents depreciation of the peso.c. Use the spot rate to forecast the percentage change in the Mexican peso over the next year.ANSWER: zero percent change21. Inflation and Interest Rate Effects. The opening of Russia's market has resulted in a highlyvolatile Russian currency (the rouble). Russia's inflation has commonly exceeded 20 percent per month. Russian interest rates commonly exceed 150 percent, but this is sometimes less than the annual inflation rate in Russia.a. Explain why the high Russian inflation has put severe pressure on the value of theRussian rouble.ANSWER: As Russian prices were increasing, the purchasing power of Russian consumers was declining. This would encourage them to purchase goods in the UK and elsewhere, which results in a large supply of roubles for sale. Given the high Russian inflation, foreign demand for roubles to purchase Russian goods would be low. Thus, the rouble’s value should depreciate against the dollar, and against other currencies.b. Does the effect of Russian inflation on the decline in the rouble’s value support the PPPtheory? How might the relationship be distorted by political conditions in Russia?ANSWER: The general relationship suggested by PPP is supported, but the rouble’s value will not normally move exactly as specified by PPP. The political conditions that could restrict trade or currency convertibility can prevent Russian consumers from shifting to foreign goods. Thus, the rouble may not decline by the full degree to offset the inflation differential between Russia and the UK Furthermore, the government may not allow the rouble to float freely to its proper equilibrium level.c. Does it appear that the prices of Russian goods will be equal to the prices of UK goodsfrom the perspective of Russian consumers (after considering exchange rates)? Explain.ANSWER: Russian prices might be higher than UK prices, even after considering exchange rates, because the rouble might not depreciate enough to fully offset the Russian inflation. The exchange rate cannot fully adjust if there are barriers on trade or currency convertibility.d. Will the effects of the high Russian inflation and the decline in the rouble offset eachother for UK importers? That is, how will UK importers of Russian goods be affected by the conditions?ANSWER: UK importers will likely experience higher prices, because the Russian inflation may not be completely offset by the decline in the rouble’s value. This may cause a reduction in the UK demand for Russian goods.22. IFE Application to Asian Crisis. Before the Asian crisis, many investors attempted tocapitalize on the high interest rates prevailing in the Southeast Asian countries although the level of interest rates primarily reflected expectations of inflation. Explain why investors behaved in this manner.Why does the IFE suggest that the Southeast Asian countries would not have attracted foreign investment before the Asian crisis despite the high interest rates prevailing in those countries?ANSWER: The investors' behavior suggests that they did not expect the international Fisher effect (IFE) to hold. Since central banks of some Asian countries were maintaining their currencies within narrow bands, they were effectively preventing the exchange rate from depreciating in a manner that would offset the interest rate differential. Consequently, superior profits from investing in the foreign countries were possible.If investors believed in the IFE, the Asian countries would not attract a high level of foreign investment because of exchange rate expectations. Specifically, the high nominal interest rate should reflect a high level of expected inflation. According to purchasing power parity (PPP), the higher interest rate should result in a weaker currency because of the implied market expectations of high inflation.23. IFE Applied to the Euro. Given the recent conversion of several European currencies to theeuro, explain what would cause the euro’s value to change against the dollar according to the IFE.ANSWER: If interest rates change in these European countries whose home currency is the euro, the expected inflation rate in those countries change, so that the inflation differential between those countries and the U.S. changes. Thus, there may be an impact on the value of the euro, because a change in the inflation differential affects trade flows and therefore affects the exchange rate.Advanced Questions24. IFE. Beth Miller does not believe that the international Fisher effect (IFE) holds. Currentone-year interest rates in Europe are 5 percent, while one-year interest rates in the U.S. are 3 percent. Beth converts $100,000 to euros and invests them in Germany. One year later, she converts the euros back to dollars. The current spot rate of the euro is $1.10.a. According to the IFE, what should the spot rate of the euro in one year be?b. If the spot rate of the euro in one year is $1.00, what is Beth’s percentage return from herstrategy?c. If the spot rate of the euro in one year is $1.08, what is Beth’s percentage return from herstrategy?d. What must the spot rate of the euro be in one year for Beth’s strategy to be successful?ANSWER:a.%90.11)05.1()03.1(1)1()1(−=−=−++=f h f i i eIf the IFE holds, the euro should depreciate by 1.90 percent in one year. This translates to a spot rate of $1.10 × (1 – 1.90%) = $1.079.b.1. Convert dollars to euros: $100,000/$1.10 = €90,909.092. Invest euros for one year and receive €90,909.09 × 1.05 = €95,454.553. Convert euros back to dollars and receive €95,454.55 × $1.00 = $95,454.55The percentage return is $95,454.55/$100,000 – 1 = –4.55%.c.1. Convert dollars to euros: $100,000/$1.10 = €90,909.092. Invest euros for one year and receive €90,909.09 × 1.05 = €95,454.553. Convert euros back to dollars and receive €95,454.55 × $1.08 = $103,090.91The percentage return is $103,090.91/$100,000 – 1 = 3.09%.d. Beth’s strategy would be successful if the spot rate of the euro in one year is greater than$1.079.25. Integrating IRP and IFE. Assume the following information is available for the U.S. andEurope:U.S. Europe Nominal interest rate 4% 6%Expected inflation 2% 5%Spot rate ----- $1.13One-year forward rate ----- $1.10a. Does IRP hold?b. According to PPP, what is the expected spot rate of the euro in one year?c. According to the IFE, what is the expected spot rate of the euro in one year?d. Reconcile your answers to parts (a). and (c).ANSWER:a.%89.11)06.1()04.1(1)1()1(−=−=−++=f h i i pTherefore, the forward rate of the euro should be $1.13 × (1 – 1.89%) = $1.109. IRP does not hold in this case.b.%86.21)05.1()02.1(1)1()1(−=−=−++=f h f I I eAccording to PPP, the expected spot rate of the euro in one year is $1.13 × (1 – 2.86%) = $1.098.c.%89.11)06.1()04.1(1)1()1(−=−=−++=f h f i i eAccording to the IFE, the expected spot rate of the euro in one year is $1.13 × (1 – 2.86%) = $1.098.Parts a and c combined say that the forward rate premium or discount is exactly equal to theexpectedpercentage appreciation or depreciation of the euro.26. IRP. The one-year risk-free interest rate in Mexico is 10%. The one-year risk-free rate in theUK is 2%. Assume that interest rate parity exists. The spot rate of the Mexican peso is £0.14.a. What is the forward rate premium?b. What is the one-year forward rate of the peso?c. Based on the international Fisher effect, what is the expected change in the spot rate over thenext year?d.If the spot rate changes as expected according to the IFE, what will be the spot rate in oneyear?pare your answers to (b) and (d) and explain the relationship.ANSWER:a. According to interest rate parity, the forward premium is07273.1)10.1()02.1(−=−++b. The forward rate is £0.14 × (1 – .07273) = £0.1298.c. According to the IFE, the expected change in the peso is:07273.1)10.1()02.1(−=−++or –7.273%d. £.14 × (1 – .07273) = £0.1298e. The answers are the same. When IRP holds, the forward rate premium and the expected percentage change in the spot rate are derived in the same manner. Thus, the forward premium serves as the forecasted percentage change in the spot rate according to IFE.27. Testing the PPP. How could you use regression analysis to determine whether therelationship specified by PPP exists on average? Specify the model, and describe how you would assess the regression results to determine if there is a significant difference from the relationship suggested by PPP.ANSWER: A regression model could be applied to historical data to test PPP. The model isspecified as:()e a a 1+I 1 + I u f 01U.S.f =+−⎡⎣⎢⎤⎦⎥+1where e f is the percentage change in the foreign currency’s exchange rate, I U.S. and I f are U.S.and foreign inflation rates, a 0 is a constant, a 1 is the slope coefficient, and u is an error term. If PPP holds, a 0 should equal zero, and a 1 should equal 1. A t-test on a 0 and a 1 is shown below.t -test for a : t = a 0s.e. of a t -test for a : t = a1s.e. of a 0001 1 1−−。
习题答案Principles of Corporate Finance第十版 Chapter8
CHAPTER 8Portfolio Theory and the Capital Asset Pricing ModelAnswers to Problem Sets1. a. 7%b. 27% with perfect positive correlation; 1% with perfect negative correlation;19.1% with no correlationc. See Figure 1 belowd. No, measure risk by beta, not by standard deviation.2. a. Portfolio A (higher expected return, same risk)b. Cannot say (depends on investor’s attitude -toward risk)c. Portfolio F (lower risk, same -expected return).3. Sharpe ratio = 7.1/20.2 = .3514. a. Figure 8.13b: Diversification reduces risk (e.g., a mixture of portfolios Aand B would have less risk than the average of A and B).b. Those along line AB in Figure 9.13a.c. See Figure 2 below5. a. See Figure 3 belowb. A, D, Gc. Fd. 15% in Ce. Put 25/32 of your money in F and lend 7/32 at 12%: Expected return = 7/32X 12 + 25/32 X 18 = 16.7%; standard deviation = 7/32 X 0 + (25/32) X 32 =25%. If you could borrow without limit, you would achieve as high anexpected return as you’d like, with correspondingly high risk, of course.6. a. 4 + (1.41 X 6) = 12.5%b. Amazon: 4 + (2.16 X 6) = 17.0%c. Campbell Soup: 4 + (.30 X 6) = 5.8%d. Lower. If interest rate is 4%, r = 4 + (1.75 X 6) = 14.5%; if rate = 6%, r = 6 +(1.75 X 4) = 13.0%e. Higher. If interest rate is 4%, r = 4 + (.55 X 6) = 7.3%; if rate = 6%, r = 6 +(.55 X 4) 5 8.2%7. a. Trueb. False (it offers twice the market risk premium)c. False8. a. 7%b. 7 + 1(5) + 1(-1) + 1(2) = 13%c. 7 + 0(5) + 2(-1) + 0(2) = 5%d. 7 + 1(5) + (-1.5)(-1) + 1(2) = 15.5%.9. a. False – investors demand higher expected rates of return on stocks withmore nondiversifiable risk.b. False – a security with a beta of zero will offer the risk-free rate of return.c. False – the beta will be: (1/3 ⨯ 0) + (2/3 ⨯ 1) = 0.67d. Truee. True10. In the following solution, security one is Campbell Soup and security two isBoeing. Then:r1 = 0.031 σ1 = 0.158r2 = 0.095 σ2 = 0.237Further, we know that for a two-security portfolio:r p = x1r1 + x2r2σp2 = x12σ12 + 2x1x2σ1σ2ρ12 + x22σ22 Therefore, we have the following results:x1x2r pσπ σπ when ρ = 0 when ρ = 0.51 0 3.10% 0.02496 0.02496 0.9 0.1 3.74% 0.02078 0.02415 0.8 0.2 4.38% 0.01822 0.02422 0.7 0.3 5.02% 0.01729 0.02515 0.6 0.4 5.66% 0.01797 0.02696 0.5 0.5 6.30% 0.02028 0.02964 0.4 0.6 6.94% 0.02422 0.03320 0.3 0.7 7.58% 0.02977 0.03763 0.2 0.8 8.22% 0.03695 0.04294 0.1 0.9 8.86% 0.04575 0.04912 0 1 9.50% 0.05617 0.0561711.a.Portfolior 1 10.0% 5.1% 2 9.0 4.6 311.06.4b.See the figure below. The set of portfolios is represented by the curved line. The five points are the three portfolios from Part (a) plus thefollowing two portfolios: one consists of 100% invested in X and the other consists of 100% invested in Y.c. See the figure below. The best opportunities lie along the straight line. From the diagram, the optimal portfolio of risky assets is portfolio 1, and so Mr. Harrywitz should invest 50 percent in X and 50 percent in Y.00.050.10.150.020.040.060.080.1Standard DeviationExpected Return12. a. Expected return = (0.6 ⨯ 15) + (0.4 ⨯ 20) = 17%Variance = (0.62⨯ 202) + (0.42⨯ 222) + 2(0.6)(0.4)(0.5)(20)(22) = 327.04Standard deviation = 327.04(1/2) = 18.08%b. Correlation coefficient = 0 ⇒ Standard deviation = 14.88%Correlation coefficient = –0.5 ⇒ Standard deviation = 10.76%c. His portfolio is better. The portfolio has a higher expected return and alower standard deviation.13. a.Average SD Sharpe RatioSauros 14.6 15.2 0.77S&P500 14.4 10.5 1.09Risk Free 2.9 1.7b. We can calculate the Beta of her investment as follows (see Table 7.7):TOTALDeviationfrom Averagemkt return 17.2 -1.9 -8.0 1.4 -8.8Deviationfrom AverageSauros return 24.5 -3.6 -12.0 3.4 -12.3SquaredDeviationfrom Averagemarketreturn 296.5 3.5 63.7 2.0 77.1 442.8Product ofDeviationsfrom Averagereturns 421.9 6.8 95.8 4.8 108.0 637.2Marketvariance 88.6Covariance 127.4Beta 1.4To construct a portfolio with a beta of 1.4, we will borrow .4 at the risk free rateand invest this in the market portfolio. This gives us annual returns as follows:Average1.4 times market 20.1less 0.4 time rf -1.2net return 19.0The Sauros portfolio does not generate sufficient returns to compensate for itsrisk.14. a. The Beta of the first portfolio is 0.714 and offers an average return of 5.9%b. We can devise a superior portfolio with a blend of 85.5% Campbell’s Soupand 14.5% Amazon.15. a.b. Market risk premium = r m– r f = 0.12 – 0.04 = 0.08 = 8.0%c. Use the security market line:r = r f + β(r m– r f)r = 0.04 + [1.5 ⨯ (0.12 – 0.04)] = 0.16 = 16.0%d. For any investment, we can find the opportunity cost of capital using thesecurity market line. With β = 0.8, the opportunity cost of capital is:r = r f + β(r m– r f)r = 0.04 + [0.8 ⨯ (0.12 – 0.04)] = 0.104 = 10.4%The opportunity cost of capital is 10.4% and the investment is expected toearn 9.8%. Therefore, the investment has a negative NPV.e. Again, we use the security market line:r = r f + β(r m– r f)0.112 = 0.04 + β(0.12 – 0.04) ⇒β = 0.916. a. Percival’s current portfolio provides an expected return of 9% with anannual standard deviation of 10%. First we find the portfolio weights for acombination of Treasury bills (security 1: standard deviation = 0%) and theindex fund (security 2: standard deviation = 16%) such that portfoliostandard deviation is 10%. In general, for a two security portfolio:σP2 = x12σ12 + 2x1x2σ1σ2ρ12 + x22σ22(0.10)2 = 0 + 0 + x22(0.16)2x2 = 0.625 ⇒ x1 = 0.375Further:r p = x1r1 + x2r2r p = (0.375 ⨯ 0.06) + (0.625 ⨯ 0.14) = 0.11 = 11.0%Therefore, he can improve his expected rate of return without changingthe risk of his portfolio.b. With equal amounts in the corporate bond portfolio (security 1) and theindex fund (security 2), the expected return is:r p = x1r1 + x2r2r p = (0.5 ⨯ 0.09) + (0.5 ⨯ 0.14) = 0.115 = 11.5%σP2 = x12σ12 + 2x1x2σ1σ2ρ12 + x22σ22σP2 = (0.5)2(0.10)2 + 2(0.5)(0.5)(0.10)(0.16)(0.10) + (0.5)2(0.16)2σP2 = 0.0097σP = 0.985 = 9.85%Therefore, he can do even better by investing equal amounts in thecorporate bond portfolio and the index fund. His expected return increasesto 11.5% and the standard deviation of his portfolio decreases to 9.85%. 17. First calculate the required rate of return (assuming the expansion assets bearthe same level of risk as historical assets):r = r f + β(r m– r f)r = 0.04 + [1.4 ⨯ (0.12 – 0.04)] = 0.152 = 15.2%The use this to discount future cash flows; NPV = -25.2910 15 0.243 3.64NPV -25.2918. a. True. By definition, the factors represent macro-economic risks thatcannot be eliminated by diversification.b. False. The APT does not specify the factors.c. True. Different researchers have proposed and empirically investigateddifferent factors, but there is no widely accepted theory as to what thesefactors should be.d. True. To be useful, we must be able to estimate the relevant parameters.If this is impossible, for whatever reason, the model itself will be oftheoretical interest only.19. Stock P: r = 5% + (1.0 ⨯ 6.4%) + [(–2.0) ⨯ (–0.6%)] + [(–0.2) ⨯ 5.1%] = 11.58%Stock P2: r = 5% + (1.2 ⨯ 6.4%) + [0 ⨯ (–0.6%)] + (0.3 ⨯ 5.1%) = 14.21%Stock P3: r = 5% + (0.3 ⨯ 6.4%) + [0.5 ⨯ (–0.6%)] + (1.0 ⨯ 5.1%) = 11.72%20. a. Factor risk exposures:b1(Market) = [(1/3)⨯1.0] + [(1/3)⨯1.2] + [(1/3)⨯0.3] = 0.83b2(Interest rate) = [(1/3)⨯(–2.0)] +[(1/3)⨯0] + [(1/3)⨯0.5] = –0.50b3(Yield spread) = [(1/3)⨯(–0.2)] + [(1/3)⨯0.3] + [(1/3)⨯1.0] = 0.37b. r P = 5% + (0.83⨯6.4%) + [(–0.50)⨯(–0.6%)] + [0.37⨯5.1%] = 12.50%21. r Boeing = 0.2% + (0.66 ⨯ 7%) + (01.19 ⨯ 3.6%) + (-0.76 ⨯ 5.2%) = 5.152%R J&J = 0.2% + (0.54 ⨯ 7%) + (-0.58 ⨯ 3.6%) + (0.19 ⨯ 5.2%) = 2.88%R Dow = 0.2% + (1.05 ⨯ 7%) + (–0.15 ⨯ 3.6%) + (0.77 ⨯ 5.2%) = 11.014%r Msft= 0.2% + (0.91 ⨯ 7%) + (0.04 × 3.6%) + (–0.4 ⨯ 5.2%) = 4.346%22. In general, for a two-security portfolio:σp2 = x12σ12 + 2x1x2σ1σ2ρ12 + x22σ22and:x1 + x2 = 1Substituting for x2 in terms of x1 and rearranging:σp2 = σ12x12 + 2σ1σ2ρ12(x1– x12) + σ22(1 – x1)2Taking the derivative of σp2 with respect to x1, setting the derivative equal to zero and rearranging:x1(σ12– 2σ1σ2ρ12 + σ22) + (σ1σ2ρ12–σ22) = 0Let Campbell Soup be security one (σ1 = 0.158) and Boeing be security two(σ2 = 0.237). Substituting these numbers, along with ρ12 = 0.18, we have:x1 = 0.731Therefore:x2 = 0.26923. a. The ratio (expected risk premium/standard deviation) for each of the fourportfolios is as follows:Portfolio A: (22.8 – 10.0)/50.9 = 0.251Portfolio B: (10.5 – 10.0)/16.0 = 0.031Portfolio C: (4.2 – 10.0)/8.8 = -0.659Therefore, an investor should hold Portfolio A.b. The beta for Amazon relative to Portfolio A is identical.c. If the interest rate is 5%, then Portfolio C becomes the optimal portfolio, asindicated by the following calculations:Portfolio A: (22.8 – 5.0)/50.9 = 0.35Portfolio B: (10.5 – 5.0)/16.0 = 0.344Portfolio C: (4.2 – 5.0)/8.8 = -0.091The results do not change.24. Let r x be the risk premium on investment X, let x x be the portfolio weight of X (andsimilarly for Investments Y and Z, respectively).a. r x = (1.75⨯0.04) + (0.25⨯0.08) = 0.09 = 9.0%r y = [(–1.00)⨯0.04] + (2.00⨯0.08) = 0.12 = 12.0%r z = (2.00⨯0.04) + (1.00⨯0.08) = 0.16 = 16.0%b. This portfolio has the following portfolio weights:x x = 200/(200 + 50 – 150) = 2.0x y = 50/(200 + 50 – 150) = 0.5x z = –150/(200 + 50 – 150) = –1.5The portfolio’s sensitivities to the factors are:Factor 1: (2.0⨯1.75) + [0.5⨯(–1.00)] – (1.5⨯2.00) = 0Factor 2: (2.0⨯0.25) + (0.5⨯2.00) – (1.5⨯1.00) = 0Because the sensitivities are both zero, the expected risk premium is zero.c. This portfolio has the following portfolio weights:x x = 80/(80 + 60 – 40) = 0.8x y = 60/(80 + 60 – 40) = 0.6x z = –40/(80 + 60 – 40) = –0.4The sensitivities of this portfolio to the factors are:Factor 1: (0.8⨯1.75) + [0.6⨯(–1.00)] – (0.4⨯2.00) = 0Factor 2: (0.8⨯0.25) + (0.6⨯2.00) – (0.4⨯1.00) = 1.0The expected risk premium for this portfolio is equal to the expected riskpremium for the second factor, or 8 percent.d. This portfolio has the following portfolio weights:x x = 160/(160 + 20 – 80) = 1.6x y = 20/(160 + 20 – 80 ) = 0.2x z = –80/(160 + 20 – 80) = –0.8The sensitivities of this portfolio to the factors are:Factor 1: (1.6⨯1.75) + [0.2⨯(–1.00)] – (0.8⨯2.00) = 1.0Factor 2: (1.6⨯0.25) + (0.2⨯2.00) – (0.8⨯1.00) = 0The expected risk premium for this portfolio is equal to the expected riskpremium for the first factor, or 4 percent.e. The sensitivity requirement can be expressed as:Factor 1: (x x)(1.75) + (x y)(–1.00) + (x z)(2.00) = 0.5In addition, we know that:x x + x y + x z = 1With two linear equations in three variables, there is an infinite number of solutions. Two of these are:1. x x = 0 x y = 0.5 x z = 0.52. x x = 6/11 x y = 5/11 x z = 0The risk premiums for these two funds are:r1 = 0⨯[(1.75 ⨯ 0.04) + (0.25 ⨯ 0.08)]+ (0.5)⨯[(–1.00 ⨯ 0.04) + (2.00 ⨯ 0.08)]+ (0.5)⨯[(2.00 ⨯ 0.04) + (1.00 ⨯ 0.08)] = 0.14 = 14.0%r2 = (6/11)⨯[(1.75 ⨯ 0.04) + (0.25 ⨯ 0.08)]+(5/11)⨯[(–1.00 ⨯ 0.04) + (2.00 ⨯ 0.08)]+0 ⨯ [(2.00 ⨯ 0.04) + (1.00 ⨯ 0.08)] = 0.104 = 10.4%These risk premiums differ because, while each fund has a sensitivity of0.5 to factor 1, they differ in their sensitivities to factor 2.f. Because the sensitivities to the two factors are the same as in Part (b),one portfolio with zero sensitivity to each factor is given by:x x = 2.0 x y = 0.5 x z = –1.5The risk premium for this portfolio is:(2.0⨯0.08) + (0.5⨯0.14) – (1.5⨯0.16) = –0.01Because this is an example of a portfolio with zero sensitivity to eachfactor and a nonzero risk premium, it is clear that the Arbitrage PricingTheory does not hold in this case.A portfolio with a positive risk premium is:x x = –2.0 x y = –0.5 x z = 1.5。
国际经济学第九版英文课后答案 第8单元
*CHAPTER 8 (Core Chapter)TRADE RESTRICTIONS: TARIFFSOUTLINE8.1 Introduction8.2 Partial Equilibrium Analysis of a TariffCase Study 8-1: Average Tariff on Non-Agricultural Products in Major Developed CountriesCase Study 8-2: Average Tariff on Non-Agricultural Products in Some MajorDeveloping Countries8.2a Partial Equilibrium Effects of a Tariff8.2b Effects of a Tariff on Producer and Consumer Surplus8.2c Costs and Benefits of a TariffCase Study 8-3: The Welfare Effects of Liberalizing Trade in Some U.S. Products Case Study 8-4: The Welfare Effects of Liberalizing Trade in Some EU Products 8.3 The Theory of Tariff Structure8.3a The Rate of Effective Protection8.3b Generalization and Evaluation of the Theory of Effective ProtectionCase Study 8-5: Rising Tariff Rates with Degree of Domestic ProcessingCase Study 8-6: Structure of Tariffs on Industrial Products in U.S., EU, Japan, and Canada8.4 General Equilibrium Analysis of a Tariff in a Small Country8.4a General Equilibrium Effects of a Tariff in a Small Country8.4b Illustration of the Effects of a Tariff in a Small Country8.4c The Stolper-Samuelson Theorem8.5 General Equilibrium Analysis of a Tariff in a Large Country8.5a General Equilibrium Effects of a Tariff in a Large Country8.5b Illustration of the Effects of a Tariff in a Large Country8.6 The Optimum Tariff8.6a The Meaning of the Concept and Retaliation8.6b Illustration of the Optimum Tariff and RetaliationAppendix: A8.1 Partial Equilibrium Effects of a Tariff in a Large NationA8.2 Derivation of the Formula for the Rate of Effective ProtectionA8.3 The Stolper-Samuelson Theorem GraphicallyA8.4 Exception to the Stolper-Samuelson Theorem - The MetzlerParadoxA8.5 Short-run Effect of a Tariff on Factors' IncomeA8.6 Measurement of the Optimum TariffKey TermsTrade or commercial policies Consumer surplusImport tariff Rent or producer surplusExport tariff Protection cost or deadweight loss of a tariff Ad valorem tariff Nominal tariffSpecific tariff Rate of effective protectionCompound tariff Domestic value addedConsumption effect of a tariff Prohibitive tariffProduction effect of a tariff Stolper-Samuelson theoremTrade effect of a tariff Metzler paradoxRevenue effect of a tariff Optimum tariffLecture Guide1.I would cover sections 1 and 2 and assign problems 1-2 in the first lecture. Themost difficult part of section 2 is the meaning and measurement of consumer and producer surplus. Since a clear understanding of the meaning and measurementof consumer and producer surplus is crucial in evaluating the effect of tariffs, Iwould explain t hese concepts very carefully.2.I would then cover section 3 and assign problems 3-6 in the second lecture. Thetheory of tariff structure is also very difficult and important, and so I would alsoexplain this concept very carefully. I found that the best way to explain it is byusing the simple example used in the text of the suit with and without importedinputs.3.The rest of the chapter can be skipped without loss of continuity by thoseInstructors who do not wish to cover the general equilibrium effects of tariffs. 4.For those Instructors who wish to cover the rest of the chapter, I would take upanother two lectures to do so. I would also assign and grade problems 8-14 tomake sure that students understand the material.5.In covering section 8.4, I would pay special attention to the explanation of Figure8-5 and to the Stolper-Samuelson theorem.6.In covering Section 8.6, please note that the optimum tariff can only be discussedintuitively without trade indifference curves (examined in Appendix A8.6). Answer to Problems1.a) Consumption is 70Y, production is 10Y and imports are 60Y (see Figure 1 onthe next page).b) Consumption is 60Y, production is 20Y and imports are 40Y (see Figure 1).c) The consumption effect is -10Y, the production effect is +10Y, the trade effectis -20Y and the revenue effect is $40 (see Figure 1).2. a) The consumer surplus is $245 without and $l80 with the tariff (see Figure 1).b)Of the increase in the revenue of producers with the tariff (as compared withtheir revenues under free trade), $l5 represents the increase in production costsand another $15 represents the increase in rent or producer surplus (see Figure1).c) The dollar value or the protection cost of the tariff is $l0 (see Figure 1).3. This will increase the rate of effective protection in the nation.4. a) g = 0.4 - (0.5)(0.4) = 0.4 - 0.2 = 0.2 = 40%1.0 - 0.5 0.5 0.55. a) g=60%b) g=80%c) g=0d) g=20%6. a) g=70%b) See the first paragraph of section 8.3b.7. See Figure 2.8.When Nation 1 (assumed to be a small nation) imposes an import tariff oncommodity Y, the real income of labor falls and that of capital rises.9.Py/Px rises for domestic producers and consumers. As production of Y (the K-intensive commodity) rises and that of X falls, the demand and income of K rises and that of L falls. Therefore, r rises and w falls.10.If Nation 1 were instead a large nation, then Nation 1's terms of trade rise and thereal income of L may also rise.India is more likely to restrict imports of K-intensive commodities in which India has a comparative disadvantage and this is likely to increase the return to capitaland reduce the return to labor according to the Stolper-Samuelson theorem.12. See Figure 3 on the previous page.13. See Figure 4.14. a) The volume of trade may shrink to zero (the origin of offer curves).App. 1. The more elastic S H and S F are, the lower is the free trade priceof the commodity and the lower is the increase in the domesticprice of the commodity as a result of the tariff.App. 2a. The supply curve of the nation for the commodity shifts upand to the left (as with the imposition of any tax); this does not affectthe consumption of the commodity with free trade, but it reducesdomestic production and increases imports of the commodity; italso increases the revenue effect and reduces producers' surplus.b)The imposition of a tariff on imported inputs going into the domestic productionof the commodity will have no effect on the size of the protection cost ordeadweight loss.App. 3. See Figure 5 (on the next page).App. 4. See Figure 6.App. 5. Real w will fall in terms of Y and rise in terms of X. On theother hand, r eal r will rise in terms of Y and fall in terms of X. Thiscan be seen by drawing a figure similar to Figure 8-10, but with theVMPLy curve shifting upward.App. 6a. See Figure 7.c) After Nation 1 has imposed an optimum tariff and Nation 2 has retaliatedwith an optimum tariff of its own, the approximate terms of trade for Nation1 is 0.8, while the approximate terms of trade of Nation2 is 1.25.d) Nation 1's welfare declines from the reduction in the volume and in the termsof trade. Although nation 2's terms of trade are higher than under free trade,the volume of trade has shrunk so much that nation 2's welfare is also likelyto be lower than under free trade.Multiple-choice Questions1. Which of the following statements is incorrect?a. An ad valorem tariff is expressed as a percentage of the value of the traded commodityb. a specific tariff is expressed as a fixed sum of the value of the traded commodity.c. export tariffs are prohibited by the U.S. Constitution*d. The U.S. uses exclusively the specific tariff2. A small nation is one:a. which does not affect world price by its tradingb. which faces an infinitely elastic world supply curve for its import commodityc. whose consumers will pay a price that exceeds the world price by the amount of the tariff*d. all of the above3. If a small nation increases the tariff on its import commodity, its:a. consumption of the commodity increasesb. production of the commodity decreasesc. imports of the commodity increase*d. none of the above4.The increase in producer surplus when a small nation imposes a tariff is measured bythe area:*a. to the left of the supply curve between the commodity price with and without the tariffb. under the supply curve between the quantity produced with and without the tariffc. under the demand curve between the commodity price with and without the tariffd. none of the above.5. If a small nation increases the tariff on its import commodity:*a. the rent of domestic producers of the commodity increasesb. the protection cost of the tariff decreasesc. the deadweight loss decreasesd. all of the above6.Which of the following statements is incorrect with respect to the rate of effectiveprotection?a. for given values of ai and ti, g is larger the greater is tb. for a given value of t and ti, g is larger the greater is a ic. g exceeds, is equal to or is smaller than t, as t i is smaller than, is equal to or is larger than t*d. when a i t i exceeds t, the rate of effective protection is positive7. With a i=50%, t i=0, and t=20%, g is:*a. 40%b. 20%c. 80%d. 08. The imposition of an import tariff by a small nation:*a. increases the relative price of the import commodity for domestic producers and consumersb. reduces the relative price of the import commodity for domestic producers and consumersc. increases the relative price of the import commodity for the nation as a wholed. any of the above is possible9. The imposition of an import tariff by a small nation:a. increases the nation's welfare*b. reduces the nation's welfarec. leaves the nation's welfare unchangedd. any of the above is possible10. According to the Stolper-Samuelson theorem, the imposition of a tariff by a nation:a. increases the real return of the nation's abundant factor*b. increases the real return of the nation's scarce factorc. reduces the real return of the nation's scarce factord. any of the above is possible11. The imposition of an import tariff by a nation results in:a. an increase in relative price of the nation's import commodityb. an increase in the nation's production of its importable commodityc. reduces the real return of the nation's abundant factor*d. all of the above12. The imposition of an import tariff by a nation can be represented by a rotation of the: *a. nation's offer curve away from the axis measuring the commodity of its comparative advantageb. the nation's offer curve toward the axis measuring the commodity of its comparative advantagec. the other nation's offer curve toward the axis measuring the commodity of its comparative advantaged. the other nation's offer curve away from the axis measuring the commodity of its comparative advantage13. The imposition of an import tariff by a large nation:a. increases the nation's terms of tradeb. reduces the volume of tradec. may increase or reduce the nation's welfare*d. all of the above14. The imposition of an optimum tariff by a large nation:a. improves its terms of tradeb. reduces the volume of tradec. increases the nation's welfare*d. all of the above15. The optimum tariff for a small nation is:a. 100%b. 50%*c. 0d. depends on elasticities。
信号与系统奥本海姆英文版课后答案chapter8
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Clearly, is just a shifted version of . Therefore,x(t)may be recovered from y(t) simply by multiplying y(t) by . There is no constraint that needs to be placed on to ensure that is recoverable from .
Chapter8 Answers
8.1Using Table 4.1, take the inverse Fourier transform of . This gives .
Therefor Y( ) of y(t) is given by
TheFourier transformof this signal is
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Thisimplies that is zero for . When is passed through a lowpass fiter with cutoff frequency ,the output will clearly be zero .Therefore =0.
国际财务管理课后习题答案chapter-8
CHAPTER 8 MANAGEMENT OF TRANSACTION EXPOSURE SUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTER QUESTIONS ANDPROBLEMSQUESTIONS1. How would you define transaction exposure? How is it different from economic exposure?Answer: Transaction exposure is the sensitivity of realized domestic currency values of the firm’s contractual cash flows denominated in foreign currencies to unexpected changes in exchange rates. Unlike economic exposure, transaction exposure is well-defined and short-term.2. Discuss and compare hedging transaction exposure using the forward contract vs. money market instruments. When do the alternative hedging approaches produce the same result?Answer: Hedging transaction exposure by a forward contract is achieved by selling or buying foreign currency receivables or payables forward. On the other hand, money market hedge is achieved by borrowing or lending the present value of foreign currency receivables or payables, thereby creating offsetting foreign currency positions. If the interest rate parity is holding, the two hedging methods are equivalent.3. Discuss and compare the costs of hedging via the forward contract and the options contract.Answer: There is no up-front cost of hedging by forward contracts. In the case of options hedging, however, hedgers should pay the premiums for the contracts up-front. The cost of forward hedging, however, may be realized ex post when the hedger regrets his/her hedging decision.4. What are the advantages of a currency options contract as a hedging tool compared with the forward contract?Answer: The main advantage of using options contracts for hedging is that the hedger can decide whether to exercise options upon observing the realized future exchange rate. Options thus provide a hedge against ex post regret that forward hedger might have to suffer. Hedgers can only eliminate the downside risk while retaining the upside potential.5. Suppose your company has purchased a put option on the German mark to manage exchange exposure associated with an account receivable denominated in that currency. In this case, your company can be said to have an ‘insurance’ policy on its receivable. Explain in what sense this is so.Answer: Your company in this case knows in advance that it will receive a certain minimum dollar amount no matter what might happen to the $/€exchange rate. Furthermore, if the German mark appreciates, your company will benefit from the rising euro.6. Recent surveys of corporate exchange risk management practices indicate that many U.S. firms simply do not hedge. How would you explain this result?Answer: There can be many possible reasons for this. First, many firms may feel that they are not really exposed to exchange risk due to product diversification, diversified markets for their products, etc. Second, firms may be using self-insurance against exchange risk. Third, firms may feel that shareholders can diversify exchange risk themselves, rendering corporate risk management unnecessary.7. Should a firm hedge? Why or why not?Answer: In a perfect capital market, firms may not need to hedge exchange risk. But firms can add to their value by hedging if markets are imperfect. First, if management knows about the firm’s exposure better than shareholders, the firm, not its shareholders, should hedge. Second, firms may be able to hedge at a lower cost. Third, if default costs are significant, corporate hedging can be justifiable because it reduces the probability of default. Fourth, if the firm faces progressive taxes, it can reduce tax obligations by hedging which stabilizes corporate earnings.8. Using an example, discuss the possible effect of hedging on a firm’s tax obligations.Answer: One can use an example similar to the one presented in the chapter.9. Explain contingent exposure and discuss the advantages of using currency options to manage this type of currency exposure.Answer: Companies may encounter a situation where they may or may not face currency exposure. In this situation, companies need options, not obligations, to buy or sell a given amount of foreign exchange they may or may not receive or have to pay. If companies either hedge using forward contracts or do not hedge at all, they may face definite currency exposure.10. Explain cross-hedging and discuss the factors determining its effectiveness.Answer: Cross-hedging involves hedging a position in one asset by taking a position in another asset. The effectiveness of cross-hedging would depend on the strength and stability of the relationship between the two assets.PROBLEMS1. Cray Research sold a super computer to the Max Planck Institute in Germany on credit and invoiced €10 million payable in six months. Currently, the six-month forward exchange rate is $1.10/€ and the foreign exchange advisor for Cray Research predicts that the spot rate is likely to be $1.05/€ in six months.(a) What is the expected gain/loss from the forward hedging?(b) If you were the financial manager of Cray Research, would you recommend hedging this euro receivable? Why or why not?(c) Suppose the foreign exchange advisor predicts that the future spot rate will be the same as the forward exchange rate quoted today. Would you recommend hedging in this case? Why or why not?Solution: (a) Expected gain($) = 10,000,000(1.10 – 1.05)= 10,000,000(.05)= $500,000.(b) I would recommend hedging because Cray Research can increase the expected dollar receipt by $500,000 and also eliminate the exchange risk.(c) Since I eliminate risk without sacrificing dollar receipt, I still would recommend hedging.2. IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed ¥250 million payable in three months. Currently, the spot exchange rate is ¥105/$ and the three-month forward rate is ¥100/$. The three-month money market interest rate is 8 percent per annum in the U.S. and 7 percent per annum in Japan. The management of IBM decided to use the money market hedge to deal with this yen account payable.(a) Explain the process of a money market hedge and compute the dollar cost of meeting the yen obligation.(b) Conduct the cash flow analysis of the money market hedge.Solution: (a). Let’s first compute the PV of ¥250 million, i.e.,250m/1.0175 = ¥245,700,245.7So if the above yen amount is invested today at the Japanese interest rate for three months, the maturity value will be exactly equal to ¥25 million which is the amount of payable.To buy the above yen amount today, it will cost:$2,340,002.34 = ¥250,000,000/105.The dollar cost of meeting this yen obligation is $2,340,002.34 as of today.(b)___________________________________________________________________Transaction CF0 CF1____________________________________________________________________1. Buy yens spot -$2,340,002.34with dollars ¥245,700,245.702. Invest in Japan - ¥245,700,245.70 ¥250,000,0003. Pay yens - ¥250,000,000Net cash flow - $2,340,002.34____________________________________________________________________3. You plan to visit Geneva, Switzerland in three months to attend an international business conference. You expect to incur the total cost of SF 5,000 for lodging, meals and transportation during your stay. As of today, the spot exchange rate is $0.60/SF and the three-month forward rate is $0.63/SF. You can buy the three-month call option on SF with the exercise rate of $0.64/SF for the premium of $0.05 per SF. Assume that your expected future spot exchange rate is the same as the forward rate. The three-month interest rate is 6 percent per annum in the United States and 4 percent per annum in Switzerland.(a) Calculate your expected dollar cost of buying SF5,000 if you choose to hedge via call option on SF.(b) Calculate the future dollar cost of meeting this SF obligation if you decide to hedge using a forward contract.(c) At what future spot exchange rate will you be indifferent between the forward and option market hedges?(d) Illustrate the future dollar costs of meeting the SF payable against the future spot exchange rate under both the options and forward market hedges.Solution: (a) Total option premium = (.05)(5000) = $250. In three months, $250 is worth $253.75 = $250(1.015). At the expected future spot rate of $0.63/SF, which is less than the exercise price, you don’t expect to exercise options. Rather, you expect to buy Swiss franc at $0.63/SF. Since you are going to buy SF5,000, you expect to spend $3,150 (=.63x5,000). Thus, the total expected cost of buying SF5,000 will be the sum of $3,150 and $253.75, i.e., $3,403.75.(b) $3,150 = (.63)(5,000).(c) $3,150 = 5,000x + 253.75, where x represents the break-even future spot rate. Solving for x, we obtain x = $0.57925/SF. Note that at the break-even future spot rate, options will not be exercised.(d) If the Swiss franc appreciates beyond $0.64/SF, which is the exercise price of call option, you will exercise the option and buy SF5,000 for $3,200. The total cost of buying SF5,000 will be $3,453.75 = $3,200 + $253.75.This is the maximum you will pay.4. Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €20 million which is payable in one year. The current spot exchange rate is $1.05/€ and the one -year forward rate is $1.10/€. The annual interest rate is 6.0% in the U.S. and5.0% in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure. (a) It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borrow euros from the Credit Lyonnaise against the euro receivable. Which alternative would you recommend? Why?(b) Other things being equal, at what forward exchange rate would Boeing be indifferent between the two hedging methods?Solution: (a) In the case of forward hedge, the future dollar proceeds will be (20,000,000)(1.10) = $22,000,000. In the case of money market hedge (MMH), the firm has to first borrow the PV of its euro receivable, i.e., 20,000,000/1.05 =€19,047,619. Then the firm should exchange this euro amount into dollars at the current spot rate to receive: (€19,047,619)($1.05/€) = $20,000,000, which can be invested at the dollar interest rate for one year to yield:$20,000,000(1.06) = $21,200,000.Clearly, the firm can receive $800,000 more by using forward hedging.(b) According to IRP, F = S(1+i $)/(1+i F ). Thus the “indifferent” forward rate will be:F = 1.05(1.06)/1.05 = $1.06/€. $ Cost Options hedge Forward hedge $3,453.75 $3,150 0 0.579 0.64 (strike price) $/SF$253.755. Suppose that Baltimore Machinery sold a drilling machine to a Swiss firm and gave the Swiss client a choice of paying either $10,000 or SF 15,000 in three months.(a) In the above example, Baltimore Machinery effectively gave the Swiss client a free option to buy up to $10,000 dollars using Swiss franc. What is the ‘implied’ exercise exchange rate?(b) If the spot exchange rate turns out to be $0.62/SF, which currency do you think the Swiss client will choose to use for payment? What is the value of this free option for the Swiss client?(c) What is the best way for Baltimore Machinery to deal with the exchange exposure?Solution: (a) The implied exercise (price) rate is: 10,000/15,000 = $0.6667/SF.(b) If the Swiss client chooses to pay $10,000, it will cost SF16,129 (=10,000/.62). Since the Swiss client has an option to pay SF15,000, it will choose to do so. The value of this option is obviously SF1,129 (=SF16,129-SF15,000).(c) Baltimore Machinery faces a contingent exposure in the sense that it may or may not receive SF15,000 in the future. The firm thus can hedge this exposure by buying a put option on SF15,000.6. Princess Cruise Company (PCC) purchased a ship from Mitsubishi Heavy Industry. PCC owes Mitsubishi Heavy Industry 500 million yen in one year. The current spot rate is 124 yen per dollar and the one-year forward rate is 110 yen per dollar. The annual interest rate is 5% in Japan and 8% in the U.S. PCC can also buy a one-year call option on yen at the strike price of $.0081 per yen for a premium of .014 cents per yen.(a) Compute the future dollar costs of meeting this obligation using the money market hedge and the forward hedges.(b) Assuming that the forward exchange rate is the best predictor of the future spot rate, compute the expected future dollar cost of meeting this obligation when the option hedge is used.(c) At what future spot rate do you think PCC may be indifferent between the option and forward hedge?Solution: (a) In the case of forward hedge, the dollar cost will be 500,000,000/110 = $4,545,455. In the case of money market hedge, the future dollar cost will be: 500,000,000(1.08)/(1.05)(124)= $4,147,465.(b) The option premium is: (.014/100)(500,000,000) = $70,000. Its future value will be $70,000(1.08) = $75,600.At the expected future spot rate of $.0091(=1/110), which is higher than the exercise of $.0081, PCC will exercise its call option and buy ¥500,000,000 for $4,050,000 (=500,000,000x.0081).The total expected cost will thus be $4,125,600, which is the sum of $75,600 and $4,050,000.(c) When the option hedge is used, PCC will spend “at most” $4,125,000. On the other hand, when the forward hedging is used, PCC will have to spend $4,545,455 regardless of the future spot rate. This means that the options hedge dominates the forward hedge. At no future spot rate, PCC will be indifferent between forward and options hedges.7. Airbus sold an aircraft, A400, to Delta Airlines, a U.S. company, and billed $30 million payable in six months. Airbus is concerned with the euro proceeds from international sales and would like to control exchange risk. The current spot exchang e rate is $1.05/€ and six-month forward exchange rate is $1.10/€ at the moment. Airbus can buy a six-month put option on U.S. dollars with a strike price of €0.95/$ for a premium of €0.02 per U.S. dollar. Currently, six-month interest rate is 2.5% in the euro zone and 3.0% in the U.S.pute the guaranteed euro proceeds from the American sale if Airbus decides to hedge using aforward contract.b.If Airbus decides to hedge using money market instruments, what action does Airbus need to take?What would be the guaranteed euro proceeds from the American sale in this case?c.If Airbus decides to hedge using put options on U.S. dollars, what would be the ‘expected’ europroceeds from the American sale? Assume that Airbus regards the current forward exchange rate as an unbiased predictor of the future spot exchange rate.d.At what future spot exchange rate do you think Airbus will be indifferent between the option andmoney market hedge?Solution:a. Airbus will sell $30 million forward for €27,272,727 = ($30,000,000) / ($1.10/€).b. Airbus will borrow the present value of the dollar receivable, i.e., $29,126,214 = $30,000,000/1.03, and then sell the dollar proceeds spot for euros: €27,739,251. This is the euro amount that Airbus is going to keep.c. Since th e expected future spot rate is less than the strike price of the put option, i.e., €0.9091< €0.95, Airbus expects to exercise the option and receive €28,500,000 = ($30,000,000)(€0.95/$). This is gross proceeds. Airbus spent €600,000 (=0.02x30,000,000) upfr ont for the option and its future cost is equal to €615,000 = €600,000 x 1.025. Thus the net euro proceeds from the American sale is €27,885,000, which is the difference between the gross proceeds and the option costs.d. At the indifferent future spot rate, the following will hold:€28,432,732 = S T (30,000,000) - €615,000.Solving for S T, we obtain the “indifference” future spot exchange rate, i.e., €0.9683/$, or $1.0327/€.Note that €28,432,732 is the future value of the proceeds under money market hed ging:€28,432,732 = (€27,739,251) (1.025).Suggested solution for Mini Case: Chase Options, Inc.[See Chapter 13 for the case text]Chase Options, Inc.Hedging Foreign Currency Exposure Through Currency OptionsHarvey A. PoniachekI. Case SummaryThis case reviews the foreign exchange options market and hedging. It presents various international transactions that require currency options hedging strategies by the corporations involved. Seven transactions under a variety of circumstances are introduced that require hedging by currency options. The transactions involve hedging of dividend remittances, portfolio investment exposure, and strategic economic competitiveness. Market quotations are provided for options (and options hedging ratios), forwards, and interest rates for various maturities.II. Case Objective.The case introduces the student to the principles of currency options market and hedging strategies. The transactions are of various types that often confront companies that are involved in extensive international business or multinational corporations. The case induces students to acquire hands-on experience in addressing specific exposure and hedging concerns, including how to apply various market quotations, which hedging strategy is most suitable, and how to address exposure in foreign currency through cross hedging policies.III. Proposed Assignment Solution1. The company expects DM100 million in repatriated profits, and does not want the DM/$ exchange rate at which they convert those profits to rise above 1.70. They can hedge this exposure using DM put options with a strike price of 1.70. If the spot rate rises above 1.70, they can exercise the option, while ifthat rate falls they can enjoy additional profits from favorable exchange rate movements.To purchase the options would require an up-front premium of:DM 100,000,000 x 0.0164 = DM 1,640,000.With a strike price of 1.70 DM/$, this would assure the U.S. company of receiving at least:DM 100,000,000 – DM 1,640,000 x (1 + 0.085106 x 272/360)= DM 98,254,544/1.70 DM/$ = $57,796,791by exercising the option if the DM depreciated. Note that the proceeds from the repatriated profits are reduced by the premium paid, which is further adjusted by the interest foregone on this amount.However, if the DM were to appreciate relative to the dollar, the company would allow the option to expire, and enjoy greater dollar proceeds from this increase.Should forward contracts be used to hedge this exposure, the proceeds received would be:DM100,000,000/1.6725 DM/$ = $59,790,732,regardless of the movement of the DM/$ exchange rate. While this amount is almost $2 million more than that realized using option hedges above, there is no flexibility regarding the exercise date; if this date differs from that at which the repatriate profits are available, the company may be exposed to additional further current exposure. Further, there is no opportunity to enjoy any appreciation in the DM.If the company were to buy DM puts as above, and sell an equivalent amount in calls with strike price 1.647, the premium paid would be exactly offset by the premium received. This would assure that the exchange rate realized would fall between 1.647 and 1.700. If the rate rises above 1.700, the company will exercise its put option, and if it fell below 1.647, the other party would use its call; for any rate in between, both options would expire worthless. The proceeds realized would then fall between:DM 100,00,000/1.647 DM/$ = $60,716,454andDM 100,000,000/1.700 DM/$ = $58,823,529.This would allow the company some upside potential, while guaranteeing proceeds at least $1 million greater than the minimum for simply buying a put as above.Buy/Sell OptionsDM/$Spot Put Payoff “Put”Profits Call Payoff“Call”Profits Net Profit1.60 (1,742,846) 0 1,742,846 60,716,454 60,716,454 1.61 (1,742,846) 0 1,742,846 60,716,454 60,716,454 1.62 (1,742,846) 0 1,742,846 60,716,454 60,716,454 1.63 (1,742,846) 0 1,742,846 60,716,454 60,716,454 1.64 (1,742,846) 0 1,742,846 60,716,454 60,716,454 1.65 (1,742,846) 60,606,061 1,742,846 0 60,606,061 1.66 (1,742,846) 60,240,964 1,742,846 0 60,240,964 1.67 (1,742,846) 59,880,240 1,742,846 0 59,880,240 1.68 (1,742,846) 59,523,810 1,742,846 0 59,523,810 1.69 (1,742,846) 59,171,598 1,742,846 0 59,171,598 1.70 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.71 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.72 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.73 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.74 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.75 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.76 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.77 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.78 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.79 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.80 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.81 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.82 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.83 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.84 (1,742,846) 58,823,529 1,742,846 0 58,823,529 1.85 (1,742,846) 58,823,529 1,742,846 0 58,823,529Since the firm believes that there is a good chance that the pound sterling will weaken, locking them into a forward contract would not be appropriate, because they would lose the opportunity to profit from this weakening. Their hedge strategy should follow for an upside potential to match their viewpoint. Therefore, they should purchase sterling call options, paying a premium of:5,000,000 STG x 0.0176 = 88,000 STG.If the dollar strengthens against the pound, the firm allows the option to expire, and buys sterling in the spot market at a cheaper price than they would have paid for a forward contract; otherwise, the sterling calls protect against unfavorable depreciation of the dollar.Because the fund manager is uncertain when he will sell the bonds, he requires a hedge which will allow flexibility as to the exercise date. Thus, options are the best instrument for him to use. He can buy A$ puts to lock in a floor of 0.72 A$/$. Since he is willing to forego any further currency appreciation, he can sell A$ calls with a strike price of 0.8025 A$/$ to defray the cost of his hedge (in fact he earns a net premium of A$ 100,000,000 x (0.007234 –0.007211) = A$ 2,300), while knowing that he can’t receive less than 0.72 A$/$ when redeeming his investment, and can benefit from a small appreciation of the A$.Example #3:Problem: Hedge principal denominated in A$ into US$. Forgo upside potential to buy floor protection.I. Hedge by writing calls and buying puts1) Write calls for $/A$ @ 0.8025Buy puts for $/A$ @ 0.72# contracts needed = Principal in A$/Contract size100,000,000A$/100,000 A$ = 1002) Revenue from sale of calls = (# contracts)(size of contract)(premium)$75,573 = (100)(100,000 A$)(.007234 $/A$)(1 + .0825 195/360)3) Total cost of puts = (# contracts)(size of contract)(premium)$75,332 = (100)(100,000 A$)(.007211 $/A$)(1 + .0825 195/360)4) Put payoffIf spot falls below 0.72, fund manager will exercise putIf spot rises above 0.72, fund manager will let put expire5) Call payoffIf spot rises above .8025, call will be exercised If spot falls below .8025, call will expire6) Net payoffSee following Table for net payoff Australian Dollar Bond HedgeStrikePrice Put Payoff “Put”Principal Call Payoff“Call”Principal Net Profit0.60 (75,332) 72,000,000 75,573 0 72,000,2410.61 (75,332) 72,000,000 75,573 0 72,000,2410.62 (75,332) 72,000,000 75,573 0 72,000,2410.63 (75,332) 72,000,000 75,573 0 72,000,2410.64 (75,332) 72,000,000 75,573 0 72,000,2410.65 (75,332) 72,000,000 75,573 0 72,000,2410.66 (75,332) 72,000,000 75,573 0 72,000,2410.67 (75,332) 72,000,000 75,573 0 72,000,2410.68 (75,332) 72,000,000 75,573 0 72,000,2410.69 (75,332) 72,000,000 75,573 0 72,000,2410.70 (75,332) 72,000,000 75,573 0 72,000,2410.71 (75,332) 72,000,000 75,573 0 72,000,2410.72 (75,332) 72,000,000 75,573 0 72,000,2410.73 (75,332) 73,000,000 75,573 0 73,000,2410.74 (75,332) 74,000,000 75,573 0 74,000,2410.75 (75,332) 75,000,000 75,573 0 75,000,2410.76 (75,332) 76,000,000 75,573 0 76,000,2410.77 (75,332) 77,000,000 75,573 0 77,000,2410.78 (75,332) 78,000,000 75,573 0 78,000,2410.79 (75,332) 79,000,000 75,573 0 79,000,2410.80 (75,332) 80,000,000 75,573 0 80,000,2410.81 (75,332) 0 75,573 80,250,000 80,250,2410.82 (75,332) 0 75,573 80,250,000 80,250,2410.83 (75,332) 0 75,573 80,250,000 80,250,2410.84 (75,332) 0 75,573 80,250,000 80,250,2410.85 (75,332) 0 75,573 80,250,000 80,250,2414. The German company is bidding on a contract which they cannot be certain of winning. Thus, the need to execute a currency transaction is similarly uncertain, and using a forward or futures as a hedge is inappropriate, because it would force them to perform even if they do not win the contract.Using a sterling put option as a hedge for this transaction makes the most sense. For a premium of:12 million STG x 0.0161 = 193,200 STG,they can assure themselves that adverse movements in the pound sterling exchange rate will not diminish the profitability of the project (and hence the feasibility of their bid), while at the same time allowing the potential for gains from sterling appreciation.5. Since AMC in concerned about the adverse effects that a strengthening of the dollar would have on its business, we need to create a situation in which it will profit from such an appreciation. Purchasing a yen put or a dollar call will achieve this objective. The data in Exhibit 1, row 7 represent a 10 percent appreciation of the dollar (128.15 strike vs. 116.5 forward rate) and can be used to hedge against a similar appreciation of the dollar.For every million yen of hedging, the cost would be:Yen 100,000,000 x 0.000127 = 127 Yen.To determine the breakeven point, we need to compute the value of this option if the dollar appreciated 10 percent (spot rose to 128.15), and subtract from it the premium we paid. This profit would be compared with the profit earned on five to 10 percent of AMC’s sales (which would be lost as a result of the dollar appreciation). The number of options to be purchased which would equalize these two quantities would represent the breakeven point.Example #5:Hedge the economic cost of the depreciating Yen to AMC.If we assume that AMC sales fall in direct proportion to depreciation in the yen (i.e., a 10 percent decline in yen and 10 percent decline in sales), then we can hedge the full value of AMC’s sales. I have assumed $100 million in sales.1) Buy yen puts# contracts needed = Expected Sales *Current ¥/$ Rate / Contract size9600 = ($100,000,000)(120¥/$) / ¥1,250,0002) Total Cost = (# contracts)(contract size)(premium)$1,524,000 = (9600)( ¥1,250,000)($0.0001275/¥)3) Floor rate = Exercise – Premium128.1499¥/$ = 128.15¥/$ - $1,524,000/12,000,000,000¥4) The payoff changes depending on the level of the ¥/$ rate. The following table summarizes thepayoffs. An equilibrium is reached when the spot rate equals the floor rate.AMC ProfitabilityYen/$ Spot Put Payoff Sales Net Profit 120 (1,524,990) 100,000,000 98,475,010 121 (1,524,990) 99,173,664 97,648,564 122 (1,524,990) 98,360,656 96,835,666 123 (1,524,990) 97,560,976 86,035,986 124 (1,524,990) 96,774,194 95,249,204 125 (1,524,990) 96,000,000 94,475,010 126 (1,524,990) 95,238,095 93,713,105 127 (847,829) 94,488,189 93,640,360 128 (109,640) 93,750,000 93,640,360 129 617,104 93,023,256 93,640,360 130 1,332,668 92,307,692 93,640,360 131 2,037,307 91,603,053 93,640,360 132 2,731,269 90,909,091 93,640,360 133 3,414,796 90,225,664 93,640,360 134 4,088,122 89,552,239 93,640,360 135 4,751,431 88,888,889 93,640,360 136 5,405,066 88,235,294 93,640,360 137 6,049,118 87,591,241 93,640,360 138 6,683,839 86,966,522 93,640,360 139 7,308,425 86,330,936 93,640,360 140 7,926,075 85,714,286 93,640,360 141 8,533,977 85,106,383 93,640,360 142 9,133,318 84,507,042 93,640,360 143 9,724,276 83,916,084 93,640,360 144 10,307,027 83,333,333 93,640,360 145 10,881,740 82,758,621 93,640,360 146 11,448,579 82,191,781 93,640,360 147 12,007,707 81,632,653 93,640,360 148 12,569,279 81,081,081 93,640,360 149 13,103,448 80,536,913 93,640,360 150 13,640,360 80,000,000 93,640,360。
细胞生物学课后练习题及答案chapter8
第八章细胞信号转导一、名词解释1. G蛋白偶联受体2. 受体酪氨酸蛋白激酶3. 细胞内受体4. 表面受体超家族5. 受体减量调节6. GTP结合蛋白7. 信号的趋同8. 信号的趋异9. 信号的串扰二、选择题：请在以下每题中选出正确答案，每题正确答案为1-6个，多选和少选均不得分1. NO直接作用于A.腺苷酸环化酶B.鸟苷酸环化酶C.钙离子门控通道2. 以下哪一类细胞可释放NOA.心肌细胞B.血管内皮细胞C.血管平滑肌细胞3. 硝酸甘油作为治疗心绞痛的药物是因为它A.具有镇痛作用B.抗乙酰胆碱C.能在体内转换为NO4. 胞内受体A.是一类基因调控蛋白B.可结合到转录增强子上C.是一类蛋白激酶D.是一类第二信使5. 受体酪氨酸激酶RPTKA.为单次跨膜蛋白B.接受配体后发生二聚化C.能自磷酸化胞内段D.可激活Ras6. Sos属于A.接头蛋白（adaptor）B.Ras的鸟苷酸交换因子（GEF）C.Ras的GTP酶活化蛋白（GAP）7. 以下哪些不属于G蛋白A.RasB.微管蛋白β亚基C.视蛋白8. PKC以非活性形式分布于细胞溶质中，当细胞之中的哪一种离子浓度升高时，PKC转位到质膜内表面A.镁离子B.钙离子C.钾离子D.钠离子9. Ca2+载体——离子霉素（ionomycin）能够模拟哪一种第二信使的作用A.IP3B.IP2C.DG10. 在磷脂酰肌醇信号通路中，质膜上的磷脂酶C（PLC-β）水解4，5-二磷酸磷脂酰肌醇（PIP2），产生哪两个两个第二信使A.1，4，5-三磷酸肌醇（IP3）B.DGC.4，5-二磷酸肌醇（IP2）11. 在磷脂酰肌醇信号通路中，G蛋白的直接效应酶是A.腺苷酸环化酶B.磷脂酶C-βC.蛋白激酶C12. 蛋白激酶A（Protein Kinase A，PKA）由两个催化亚基和两个调节亚基组成，cAMP能够与酶的哪一部分结合A.催化亚基B.调节亚基13. 在cAMP信号途径中，环腺苷酸磷酸二酯酶（cAMP phosphodiesterase）的作用是A.催化ATP生成cAMPB.催化ADP生成cAMPC.降解cAMP生成5’-AMP14. 在cAMP信号途径中，G蛋白的直接效应酶是A.蛋白激酶AB.腺苷酸环化酶C.蛋白激酶C15. 以下哪一种感觉不是由G蛋白偶联型受体介导的A.听觉B.味觉C.视觉D.嗅觉16. G蛋白的GTP酶活化蛋白GAP（GTPase activating protein）可A.激活G蛋白B.增强G蛋白的活性C.使G蛋白失活17. G蛋白耦联型受体通常为A.3次跨膜蛋白B.7次跨膜蛋白C.单次跨膜蛋白18. 三聚体GTP结合调节蛋白（trimeric GTP-binding regulatory protein）简称G蛋白，位于质膜胞质侧，由α、β、γ三个亚基组成。
《新编简明英语语言学教程》第二版 课后习题答案 chapter 8
Chapter 8 Language and Society1. How is language related to society?答：There are many indications of the inter-relationship between language and society. One of them is that while language is principally used to communicate meaning, it is also used to establish and maintain social relationships. This social function of language is embodied in the use of such utterances as “Good morning!”, “Hi!”, “How's your family?”, “Nice day today, isn't it?”.Another indication is that users of the same language in a sense all speak differently. The kind of language each of them chooses to use is in part determined by his social background. And language, in its turn, reveals information about its speaker. When we speak, we cannot avoid giving clues to our listeners about ourselves.Then to some extent, language, especially the structure of its lexicon, reflects both the physical and the social environments of a society. For example while there is only one word in English for “snow”, there are several in Eskimo. This is a reflection of the need for the Eskimos to make distinctions between various kinds of snow in their snowy living environment.As a social phenomenon language is closely related to the structure of the society in which it is used, and the evaluation of a linguistic form is entirely social. To a linguist, all language forms and accents are equally good as far as they can fulfill the communicative functions they are expected to fulfill. Therefore, judgments concerning the correctness and purity of linguistic varieties are social rather than linguistic. A case in point is the use of the postvocalic [r]. While in English accents without postvocalic [r] are considered to be more correct than accents with it, in New York city, accents with postvocalic [r] enjoys more prestige and are considered more correct than without it.2. Explain with an example that the evaluation of language is social rather than linguistic.答：The evaluation of language is social rather than linguistic. This is because every language or language variety can express all ideas that its native speakers want to express. That is to say, language and language variety are equal in expressing meaning. For example, the much-prejudiced Black English can be used by the black people to communicate with each other without feeling any hindrance. But many other people think Black English is not pure English because it does not conform to their grammar and not adopted by educated people. As a result, many people feel shameful to use Black English. From this example we can know that the evaluation of language is social, not linguistic.3. What are the main social dialects discussed in this chapter? How do they jointly determine idiolect?答：The main social dialects discussed in this chapter are regional dialect, sociolect, gender and age. Idiolect is a personal dialect, of an individual speaker that combines elements regarding regional, social, gender, and age variations. These factors jointly determine the way he/she talks. While the language system provides all its users with the same set of potentials, the realization of these potentials is individualized by a number of social factors, resulting in idiolects.4. In what sense is the standard dialect a special variety of language?答：First of all, the standard dialect is based on a selected variety of the language, usually it is the local speech of an area which is considered the nation's political and commercial center. Forexample, standard English developed out of the English dialects used in and around London as they were modified over the centuries by speakers in the court, by scholars from universities and writers. Gradually the English used by the upper classes in the capital city diverged markedly from the English used by other social groups and came to be regarded as the model for all those who wished to speak and write well.Second, the standard dialect is not dialect a child acquires naturally like his regional dialect. It is a superimposed variety; it is a variety imposed from above over the range of regional dialects. Some government agenc y writes grammar books and dictionaries to ‘fix’ this variety and everyone agrees on what is correct usage of the language. So it has a widely accepted codified grammar and vocabulary. Once codification takes place, it is necessary for an ambitious citizen to learn to use the correct language and to avoid ‘incorrect’ language. Therefore, the standard dialect is the variety which is taught and learnt in schools.Then the standard dialect has some special functions. Also designated as the official or national language of a country, the standard dialect is used for such official purposes as government documents, education, news reporting; it is the language used on any formal occasions.5. What is register as used by Halliday? Illustrate it with an example of your own.答：According to Halliday, “Language varies as its function varies; it differs in different situations.” The type of language which is selected as appropriate to the type of situation is a register. Halliday further distinguishes three social variables that determine the register: field of discourse, tenor of discourse, and mode of discourse.For example, a lecture on linguistics could be identified asField: scientific (linguistic)Tenor: teacher — students (formal, polite)Mode: oral (academic lecturing)6. What linguistic features of Black English do you know? Do you think Black English is an illogical and inferior variety of English? Why (not)?答：(1) A prominent phonological feature of Black English is the simplification of consonant clusters at the end of a word. According to this consonant deletion rule, the final-position consonants are often deleted; thus “passed” is pronounced [pa:s], mend [men], desk [des], and told [t??l].A syntactic feature of Black English that has often been cited to show its illogicality is the deletion of the link verb “be”. In Black English we frequently come across sentences without the copula verb: “They mine”, “You crazy”, “Her hands cold”, and “That house big”. In fact, copula verb deletion is not a unique feature of Black English; it is also found in some other dialects of English and in languages like Russian and Chinese. Another syntactic feature of Black English that has been the target of attack is the use of double negation constructions, e.g.(8 — 2) He don't know nothing. (He doesn't know anything.)(8 — 3) I ain't afraid of no ghosts. (I'm not afraid of ghosts.)Some people consider these sentences illogical because they claim that two negatives make a positive. But in fact such double negative constructions were found in all dialects of English of the earlier periods.(2) (略)7. What peculiar features docs pidgin have?答：Pidgins arose from a blending of several languages such as Chinese dialects and English, African dialects and French, African dialects and Portuguese. Usually a European language serves as the basis of the pidgin in the sense that some of its grammar and vocabulary is derived from the European language used by traders and missionaries in order to communicate with peoples whose languages they did not know.Pidgins typically have a limited vocabulary and a very reduced grammatical structure characterized by the loss of inflections, gender end case, The “simplified” v ariety performs its functions as trading and employment.8. How do bilingualism and diglossia differ, and what do they have in common?答：Bilingualism refers to the situation that in some speech communities, two languages are used side by side with each having a different role to play; and language switching occurs when the situation changes. But instead of two different languages, in a diglossic situation two varieties of a language exist side by side throughout the community, with each having a definite role to play.The two languages of bilingualism and the two varieties of diglossia each has different role to play as situation changes.。
期权期货与其他衍生产品第九版课后习题与答案Chapter (8)
Chapter 8Securitization and the Credit Crisis of 2007Practice QuestionsProblem 8.1.What was the role of GNMA (Ginnie Mae) in the mortgage-backed securities market of the 1970s?GNMA guaranteed qualifying mortgages against default and created securities that were sold to investors.Problem 8.2.Explain what is meant by a) an ABS and b) an ABS CDO.An ABS is a set of tranches created from a portfolio of mortgages or other assets. An ABS CDO is an ABS created from particular tranches (e.g. the BBB tranches) of a number of different ABSs.Problem 8.3.What is a mezzanine tranche?The mezzanine tranche of an ABS or ABS CDO is a tranche that is in the middle as far as seniority goes. It is ranks below the senior tranches and therefore absorbs losses before they do. It ranks above the equity tranche (so that the equity tranche absorbs losses before it does). Problem 8.4.What is the waterfall in a securitization?The waterfall defines how the cash flows from the underlying assets are allocated to the tranches. In a typical arrangement, cash flows are first used to pay the senior tranches their promised return. The cash flows (if any) that are left over are used to provide the mezzanine tranches with their promised returns. The cash flows (if any) that are left over are then used to provide the equity tranches with their promised returns. Any residual cash flows are used to pay down the principal on the senior tranches.Problem 8.5.What are the numbers in Table 8.1 for a loss rate of a) 12% and b) 15%?Problem 8.6.What is a subprime mortgage?A subprime mortgage is a mortgage where the risk of default is higher than normal. This maybe because the borrower has a poor credit history or the ratio of the loan to value is high or both.Problem 8.7.Why do you think the increase in house prices during the 2000 to 2007 period is referred to as a bubble?The increase in the price of houses was caused by an increase in the demand for houses by people who could not afford them. It was therefore unsustainable.Problem 8.8.Why did mortgage lenders frequently not check on information provided by potential borrowers on mortgage application forms during the 2000 to 2007 period?Subprime mortgages were frequently securitized. The only information that was retained during the securitiza tion process was the applicant’s FICO score and the loan-to-value ratio of the mortgage.Problem 8.9.How were the risks in ABS CDOs misjudged by the market?Investors underestimated how high the default correlations between mortgages would be in stressed market conditions. Investors also did not always realize that the tranches underlying ABS CDOs were usually quite thin so that they were either totally wiped out or untouched. There was an unfortunate tendency to assume that a tranche with a particular rating could be considered to be the same as a bond with that rating. This assumption is not valid for the reasons just mentioned.Problem 8.10.What is meant by the term “agency costs”? How did agency costs play a role in the credit crisis?“Agency costs” is a term used to describe the costs in a situation where the interests of two parties are not perfectly aligned. There were potential agency costs between a) the originators of mortgages and investors and b) employees of banks who earned bonuses and the banks themselves.Problem 8.11.How is an ABS CDO created? What was the motivation to create ABS CDOs?Typically an ABS CDO is created from the BBB-rated tranches of an ABS. This is because it is difficult to find investors in a direct way for the BBB-rated tranches of an ABS.Problem 8.12.Explain the impact of an increase in default correlation on the risks of the senior tranche of an ABS. What is its impact on the risks of the equity tranche?As default correlation increases, the senior tranche of a CDO becomes more risky because it is more likely to suffer losses. As default correlation increases, the equity tranche becomes less risky. To understand why this is so, note that in the limit when there is perfect correlationthere is a high probability that there will be no defaults and the equity tranche will suffer no losses.Problem 8.13.Explain why the AAA-rated tranche of an ABS CDO is more risky than the AAA-rated tranche of an ABS.A moderately high default rate will wipe out the tranches underlying the ABS CDO so that the AAA-rated tranche of the ABS CDO is also wiped out. A moderately high default rate will at worst wipe out only part of the AAA-rated tranche of an ABS.Problem 8.14.Explain why the end-of-year bonus is sometimes r eferred to as “short-term compensation.”The end-of-year bonus usually reflects performance during the year. This type of compensation tends to lead traders and other employees of banks to focus on their next bonus and therefore have a short-term time horizon for their decision making.Problem 8.15.Add rows in Table 8.1 corresponding to losses on the underlying assets of (a) 2%, (b) 6%, (c) 14%, and (d) 18%.Further QuestionsProblem 8.16.Suppose that the principal assigned to the senior, mezzanine, and equity tranches is 70%, 20%, and 10% for both the ABS and the ABS CDO in Figure 8.3. What difference does this make to Table 8.1?‘‘Resecuritization was a badly flawed idea. AAA tranches created from the mezzanine tranches of ABSs are bound to have a higher probability of default than the AAA-rated tranches of ABSs.’’ Discuss this point of view.When the AAA-rated tranches of an ABS experiences defaults, the mezzanine tranches of the ABSs must have been wiped out. As a result the AAA tranche of the ABS CDO has also wiped out. If the portfolios underlying the different ABSs have the same default rates, it must therefore be the case the AAA-rated tranche of the ABS is safer than the AAA-rated tranche of the ABS CDO. If there is a wide variation if the default rates, it is possible for theAAA-rated tranche of the ABS CDO to fare better than some (but not all) AAA rated tranches of the underlying ABSs.Resecuritization can only be successful if the default rates of the underlying ABS portfolios are not highly correlated. The best approach would seem to be to obtain as much diversification as possible in the portfolio of assets underlying the ABS. Resecuritization then has no value.Problem 8.18.Suppose that mezzanine tranches of the ABS CDOs, similar to those in Figure 8.3, are resecuritized to form what is referred to as a “CDO squared.” As in the case of tranches created from ABSs in Figure 8.3, 65% of the principal is allocated to a AAA tranche, 25% to a BBB tranche, and 10% to the equity tranche. How high does the loss percentage have to be on the underlying assets for losses to be experienced by a AAA-rated tranche that is created in this way. (Assume that every portfolio of assets that is used to create ABSs experiences the same loss rate.)For losses to be experienced on the AAA rated tranche of the CDO squared the loss rate on the mezzanine tranches of the ABS CDOs must be greater than 35%. This happens when the loss rate on the mezzanine tranches of ABSs is 10+0.35×25 = 18.75%. This loss rate occurs when the loss rate on the underlying assets is 5+0.1875×15 = 7.81%Problem 8.19.Investigate what happens as the width of the mezzanine tranche of the ABS in Figure 8.3 is decreased with the reduction of mezzanine tranche principal being divided equally between the equity and senior tranches. In particular, what is the effect on Table 8.1?The ABS CDO tranches become similar to each other. Consider the situation where the tranche widths are 12%, 1%, and 87% for the equity, mezzanine, and senior tranches. The table becomes:Suppose that the structure in Figure 8.1 is created in 2000 and lasts 10 years. There are no defaults on the underlying assets until the end of the eighth year when 17% of the principal is lost because of defaults during the credit crisis. No principal is lost during the final two years. There are no repayments of principal until the end. Evaluate the relative performance of the tranches. Assume a constant LIBOR rate of 3%. Consider both interest and principal payments.The cash flows per $100 of principal invested in a tranche are roughly as followsThe internal rates of return for the senior, mezzanine and equity tranches are approximately 3.6%, -6%, and 16.0%. This shows that the equity tranche can fare quite well if defaults happen late in the life of the structure.。
Chapter_8
10 F
(a)
i(0-) = 12/6 = 2A, v(0-) = 12V At t = 0+, i(0+) = i(0-) = 2A, v(0+) = v(0-) = 12V (b) For t > 0, we have the equivalent circuit shown in Figure (b). v L = Ldi/dt or di/dt = v L /L Applying KVL at t = 0+, we obtain, v L (0+) – v(0+) + 10i(0+) = 0 v L (0+) – 12 + 20 = 0, or v L (0+) = -8 Hence, Similarly, di(0+)/dt = -8/2 = -4 A/s i C = Cdv/dt, or dv/dt = i C /C i C (0+) = -i(0+) = -2 dv(0+)/dt = -2/0.4 = -5 V/s (c) As t approaches infinity, the circuit reaches steady state. i() = 0 A, v() = 0 V
Chapter 8, Solution 4. (a) At t = 0-, u(-t) = 1 and u(t) = 0 so that the equivalent circuit is shown in Figure (a). i(0-) = 40/(3 + 5) = 5A, and v(0-) = 5i(0-) = 25V. Hence, i(0+) = i(0-) = 5A v(0+) = v(0-) = 25V 3 i
财务报告与分析：三友会计名著译丛 第08章习题答案
财务报告与分析：三友会计名著译丛第08章习题答案1Chapter 8 ProfitabilityPROBLEMS PROBLEM 8-1 Net Profit Margin = Sales Net Itemsng Nonrecurri and Earnings of Share Minority Before Income Net20042003$1,050,000$52,500$1,000,000$40,0005.00% 4.00%Return on Assets = Assets Total Average Itemsng Nonrecurri and Earnings of Share Minority Before Income Net20042003$230,000$52,500$200,000$40,00022.83% 20.00%Total Asset Turnover = AssetsTotal Average SalesNet20042003$230,000$1,050,000$200,000$1,000,0004.57 times5.00 timesper year per year2= Return on Common Equity = Equity Common Average DividendsPreferred Minus Items Noncurring Before Income Net20042003$170,000$52,500$160,000$40,00030.88% 25.00%Ahl Enterprise has had a substantial rise in profit to sales. This is somewhat tempered by a reduction in asset turnover. Given a slight rise in common equity, there is a substantial rise in return on common equity.PROBLEM 8-2 a.2004 2003 Sales Cost of goods sold Gross profit Selling expense General expense Operating income Income tax Net income 100.0% 60.7 14.6 10.0 14.7 5.9 8.8% 100.0% 60.8 20.0 8.3 4.2 6.7%b. Starr Canning has had a sharp decrease in selling expense coupledwith only a modest rise in general expenses giving an overall rise in the net profit margin.PROBLEM 8-3 Earnings Before interest and tax $245,000 Interest (750,000 x 6%) 45,000 Earnings before tax $200,000 Tax 80,000 Net income $120,000 Preferred dividends 15,000 Income available to common $105,0003a. 4.00%$3,000,000$120,000Assets Total Average Items ng Nonrecurri and Earnings of Share Minority Before Income Net Assets on Return ===b. 4.00%$3,000,000$120,000Equity Total Average Stock Preferred Redeemable on Dividends - Items ngNonrecurri Before Income Net Equity Total on Return ===c. Equity Common Average EquityCommon Average - Items ng Nonrecurri Before Income Net Equity Common onReturn =7.00%$1,500,000$15,000-$80,000-$200,000=d.$45,000$245,000Interestd Capitalize Including Expense, Interest Earnings Minority and Earnings,Equity Expense Tax Expense,Interest Excluding Earnings, Recurring Earned Interest Times == = 5.44 timesper yearPROBLEM 8-4Vent Molded Plastics Vent Molded Plastics SalesSales returnsCost of goods sold Selling expense General expense Other income Other expense Income tax Net income 7.0 72.1 9.4 7.0 .4 1.5 4.8 5.6%.3 67.1 10.1 7.9 .4 1.3 5.5 8.5%Sales returns are higher than the industry. Cost of sales ismuch higher, offset some by lower operating expenses. Other expense (perhaps interest) is somewhat higher. Lower taxes are perhaps caused by lower income. Overall profit is less, primarily due to cost of sales.4PROBLEM 8-5 a. 122.72%$1,294,966$1,589,150=2004 sales were 122.72% of those in 2003.b. 100.80%$137,110$138,204=2004 net earnings were 100.80% of those in 2003.c. 1. Net Profit Margin = SalesNet Itemsng Nonrecurri and Earnings of Share Minority Before Profit Net200420039.39%$1,589,150$149,260=11.56%$1,294,966$149,760=2. Return on Assets = Assets Total Average Itemsng Nonrecurri and Earnings of Share Minority Before Income Net2004 200310.38%6$$1,437,63$149,260= 12.67%$1,182,110$149,760=3. Total Asset Turnover = AssetsTotal Average SalesNet20042003$1,437,636$1,589,150$1,182,110$1,294,9664. DuPont Analysis: Return on = Net Profit x Total Asset Assets Margin Turnover2004 10.42* = 9.39% x 1.11 2003 12.72* = 11.56% x 1.10 *Rounded causes the difference from the 10.38% and 12.67%computed in part 2.55.2004 2003Operating income Net salesLess: Cost of product sold Research and develop- ment expensesGeneral and selling Operating income$1,589,150135,314 526,680 $ 275,766$1,294,966113,100 446,110 $ 269,506Operating Income Margin = SalesNet IncomeOperating20042003$1,589,150$275,766$1,294,966$269,5066. Return on Operating Assets = AssetsOperating Average IncomeOperating20042003$1,411,686$1,589,150$1,159,666$269,506= 19.53% = 23.24%7. Operating Asset Turnover = AssetsOperating Average SalesNet20042003$1,411,686$1,589,150$1,159,666$1,294,966= 1.13 times = 1.12 timesper year per year68. DuPont Analysis: Return on = Net Profit x Total Asset Assets Margin Turnover2004 19.61%* = 17.35% x 1.13 2003 23.31%* = 20.81% x 1.12 *Rounding causes the difference from the 19.53% and 23.24%computed in part 6.9.2004 2003 Net earnings before minority share Interest expense Earnings before tax Provision for income tax Tax rate 1 – tax rate (interest expense x (1 – tax rate) Net earnings before minority share + (interest expense) x (1 – tax rate) Long-term debt + equity Return on investment $ 149,260 18,768 263,762 114,502 43.4% 56.6% 10,623 159,883 1,019,420 15.7% $ 149,760 11,522 271,500 121,740 44.8% 55.2% 6,360 156,120 933,23216.7%10. Return on Common Equity = AssetsOperating Average SalesNet2004 2003$810,292$138,204 $720,530$137,110= 17.06% = 19.03%d. Profits in relation to sales, assets, and equity have alldeclined. Turnover has remained stable. Overall, although absolute profits have increased in 2004, compared with 2003, the profitability ratios show a decline.7PROBLEM 8-6 a. 1. Net Profit Margin = SalesNet Itemsng Nonrecurri and Earnings of Share Minority Before Income Net200420032002 $1,600,000$97,051$1,300,000$51,419$1,200,000$45,101= 6.07%= 3.96%= 3.76%2. Return on Assets = AssetsTotal Average Itemng Nonrecurri and Earnings of Share Minority Before Income Net200420032002 $1,440,600$97,051$1,220,000$51,419$1,180,000$45,101= 6.04%= 4.21%= 3.82%3. Total Asset Turnover =AssetsTotal Average SalesNet200420032002 $1,440,600$1,600,000$1,220,000$1,300,000$1,180,000$1,200,000= 1.11 times per year= 1.07 times per year= 1.02 times per year4. DuPont AnalysisReturn on Assets =Net Profit Marginx Total Asset Turnover 2004: 6.74% 2003: 4.24% 2002: 3.84%= = =6.07% 3.96%* 3.76%*x x x1.11 times 1.07 times 1.02 times*Rounding difference from the 4.21% and 3.82% computed in 2.85. Operating Income Margin =SalesNet IncomeOperating200420032002(2) Net sales Less:Material and manufacturing costs of products sold Research and development General and selling(1) Operating income(1) Dividend by (20)740,000 90,000 600,000 1,430,00010.63%624,000 78,000 500,500 1,202,5007.50%576,000 71,400 465,000 1,112,4007.30%6. Return on Operating Assets =AssetsOperating Average IncomeOperating200420032002Operating Income_____ $ 170,00012.23%$ 97,5008.41%$ 87,0007.98%7. Operating Asset Turnover =AssetsOperating Average SalesNet200420032002Net Sales_________ $1,600,000 1.15 times$1,300,0001.12 times$1,200,0001.10 times8. DuPont Analysis with operating ratiosReturn on Assets=Net Profit Marginx Total Asset Turnover 2004: 12.22%* 2003: 8.40%* 2002: 8.03%= = =10.63% 7.50% 7.30%x x x1.15 1.12 1.10*Rounding difference from the 12.23%, 8.41%, and 8.04% computed in 6.99. Equity)s Liabilitie Term -(Long Average Rate)]Tax -(1 x Expense) [(Interest Items ng Nonrecurri and Earnings of Share Minority Before Income Net Investment on Return ++=Estimated tax rate:200420032002(1) Provision for income taxes (2) Earnings before income taxes and Minority equity(1) divided by (2) 1 – tax rate(3) Interest expense x (1-tax rate) $19,000 x 6.00% $18,200 x 59.00% $17,040 x 58.00%(4) Earnings before minority equity (3) plus (4) (A)(5) Total long-term debt(6) Total stockholders’ equity (5) plus (6) (B)(A) divided by (B)$ 62,049$ 159,10039.00% 61.00%11,59097,051 108,641211,100 811,200 1,022,30010.63%$ 35,731$ 87,15041.00% 59.00%10,73851,419 62,157212,800 790,100 1,002,9006.20%$ 32,659$ 77,76042.00% 58.00%9,88345,101 54,984214,000 770,000 984,0005.59%10. EquityTotal Average StockPreferred Redeemable on Dividends -Items ng Nonrecurri Before Income Net Equity Total on Return =200420032002Net income etc.Average total equity$ 86,851 $811,200 $ 42,919 $790,100$ 37,001 $770,000b. All ratios computed indicate a significant improvement Iprofitability.PROBLEM 8-7 a. 1. SalesNet Itemsng Nonrecurri and Earnings of Share Minority Before Income Net Margin Profit Net =2004 2003 2002 $ 171,115 $1,002,100= 17.08%$163,497 $980,500= 16.67%$143,990 $900,000= 16.00%2. AssetsTotal Average Itemsng Nonrecurri and Earnings ofShare Minority Before Income Net Assets on Return =2004 2003 2002 $171,115= 20.40%$163,497= 21.23%$143,990= 18.82%3. AssetsTotal Average SalesNet Turnover Asset Total =2004 2003 2002$1,002,100 $ 839,000= 1.19 times per year$980,500 $770,000= 1.27 times per year$900,000 $$765,000= 1.18 times per year4. DuPont AnalysisReturn on Assets= Operating Income Margin x Total Asset Turnover 2004: 20.88%* 2003: 21.17%* 2002: 18.88%*= = = 17.08% 16.67% 16.00% x x x 1.19 times per year 1.27 times per year 1.18 times per year*Rounding difference from the 20.40%, 21.23%, and 18.82% computed in 2.5. Equitys Liabilitie Term -(Long Average Rate)]Tax -1Expense)x( [(Interest Items ng Nonrecurri and Earnings of Share Minority Before Income Net Investment on Return +=Estimated tax rate:200420032002(1) Provision for income taxes (2) Earnings before income taxes tax rate [(1) divided by (2)] 1 – tax rate(3) Interest expense x (1-tax rate) $14,620 x 59.50% $12,100 x 59.00% $11,250 x 57.70%(4) Net earnings(3) plus (4) (A)(5) Average long-term debt(6) Average shareholders ’ equity (5) plus (6) (B)(A) divided by (B)$116,473 $287,588 40.50% 59.50%8,699171,115 179,814120,000 406,000 526,00034.19%$113,616 $277,113 41.00% 59.00%7,139163,497 170,636112,000 369,500 481,50035.44%$105,560 $249,550 42.30% 57.70%6,491143,990 150,481101,000 342,000 443,00033.97%6. EquityTotal Average StockPreferred Redeemable on Dividends -Items ng Nonrecurri Before Income Net Equity on Return =2004 2003 2002Net earningsAverage total equity$171,115 $163,497$143,990 7. AssetsFixed Net Average SalesNet Assets Fixed to Sales =2004 2003 2002 $1,002,100= 3.31$980,500= 3.49$900,000= 5.20b. The ratios computed indicate a very profitable firm. Most ratios indicate A very slight reduction in profitability in 2003.Sales to fixed assets has declined materially, but this is the only ratio for which the trend appears to be negative.PROBLEM 8-8 a. 1. SalesNet Itemsng Nonrecurri and Earnings of Share Minority Before Income Net Margin Profit Net =2004 2003 2002 $20,070-$8,028= 4.05%$16,660-$6,830= 3.83%$15,380-$6,229= 3.78%2. AssetsTotal Average Itemsng Nonrecurri and Earnings of Share Minority Before Income Net Assets on Return =2004 2003 2002$20,070-$8,028= 8.26%$16,660-$6,830= 7.18%$15,380-$6,229= 6.73%3. AssetsTotal Average SalesNet Turnover Asset Total =2004 2003 2002 $297,580= 2.04 times per year$256,360= 1.87 times per year$242,150= 1.78 times per year4. DuPont AnalysisReturn on Assets = Operating Income Margin x Total AssetTurnover 2004: 8.26% 2003: 7.16%* 2002: 6.73%= = = 4.05% 3.83% 3.78% x x x2.04 times 1.87 times 1.78 times*Rounding difference from the 7.18% computed in 2.5. SalesNet IncomeOperating Margin Income Operating =2004 2003 2002 $ 26,380= 8.86%$ 22,860= 8.92%$ 20,180= 8.33%6. AssetsOperating Average IncomeOperating Assets Operating on Return =2004 2003 2002$26,380_____ $89,800+$45,850= 19.45%$ 22,860____ $84,500+$40,300= 28.32%$ 20,180____ $83,100+$39,800= 16.42%7. AssetsOperating Average SalesNet Turnover Asset Operating =2004 2003 2002 $45,850$89,800$297,580+= 2.19 times per year$40,300$84,500$256,360+= 2.05 times per year$39,800$83,100$242,150+= 1.97 times per year8. DuPont Analysis with Operating RatiosReturn on Assets = Operating Income Margin x Total AssetTurnover 2004: 19.40%* 2003: 18.29%* 2002: 16.41%*= = = 8.86% 8.92% 8.33% x x x2.19 times 2.05 times 1.97 times*Rounding difference from the 19.45%, 18.32%, and 16.42% computed in 6.9.SalesNet ProfitGross Margin Profit Gross =2004 2003 2002$ 91,580= 30.77%$ 80,060= 31.23%$ 76,180= 31.46%b. Net profit margin and total asset turnover both improved. This resulted in a substantial improvement to return on assets.Operating income margin declined slightly in 2003 after a substantial improvement in 2002. Operating asset turnover improved each year. The result of the improvement in operating income margin and operating asset turnover was a substantial improvement in return on operating assets. Gross profit margin declined slightly each year.Overall profitability improved substantially over the three-year period.PROBLEM 8-9 a. 1.AssetsTotal Average Itemsng Nonrecurri and Earnings of Share Minority Before Income Net Assets on Return =2004 2003 2002 (A) (B)$ 2,100,000 7,000,000 100,000 10,000,000$ 1,950,000 6,200,000 100,000 9,000,000$ 1,700,000 5,800,000 100,000 8,300,0002. Equity)s Liabilitie Term -(Long Average Rate)]-Tax -1Expense)x( [(Interest Items ng Nonrecurri and Earnings of Share Minority Before Income Net Investment on Return ++=Estimated tax rate:200420032002(1) Provision for income taxes (2) Income before taxtax rate = (1) divided by (2)1 – tax rate(3) Interest expense x (1-tax rate) $80,000 x 58.33% $600,000 x 57.35% $550,000 x 61.82%(4) Net income(3) plus (4) (A)Long-term debt Preferred stock Common equity(B)(A) divided by (B)$ 1,500,000 3,600,00041.67%58.33%$ 466,640$ 2,100,000$ 2,566,640$ 7,000,000100,000 10,000,000 $17,100,00015.01%$ 1,450,000 3,400,00042.65%57.35%$ 344,100$ 1,950,000$ 2,294,100$ 6,200,000100,000 9,000,000 $15,300,00014.99%$ 1,050,000 2,750,00038.18%61.82%$ 340,000$ 1,700,000$ 2,040,010$ 5,800,000100,000 8,300,000 $14,200,00014.37%3.EquityTotal Average StockPreferred Redeemable on Dividends Itemsng Nonrecurri Before Income Net Equity Total on Return =2004 2003 2002 0$10,000,00$100,000$2,100,000+= 20.79%$9,000,000$100,000$1,950,000+= 21.43% $8,300,000$100,000$1,700,000++= 29.24%4.EquityCommon Average DividendsPreferred Items ng Nonrecurri Before Income Net Equity Common on Return ==2004 2003 2002$10,000,00$14,000-$2,100,000= 20.86%$9,000,000$14,000-$1,950,000= 21.51%$8,300,000$14,000-$1,700,000= 20.31%b. Return on assets improved in 2003 and then declined in 2004.Return on investment improved each year. Return on total equity improved and then declined. Return on common equity improved and then declined.In general, profitability has improved in 2003 over 2002 but was down slightly in 2004.c. The use of long-term debt and preferred stock both benefitedprofitability.Return on common equity is slightly more than return on total equity, indicating a benefit from preferred stock.Return on total equity is substantially higher than return on investment, indicating a benefit from long-term debt. PROBLEM 8-10a. Sales $120,000Gross profit (40%) 48,000Cost of goods sold (60%) 72,000Beginning inventory $ 10,000+ purchase 100,000Total available- Ending inventory ?____Cost of goods sold $ 72,000Ending inventory (110,000-72,000) $ 38,000b. If gross profit were 50%, the analysis would be as follows:Sales $120,000Gross profit (50%) 60,000Cost of goods sold (50%) 60,000Beginning inventory $ 10,000Purchases 100,000Total available $110,000- Ending inventory 50,000Cost of goods sold $ 60,000If gross profit were higher, the loss would be higher.Net Profit RetainedEarningsTotalStockholders’Equitya. a stock dividend isdeclared and paid.b. Merchandise is purchased on credit.c. Marketable securities are sold above cost.d. Accounts receivable arecollected.e. A cash dividend isdeclared and paid.f. Treasury stock ispurchased and recordedat cost.g. Treasury stock is soldabove cost.h. Common stock is sold.i. A fixed asset is sold for less than book value.j. Bonds are converted into common stock. 0+--+--+--++-+a. 1.SalesNet Itemsng Nonrecurri and Earnings of Share Minority Before Income Net Margin Profit Net =2004:7.42%$980,000$72,700=2003:6.76%$960,000$64,900=2002:6.15%$940,000$57,800=2001:5.69%$900,000$51,200=2000:5.10%$880,000$44,900=2. AssetsTotal Average SalesNet Turnover Asset Total =2004:year per times 1.14$86,000)/2($859,000$980,000=+2003:year per times 1.112$870,000)/($861,000$960,000=+2002:year per times 1.082$867,000)/($870,000$940,000=+2001:year per times 1.042$863,000)/($867,000$900,000=+2000: Cannot compute average assets.Year-End Balance Sheet Figures2004:year per times 1.14$859,000$980,000=2003:year per times 1.11$861,000$960,000=2002:year per times 1.08$870,000$940,000=2001:year per times 1.04$867,000$900,000=2000:year per times 1.02$863,000$880,000=3. AssetsTotal Average Itemsng Nonrecurri and Earnings of Share Minority Before Income Net Assets on Return =Average Balance Sheet Figures2004:8.45%2$861,000)/($859,000$72,700=+2003:7.50%2$870,000)/($861,000$64,900=+2002:6.66%2$867,000)/($870,000$57,800=+2001:5.92%2$863,000)/($867,000$51,200=+2000: Cannot compute average assets.Year-End Balance Sheet Figures2004: 8.46%$859,000$72,700=2003: 7.54%$861,000$64,900=2002: 6.64%$870,000$57,800=2001: 5.91%$867,000$51,200=2000: 5.20%$863,000$44,900=4. Turnover Asset Total x Margin Profit Net Assets on Return DuPont =Average Balance Sheet Figures2004: 7.42% x 1.14 times = 8.46%2003: 6.76% x 1.11 times = 7.50%2002: 6.15% x 1.08 times = 6.64%2001: 5.69% x 1.04 times = 5.92%2002: Cannot compute average assetsYear-End Balance Sheet Figures2004: 7.42% x 1.14 times = 8.46%2003: 6.76% x 1.11 times = 7.50%2002: 6.15% x 1.08 times = 6.64%2001: 5.69% x 1.04 times = 5.92%2000: 5.10% x 1.02 times = 5.20%5. Sales Net Income Operating Margin Income Operating =2004: 11.73%$980,000$240,000-$355,000=2003: 10.94%$960,000$239,000-$344,000=2002: 10.11%$940,000$238,000-$333,000=2001: 9.00%$900,000$239,000-$320,000=2000: 8.98%$880,000$235,000-$314,000=6. Assets Operating Average Sales Net Turnover Asset Operating =2004: year per times 1.26$85,000)/2-$861,000$80,000-($859,000$980,000=+2003: year per times 1.23$90,000)/2-$870,000$85,000-($861,000$960,000=+2002: year per times 1.21$95,000)/2-$867,000$90,000-($870,000$940,000=+2001: year per times 1.172$100,000)/-$863,000$95,000-($870,000$900,000=+2000: Average assets cannot be computed.2004: year per times 1.26$80,000-$859,000$980,000=2003: year per times 1.24$85,000-$861,000$960,000=2002: year per times 1.21$90,000-$870,000$940,000=2001: year per times 1.17$95,000-$867,000$900,000=2000: year per times 1.15$100,000-$863,000$880,000=7. Assets Operating Average Income Operating Assets Operating on Return =2004: 14.79%$85,000)/2-$861,000$80,000-($859,000$240,000-$355,000=+2003: 13.50%$90,000)/2-$870,000$85,000-($861,000$239,000-$344,000=+2002: 12.24%$95,000)/2-$867,000$90,000-($870,000$238,000-$333,000=+2001: 10.55%$100,000/2-$863,000$95,000-($867,000$239,000-$320,000=+2000: Average Assets cannot be computed.2004: 14.76%$80,000-$859,000$240,000-$355,000=2003: 13.53%$80,000-$861,000$239,000-$344,000=2002: 12.18%$90,000-$870,000$238,000-$333,000=2001: 10.49%$95,000-$867,000$239,000-$320,000=2000: 10.35%$100,000-$863,000$235,000-$314,000=8. DuPont Return on Operating Assets =Operating Income Margin x Operating Asset TurnoverAverage Balance Sheet Figures2004: 11.73% x 1.26 = 14.78%2003: 10.94% x 1.23 = 13.46%2002: 10.11% x 1.21 = 12.23%2001: 9.00% x 1.17 = 10.53%2000: Average assets cannot be computed.Year-End Balance Sheet Figures2004: 11.73% x 1.26 = 14.78%2003: 10.94% x 1.24 = 13.57%2002: 10.11% x 1.21 = 12.23%2001: 9.00% x 1.17 = 10.53%2000: 8.98% x 1.15 = 10.33%9. Assets Fixed Net Average Sales Net Assets Fixed to Sales =2004: 1.982$491,000)/($500,000$980,000=+2003: 1.972$485,000)/($491,000$960,000=+2002: 1.952$479,000)/($485,000$940,000=+2001: 1.902$479,000)/($479,000$900,000=+2000: Average net fixed assets cannot be computed.Year-End Balance Sheet Figures2004: 1.96$500,000$980,000=2003: 1.96$491,000$960,000=2002: 1.94$485,000$940,000=2001: 1.88$479,000$900,000=2000:1.87$470,000$880,000=10. Equity)Liabiities Term -(Long Average Rate)] Tax -(1 x Expense [Interest Items ng Nonrecurri and Earnings of Share Minority Before Income Net Investment on Return ++=Average Balance Sheet Figures2004: 11.58%2$195,000)/-$861,000$194,000-($859,000.33)-(1 $6,500$72,700=++2003: 10.35%2$195,500)/-$870,000$195,000-($861,000.34)-$6,700(1$64,900=++2002: 9.37%2$195,000)/-$867,000$195,500-($870,000.34)-$8,000(1$57,000=++2001: 8.50%2$196,500)/-$863,000$195,000-($867,000.30)-$8,100(1$51,200=++2000: Average (Long-Term Liabilities + Equity cannotbe computed.Year-End Balance Sheet Figures2004: 11.59%$194,000-$859,000.33)-$6,500(1$72,700=+2003: 10.42%$195,500-$861,000.34)-$6,700(1$64,900=+2002: 9.35%$195,500-$870,000.34)-$8,000(1$57,800=+2001: 8.46%$195,000-$867,000.30)-$8,100(1$51,200=+2000:7.83%$196,500-$863,000.34)-$11,000(1$44,900=+11. Equity Total Average Stock Preferred Redeemable on Dividends -Items Equity Total on Return =Average Balance Sheet Figures2004: 12.77%2$518,000)/($520,000$6,400-$72,700=+2003: 11.33%2$515,000)/($518,000$6,400-$64,900=+2002: 10.03%2$510,000)/($515,000$6,400-$57,800=+2001: 8.38%2$559,000)/($510,000$6,400$51,200=++2000: Average total equity cannot be computed.Year-End Balance Sheet Figures2004: 12.75%$520,000$6,400-$72,700=2003: 11.29%$518,000$6,400-$64,900=2002: 9.98%$515,000$6,400-$57,800=2001: 8.78%$510,000$6,400-$51,200=2000:8.03%$559,000$44,900=12. Equity Common Average Dividends Preferred -Items Equity Common on Return =Average Balance Sheet Figures2004: 13.36%$70,000)/2-$518,000$70,000-($520,000$6,300-$6,400-$72,700=+2003: 11.69%$70,000)/2-$515,00$70,000-($518,000$6,300-$6,400-$64,900=+2002: 10.19%$70,000)/2-$510,000$70,000-($515,000$6,300-$6,400-$57,800=+2001: 8.76%2$120,000)/-$559,000$70,000-($510,000$6,300-$6,400-$51,200=+2000: Average common equity cannot be computed.Year-End Balance Sheet Figures2004: 13.33%$70,000-$520,000$6,300-$6,400-$72,700=2003: 11.65%$70,000-$518,000$6,300-$6,400-$64,900=2002: 10.13%$70,000-$515,000$6,300-$6,400-$57,800=2001: 8.75%$70,000-$510,000$6,300-$6,400-$51,200=2000:7.77%$120,000-$559,000$10,800-$44,900=13. Sales Net Profit Gross Margin Profit Gross =2004: 36.22%$980,000$355,000=2003: 35.83%$960,000$344,000=2002: 35.43%$940,000$333,000=2001: 35.56%$900,000$320,000=2000: 35.68%$880,000$314,000=b.In general, the profitability appears to be very good and the trend is positive.There was not a significant difference in results between usingaverage balance sheet figures and year-end figures. Theyear-end figure allowed for an additional year was not a very profitable year in relation to subsequent years.。
《会计专业英语》习题答案人大版Chapter 8
Chapter 8 Financial Statements and Financial Statement AnalysisMultiple Choice Questions1. A2. C3. B4. B5. D6. C7. B8. D9. A 10. B 11. A 12. C 13.D 14. A 15. A 16. A 17. B 18. B 19. B 20. DDiscussion Questions1. Is the measurement of net income absolutely accurate? Why or why not?The measurement of net income is not absolutely accurate due to the assumptions and estimates in the accounting process. An Income Statement has certain limitations. For example, the amounts shown for depreciation expense are based upon estimates of the useful lives of the company’s tool, equipment, and building. In addition, the Income Statement includes only those events that have been evidenced by actual business transactions. Perhaps during the year, the company’s advertising has caught the attention of many potential customers, who may be the sources of future income. However, the Income Statement cannot reflect the unrealized revenue. Only after the real transactions take place, can the sales revenues be recognized.2. What are the three types of business activities? Give examples of each type of activity.The three types of business activities include operating, investing, and financing activities. Operating activities include the cash effects of transactions that create revenues and expenses in normal course of business. This category is the most important. It shows the cash provided by company operations, which is generally considered to be the best measure of a company’s ability to generate sufficient cash to continue as a going concern. They include sales of goods and services, payments to supplies of merchandise and services.Investing activities include the cash effects of transactions involving plant assets, intangible assets, and investments. They include purchase of property, plant, andequipment, investments in debt or equity securities of other entities.Financing activities involve liability and owners’ equity items. They include: (1) obtaining resources from owners and providing them with a return on their investments, and (2) borrowing money from creditors and repaying the amounts borrowed.3. What types of information are presented in the notes to the financial statements?A set of financial statements is normally accompanied by several notes. Notes to the financial statements are the means of explaining the items presented in the main body of financial statements. Notes disclose information useful in interpreting the statements and are an integral part of the financial statements.Many items are disclosed in notes accompanying the financial statements. Among the most useful are the followings:(1) Accounting policies and methods;(2) Unused lines of credit;(3) Significant commitments and loss contingencies;(4) Dividends in arrears;(5) Assets pledged to secure specific liabilities;(6) Changes in accounting policies and methods.4. Distinguish between trend change analysis and component percentage analysis. Which will be better suited for analyzing the changes in sales over several years?Trend changes are the changes in financial statement items from a base year to the following or preceding years. To compute trend change, a base year is firstly selected and each item in the financial statements for the base year is given a weight of 100 percent. Then, each item in the financial statements for the following or preceding years is expressed as a percentage of the base-year amount.Component percentage analysis is the proportional expression of each financial statement item in a given period to a base amount within the financial statement.Trend change analysis is better for analyzing the changes in sales over several years.5. Explain the ratios used to evaluate profitability. Explain briefly how each is computed.Profitability ratios measure the degree of success or failure of a company in a given year. Usually the key ratios include gross profit ratio, profit margin on sales, return on assets, return on equity, earnings per share, price-earnings ratio, and payout ratio.(1) Gross profit ratio.Gross profit ratio is computed by dividing gross profit by net sales. Gross profit (also known as gross margin) is the difference between net sales and the cost of goods sold.Gross profit = Net sales - Cost of goods soldGross profit ratio = Gross profitNet sales(2) Profit margin on sales.Profit margin on sales is computed as dividing net income by net sales. Net income is the difference between net sales and all expenses (including cost of goods sold). A company can improve its profit margin on sales by increasing its gross profit rate and/or by controlling its operating expense and other expenses.Profit margin on sales = Net incomeNet sales(3) Return on assets (ROA).ROA is computed by dividing net income by average total assets. Average total assets are computed by adding the beginning and ending values of total assets and dividing the total by two.ROA = Net incomeAverage total assets(4) Return on common owners equity (ROE).ROE equals net income less preferred dividends, divided by average common owners’ equity. Average common owners’ equity is computed by adding the beginning and ending values of total common owners’ equity and dividing the total by two.ROE = Net income-PreferreddividendsAverage common owners’ equity(5) Earnings per share (EPS).EPS equals net income less preferred dividends, divided by weighted-average number of shares outstanding in the same year. The weighted-average number of shares outstanding for the year is determined by multiplying the number of shares outstanding by the fraction of the year in which the number of shares outstanding remained unchanged.EPS = Net income-PreferreddividendsWeighted-average number ofshares outstanding(6) Price-earnings ratio (P/E ratio).P/E ratio is computed by dividing the current market price per share of a company’s stock by its annual EPS.P/E ratio = Stock price pershareEarning pershare(7) Payout ratio.Payout ratio equals cash dividends paid to common stockholders divided by net income (less preferred dividends).Payout ratio = Cash dividendsNet income -Preferreddividends6. Why might earnings per share be more significant to a stockholder in a large corporation than the total amount of net income?Earnings per share shows the dollars earned by each share of common stock. EPS equals net income less preferred dividends, divided by weighted-average number of shares outstanding in the same year. That is, a stockholder can know the net income he earns on the share of common stocks he owns.However, based on the total amount of net income, a stockholder cannot know how much he earns from his shares.7. Company C has a current ratio of 3 to pany D has a current ratio of 2 to 1. Does this mean that company C’s operating cycle is longer than company D’s? Why or why not?No, this does not mean that company C’s operating cycle is longer than company D’s. A company’s operating cycle is calculated as”Operating cycle=days to collect accounts receivable + days to sell inventoryDays to collect accounts receivable = 365Accounts receivable turnover rateDays to sell inventory = 365Inventory turnover rateAlthough Company C has a higher current ratio, we cannot calculate days to Days to collect accounts receivable and Days to sell inventory based on the information.8. Which ratio or ratios do you think should be of the greatest interest to:(1) A bank contemplating a short-term loan?A bank contemplating a short-term loan should be interested in such financial ratios as working capital, current ratio, quick ratio, and current cash debt coverage ratios.(2) An investor in common stock?An investor in common stock should be interested in such financial ratio as gross profit ratio, profit margin on sales, return on assets, return on equity, return on investment, earnings per share, price-earnings ratio, and payout ratio.9. Mr. Wang, the chief marketing officer, wants to reduce the selling price of his company’s products by 10% to increase market share. He says, “I know this will reduce our gross profit rate, but the increased number of units sold will make up for the lost margin.” Before this action is taken, what other factors does the company need to consider?Gross profit rate = Gross profitNet salesGross profit = Net sales - Cost of goods soldFrom the above, we know that gross profit rate is determined both by net sales and cost of goods sold. Reducing the net sales does not always lead to a reduced gross profit rate. If cost of goods sold greatly reduces, it is possible that gross profit ratio increases. If cost of goods sold increases, it is possible that the increased number of units sold will not make up for the lost margin. Therefore, before this action is taken, the company needs to consider cost of goods sold of his company’s products.10. Mr. Gao, the chief executive officer (CEO), is puzzled. During last year,his company experienced a net loss of $960,000, yet its cash increased by $540,000in the same year. Explain to the CEO how this could occur.Profit is the difference between revenues and expenses for a specified period oftime. If expenses are greater than revenues, the difference is net loss. Net income/netloss is measured on an accrual basis, while cash flows are measured on a cash basis.Under accrual basis of accounting, companies report revenue when earned, even if cashhas not been received, and they report expenses when incurred, even if cash has notbeen paid. As a result, net income/net loss is not the same as net cash.In this case, the net loss of $960,000 is the result of revenues minus expensesduring last year. It is measured on an accrual basis. However, the increased cash of $540,000 is the net cash from operating, investing, and financing activities during lastyear. It is measured on a cash basis. So, it is not strange that his company experienceda net loss of $960,000, and its cash increased by $540,000 in the same year.ProblemsProblem 8-1A condensed balance sheet for Company E prepared at the end of the year is as follows:AssetsCash $ 90,000Accounts receivable 168,000 Accounts payable 85,000 Inventory 350,000 Long-term liabilities 300,000 Prepaid expenses 75,000 Capital stock ($3 par) 330,000 Plant and equipment (net) 520,000 Retained earnings 563,000 Other assets 105,000Total $1,308,000 Total $1,308,000During the year the company earned a gross profit of $1,550,000 on sales of$3,200,000. Accounts receivables, inventory, and plant assets remained almost constantin amount through the year, so year-end figures may be used rather than the average.This company issued no preferred stocks. (红字标黄色是更正信息)RequiredCompute the following: (Carry to two decimal places)(1) Current ratioCurrent assets = cash + accounts receivable + inventory + prepaid expenses = $90,000+$168,000+$350,000+$75,000= $683,000Current liabilities = notes payable + accounts payable= $30,000 + $85,000= $115,000Current ratio = Current assets Current liabilities = $683,000$115,000 = 5.94(2) Quick ratioQuick assets = cash + accounts receivable= $90,000 + $168,000= $258,000Current liabilities = notes payable + accounts payable= $30,000 + $85,000= $115,000Quick ratio = Quick assets Current liabilities = $258,000$115,000 = 2.24(3) Working capitalCurrent assets = cash + accounts receivable + inventory + prepaid expenses = $90,000 + $168,000 + $350,000 + $75,000= $683,000Current liabilities = notes payable + accounts payable= $30,000 + $85,000= $115,000Working capital = current assets - current liabilities= $683,000 - $115,000= $568,000(4) Debt ratioTotal assets = $1,308,000Total liabilities = notes payable + accounts payable + long-term liabilities = $30,000 + $85,000 + $300,000= $415,000Debt ratio = Total liabilitiesTotal assets = $415,000$1,308,000= 31.72%(5) Accounts receivable turnover (all sales were on credit) Net sales = $3,200,000Average accounts receivable = $168,000Accounts receivable turnover rate = Net salesAverage (net) accounts receivable=$3,200,000$168,000=19.05 times per year(6) Inventory turnoverCost of goods sold = net sales – gross profit= $3,200,000 - $1,550,000= $1,650,000Average inventory = $350,000Inventory turnover rate = Cost of goods soldAverage (net) inventory= $1,650,000$350,000= 4.71 times per year(7) Profit margin on salesNet sales = $3,200,000Net income = retained earnings = $563,000Profit margin on sales = Net incomeNet sales = $563,000$3,200,000= 17.59%(8) Return on assetsNet income = retained earnings = $563,000 Average total assets = $1,308,000ROA = Net incomeAverage total assets = $563,000$1,308,000= 43.04%(9) Return on equity (this company issued no preferred stocks) Net income = retained earnings = $563,000Average common owners’ equity = capital stock + retained earnings= $330,000 + $563,000= $893,000ROE = Net income-Preferreddividends Average common owners’ equity = $563,000$893,000= 63.05%(10) Earnings per share (this company issued no preferred stocks)Net income = retained earnings = $563,000Weighted-average number of shares outstanding = $330,000/$3 = 110,000 sharesEPS = Net income-PreferreddividendsWeighted-average number ofshares outstanding =$563,000110,000= $5.12 per shareProblem 8-2The following selected data are from a recent annual report of company F. Dollar amounts are stated in millions.Beginning of the year End of the yearTotal current assets $9,230 $9,378Total current liabilities 4,836 5,902Total assets 31,125 33,561Total owners’ equity16,028 17,162Operating income 4,280Net income $3,735The company has long-term liabilities that bear interests at annual rate from 7 percent to 10 percent.Required1. Compute the company’s current ratio at: (1) the beginning of the year and, (2) the end of the year. (Carry to two decimal places)(1) Current ratio at the beginning of the yearTotal current assets = $9,230Total current liabilities = $4,836Current ratio = Current assetsCurrent liabilities = $9,230$4,836= 1.91(2) Current ratio at the end of the year Total current assets = $9,378Total current liabilities = $5,902Current ratio = Current assetsCurrent liabilities = $9,378$5,902= 1.592. Compute the company’s working capital at: (1) the beginning of the year and, (2) the end of the year. (Express dollar amounts in thousands)(1) Working capital at the beginning of the yearTotal current assets = $9,230Total current liabilities = $4,836Working capital = current assets - current liabilities= $9,230 - $4,836= $4,394(2) Working capital at the end of the yearTotal current assets = $9,378Total current liabilities = $5,902Working capital = current assets - current liabilities= $9,378 - $5,902= $3,4763. Is the company’s short-term, debt-paying ability improving or deteriorating? Company F’s short-term debt-paying ability has declined, as evidenced by its lower current ratio at the end of the year (1.59 vs. 1.91). The dollar amount of working capital has also decreased ($4,394 million to $3,476 million) which means that the company has a lesser ‘cushion’ between its currently-maturing obligations and its most liquid assets.4. Compute the company’s (1) return on average total assets and (2) return on average total owners’ equity. (Round the average assets and average equity to the nearest dollar and final computations to the nearest 1 percent)(1) Return on average total assetOperating income = $4,280Average total assets = ($31,125 + $33,561)/2 = $32,343ROA = Net incomeAverage total assets = $4,280$32,343= 13.23%(2) Return on average total owners’ equity Net income = $3,735Average owners’ equity = ($16,028 + $17,162)/2= $16,595ROE = Net income-Preferreddividends Average common owners’ equity = $3,735$16,595= 22.51%e. As an equity investor, do you think that company F’s management is utilizing the company’s resources in a reasonably efficient manner? Explain.Yes, company F’s management is using the company’s assets to generate a strong return on both assets (13.23%) and owners’ equity (22.51%), while maintaining strong liquidity with which to satisfy its obligations as they mature.Problem 8-3The following selected data for company M and company N for the year end are as follows:company M company NNet credit sales $1,600,000 $1,500,000Cost of goods sold 1,250,000 1,120,000Cash 175,000 89,000 Accounts receivable (net) 180,000 155,000 Inventory 72,000 218,000Current liabilities $210,000 $190,000Assume that the year-end balances shown for accounts receivable and for inventory also represent the average balances of these items throughout the year.Required1. For each of the two companies, compute the following:(1) Working capitalCompany M:Total current assets = cash + accounts receivable + inventory= $175,000 + $180,000 + $72,000= $427,000Total current liabilities = $210,000Working capital = current assets - current liabilities= $427,000 - $210,000= $217,000Company N:Total current assets = cash + accounts receivable + inventory= $89,000 + $155,000 + $218,000= $462,000Total current liabilities = $190,000Working capital = current assets - current liabilities= $462,000 - $190,000= $272,000(2) Current ratio Company M:Total current assets = $427,000 Total current liabilities = $210,000Current ratio = Current assetsCurrent liabilities = $427,000$210,000 = 2.03 Company N:Total current assets = $462,000 Total current liabilities = $190,000Current ratio = Current assetsCurrent liabilities = $462,000$190,000 = 2.43(3) Quick ratio Company M:Total quick assets = cash + accounts receivable= $175,000 + $180,000 = $355,000Total current liabilities = $210,000Quick ratio = Quick assetsCurrent liabilities = $355,000$210,000 = 1.69 Company N:Total quick assets = cash + accounts receivable= $89,000 + $155,000 = $244,000Total current liabilities = $190,000Quick ratio = Quick assetsCurrent liabilities = $244,000$190,000 = 1.28(4) Number of times inventory turned over during the year and the average number of days required to turn over inventory (round computation the nearestday)Company M:Cost of goods sold = $1,250,000 Average inventory = $72,000Inventory turnover rate = Cost of goods soldAverage (net) inventory = $1,250,000$72,000= 17.36 times per yearDays to sell inventory = 365Inventory turnover rate = 36517.36= 21 daysCompany N:Cost of goods sold = $1,120,000 Average inventory = $218,000Inventory turnover rate = Cost of goods soldAverage (net) inventory = $1,120,000$218,000= 5.14 times per yearDays to sell inventory = 365Inventory turnover rate = 3655.14= 71 days(5) Number of times accounts receivable turned over during the year and the average number of days required to collect account receivable (round computation the nearest day)Company M:Net credit sales = $1,600,000Average accounts receivable = $180,000Accounts receivable turnover rate = Net salesAverage (net) accounts receivable=$1,600,000$180,000=8.89 times per yearDays to collect accounts receivable = 365Accounts receivable turnover rate =3658.89= 41 daysCompany N:Net credit sales = $1,500,000Average accounts receivable = $155,000Accounts receivable turnover rate = Net salesAverage (net) accounts receivable=$1,500,000$155,000= 9.68 times per yearDays to collect accounts receivable = 365Accounts receivable turnover rate =3659.68= 38 days2. From the viewpoint of short-term creditor, comment on the quality of each company’s working capital. To which company would you prefer to sell $65,000 in merchandise on a 30-day open account?As Company M’s working capital ($217,000) is more than company N’s working capital ($272,000), from the viewpoint of short-term creditor, the quality of company N’s working capital is better than that of company M’s.I prefer to sell $65,000 in merchandise on a 30-day open account to company M,as company M spends less days (21 days) to sell inventory than company N (71 days).Problem 8-4The following data are selected from the financial statements of company G, a retail store:From the balance sheet:AssetsCash $46,000 Accounts receivable (net) 205,000 Inventory (at cost) 295,000 Plant & equipment (net of depreciation) 605,000 Current liabilities 210,000 Total owners’ equity600,000 Total assets 1,700,000 From the income statement:Net sales $3,000,000 Cost of goods sold 2,250,000 Operating expenses 525,000 Interest expense 85,000 Income tax expense 22,400 Net income 117,600 From the statement of cash flows:Net cash provided by operating activities $62,000 (including interest paid of $65,000) (68,000) Net cash used in investing activitiesFinancing activities:Amounts borrowed$52,000 Repayment of amounts borrowed (23,000) Dividends paid(21,000)Net cash provided by financing activities 8,000 Net increase in cash during the year$2,000Assume that the year-end balances shown for total assets and total owners’ equity also represent the average balances of these items throughout the year. This company issued no preferred shares. Required1. Explain how the interest expense shown in the income statement could be $85,000, when the interest payment appearing in the statement of cash flows is only $65,000.In the statement of cash flows, amounts are reported on a cash basis, whereas in the income statement, they are reported under the accrual basis. Apparently $20,000 of the interest expense incurred during the year had not been paid as of year-end. This amount should be included among the accrued expenses appearing as a current liability in the company’s balance sheet.2. Compute the following ratios/Dollar Amounts (round to one decimal place): (1) Current ratioTotal current assets = = cash + accounts receivable + inventory= $46,000 + $205,000 + $295,000 = $546,000Total current liabilities = $210,000Current ratio = Current assetsCurrent liabilities = $546,000$210,000 = 2.6(2) Working capitalTotal current assets = = cash + accounts receivable + inventory= $46,000 + $205,000 + $295,000= $546,000Total current liabilities = $210,000Working capital = Total current assets - Total current liabilities= $546,000 - $210,000= $336,000(3) Quick ratioTotal quick assets = = cash + accounts receivable= $46,000 + $205,000= $251,000Total current liabilities = $210,000Quick ratio = Quick assetsCurrent liabilities = $251,000$210,000= 1.2(4) Debt ratioTotal liabilities = total assets – total owners’ equity= $1,700,000 - $600,000= $1,100,000Total assets = $1,700,000Debt ratio = Total liabilitiesTotal assets = $1,100,000$1,700,000=64.7%(5) Times interest earnedIncome before income taxes and interest expense= net income + income taxes + interest expense= $117,600 + $22,400 + $85,000= $225,000Interest expense = $85,000Times interest earned = Income before income taxes and interestexpenseInterestexpense= $225,000$85,000= 2.6 times(6) Cash debt coverage ratioNet cash provided by operating activities = $62,000Average total liabilities = $1,100,000Cash debt coverage ratio = Net cashprovided by operating activitiesAverage total liabilities=$62,000$1,100,000= 0.06 times3. Comment on these measurements and evaluate Company G’s short-term debt-paying ability.By traditional measures, company G’s current ratio (2.6 to 1) and quick ratio (1.2 to 1) appear quite adequate. The company also generates a positive cash flow from operating activities ($62,000) which is about triple the amount of its dividend payments to stockholders ($21,000).4. Compute the following ratios:(1) Gross profit rateGross profit = Net sales - Cost of goods sold = $3,000,000 - $2,250,000 = $750,000 Net sales = $3,000,000Gross profit ratio = Gross profitNet sales = $750,000$3,000,000= 25%(2) Profit margin on sales Net income = $117,600 Net sales = $3,000,000Profit margin on sales = Net incomeNet sales = $117,600$3,000,000= 3.9%(3) Return on assetsNet income = $117,600 Average total assets = $1,700,000ROA = Net incomeAverage total assets = $117,600$1,700,000= =6.9%(4) Return on equityThis company issued no preferred shares. Net income = $117,600Average common owners’ equity = $600,000ROE = Net income-Preferreddividends Average common owners’ equity = $117,600$600,000= 19.6%(5) Payout ratioThis company issued no preferred shares. Net income = $117,600Cash dividends = $21,000Payout ratio = Cash dividendsNet income -Preferreddividends = $21,000$117,600= 17.9%5. Comment on Company G’s performance under these measurements.Company G’s profit margin on sales is 3.9%, indicating that one dollar of net sales results in net income of 3.9 cents. Investors and management can assess the company’s profitability by comparing its profit margin ratio with its competitors’ in the same industry. Profit margin on sales vary across industries. Retail stores generally experience lower profit margins.The 6.9% return on assets is not adequate by traditional standards to a retail store. However, the 19.6% return on equity is high. The problem arises because of company G’s relatively large interest expense, which is stated as $85,000 for the year.At year-end, company G has total liabilities of $1,100,000 ($1,700,000 total assets less $600,000 in owners’ equity). But $210,000 of these are current liabilities, most of which do not bear interest. Thus, company G has about $890,000 in interest-bearing debt.Interest expense of $85,000 on $890,000 of interest-bearing debt indicates an interest rate of approximately 9.55%. Obviously, it is not profitable to borrow moneyat 9.55%, and then reinvest these borrowed funds to earn a pretax return of only 6.9%. If company G cannot earn a return on assets that is higher than the cost of borrowing, it should not borrow money.Company G has a payout ratio of 17.9%, indicating that it has decided that it can and should pay 17.9% of its earnings to its owners. A higher percentage could mean that it has more cash than it has business opportunities to use that cash. A lower percentage could mean that it has very little cash to spare due to a declining business, or, very little cash to spare because it has many internal opportunities to invest that same cash.6. Discuss the safety of long-term creditors’ claims.Long-term creditors do not appear to have a high margin of safety. The debt ratio of 64.7% is high for American (or Chinese) industry. Also, debt is continuing to rise. During the current year, the company borrowed an additional $52,000, while repaying only $23,000 of existing liabilities. In the current year, interest payments alone ($65,000) was more than the net cash flow from operating activities ($62,000).A general rule of thumb is that a cash debt coverage ratio below 0.20 times is cause for additional examination. Company G’s cash debt coverage ratio is 0.06 times, below the 0.20 threshold, suggesting that the company is not solvent.。
第8章通信理论 principles of communications systems,modulation,and noise 课后答案第六版
N0 = 10
5;
and R = 1000 bits/second, we get 10
5
Ps, required = z jrequired N0 R = 4:76 R, bps 1; 000 10; 000 100; 000 PE = 10 3 ; A2 and 4:76 10 2 W; 1 4:76 10 1 W; 10 4:76 W; 100 BW kHz kHz kHz
6CHAPTER 8. FUNDAMENTALS OF BASIC BINARY DIGITAL COMMUNICATION SYSTEMS where BN is the noise equivalent bandwidth of the …lter. Thus SNR = 2 A2 1 e 2 s2 0 (T ) = E [N 2 ] N0 f3
1000 = 4:76
10
2
W
Similar calculations allow the rest of the table to be …lled in, giving the following results. PE = 10 4 6:9 10 2 W 6:9 10 1 W 6:9 W PE = 10 5 9:08 10 2 W 9:08 10 1 W 9:08 W PE = 10 6 11:3 10 2 W 11:3 10 1 W 11:3 W
4 5 6
8.39 (6.9) 9.58 (9.08) 10.53 (11.3)
231.9 176.2 141.6
Problem 8.7 (a) For the pulse sequences ( A; A) and (A; A), which occur half the time, no degradation p results from timing error, so the error probability is Q 2Eb =N0 . The error probability for the sequences ( h A; A) and (A; A), which i occur the other half the time, result in the p error probability Q 2Eb =N0 (1 2 j T j =T ) (sketches of the pulse sequences with the integration interval o¤set from the transition between pulses is helpful here). Thus, the average error probability is the given result in the problem statement. Plots are shown in Figure 8.1 for the giving timing errors. (b) Blowing up the plots of Figure 8.1 show that the intercepts of PE = 10 4 are about 8.4, 9.9, 12.4, and 15.9 dB, respectively, for timing errors of 0, 0.1, 0.2, and 0.3. The corresponding degradations are 1.5, 4, and 7.5 dB for timing errors of 0.1, 0.2, and 0.3, respectively.
Chapter_8_Solutions
Chapter 8Fundamentals of Capital BudgetingNote:All problems in this chapter are available in MyFinanceLab. An asterisk (*) indicates problems with a higher level of difficulty.1.Plan: We can compute the total capitalization of the machine by adding the total cost oftransporting and installing the machine to the initial cost of purchasing the machine, and thiswill provide us with the total cost of the machine that we must appreciate over the 5 years of themachine’s life. In order to compute the annual depreciation expense of the machine we can thentake the total capitalization of the machine and divide it by the depreciable life of the machine.Execute:Capitalization of machine: $10,050,000Annual depreciation expense: 10,050,000/5 = $2,010,000Evaluate: Rather than expensing the $10,050,000 it costs to buy, ship, and install the machinein the year it was bought, accounting principles require you to depreciate the $10,050,000 overthe depreciable life of the equipment. Assuming the equipment has a 5-year depreciable life andthat we use the straight-line method, we would expense $10,050,000/5 = $2,010,000 per year for five years. The idea is to match the cost of acquiring the machine to the timing of the revenuesit generates.2.Plan: We need four items to calculate incremental earnings: (1) incremental revenues,(2) incremental costs, (3) depreciation, and (4) the marginal tax rate.Execute:= (Revenues − Costs − Depreciation) × (1 − tax rate)earningsAnnualincrementalearningsincrementalAnnual=−−×−=(4 1.2 2.01)(10.35)$513,500Evaluate: These incremental earnings are an intermediate step on the way to calculating theincremental cash flows that would form the basis of any analysis of the project. The cost of theequipment does not affect earnings in the year it is purchased, but does so through the depreciation expense in the following five years. Note that the depreciable life, which is based on accountingrules, does not have to be the same as the economic life of the asset—the period over which itwill have value.90 Berk/DeMarzo/Harford • Fundamentals of Corporate Finance3. Plan: We can compute the incremental revenues by taking the percentage increase in sales ofthe 100,000 units multiplied by the $20 sales price per unit.Execute: Incremental revenues =××=(0.20100,000)$20$400,000.Evaluate: A new product typically has lower sales initially, as customers gradually becomeaware of the product. Sales will then accelerate, plateau, and ultimately decline as the productnears obsolescence or faces increased competition. Similarly, the average selling price of aproduct and its cost of production will generally change over time. Prices and costs tend to risewith the general level of inflation in the economy.4.Plan: We can compute the level of incremental sales associated with introducing the new pizzaassuming that customers will spend the same amount on either version by using the sales of the new pizza and the lost sales of the original pizza (40% of customers who switched to the newpizza multiplied by the $20 million in new sales).We can compute the level of incremental sales associated with introducing the new pizzaassuming that 50% of the customers will switch to another brand by using the sales of the newpizza and the lost sales of the original pizza from the customers who would not have switchedbrands.Execute:a. Sales of new pizza − lost sales of original = 20 − 0.40(20) = $12 million.b. Sales of new pizza − lost sales of original pizza from customers who would not have switchedbrands = 20 − 0.50(0.40)(20) = $16 million.Evaluate: More incremental sales are generated if 50% of the customers who will switch fromPisa Pizza’s original pizza to its healthier pizza will switch to another brand if Pisa Pizza doesnot introduce a healthier pizza than just the incremental sales associated with introducing thenew pizza. A new product typically has lower sales initially, as customers gradually becomeaware of the product. Sales will then accelerate, plateau, and ultimately decline as the productnears obsolescence or faces increased competition. Similarly, the average selling price of aproduct and its cost of production will generally change over time. Prices and costs tend to risewith the general level of inflation in the economy.5. Plan: We need four items to calculate incremental earnings: (1) incremental revenues,(2) incremental costs, (3) depreciation, and (4) the marginal tax rate.Execute:Year 1 2 Incremental Earnings Forecast ($000s)1 Sales of Mini Mochi Munch 9,000 7,000Sales 2,000 2,0002 Other3 Cost of Goods Sold (7,350) (6,050)2,9504 Gross Profit 3,6505 Selling, General & Admin. (5,000) —6 Depreciation — —2,9507 EBIT (1,350)8 Income tax at 35% 473 (1,033)9 Unlevered Net Income (878) 1,918Chapter 8 Fundamentals of Capital Budgeting 91 Evaluate: These incremental earnings are an intermediate step on the way to calculating the incremental cash flows that would form the basis of any analysis of the project. The cost of the equipment does not affect earnings in the year it is purchased, but does so through thedepreciation expense in the following five years. Note that the depreciable life, which is based on accounting rules, does not have to be the same as the economic life of the asset—the period over which it will have value. Net income is negative in the first year because the additional selling, general, and administrative costs occurred only in the first year.6. Plan: We can compute the incremental impact on this year’s EBIT of the drop in price bysubtracting the gross profit without the price drop from the gross profit with the price drop.We can compute the incremental impact on EBIT for the next three years of a price drop in the first year from the additional sales on ink cartridges by finding the change in EBIT from ink cartridge sales, which will be the incremental impact on EBIT for years 2 and 3. Note that for year one, we must remember to subtract the incremental impact on EBIT from the price drop in year one.Execute:a. Change in EB I T = Gross profit with price drop − Gross profit without price drop= 25,000 × (300 − 200) − 20,000 × (350 − 200)=−$500,000b. Change in EBIT from ink cartridge sales = 25,000 × $75 × 0.70 − 20,000 × $75 × 0.70= $262,500T herefore, incremental change in EBIT for the next three years is− 500,000 =−$237,500Year1: $262,5002: $262,500Year3: $262,500YearEvaluate: A new product typically has lower sales initially, as customers gradually become aware of the product. Sales will then accelerate, plateau, and ultimately decline as the product nears obsolescence or faces increased competition. Similarly, the average selling price of a product and its cost of production will generally change over time. Prices and costs tend to rise with the general level of inflation in the economy.7. Plan: The difference between incremental earnings and incremental free cash flows is driven bythe equipment purchased. We need to recognize the cash outflow associated with the purchase in year 0 and add back the depreciation expenses from years 1 to 5, as they are not actually cash outflows.Execute:Free cash flows = After-tax earnings + depreciation − capital expenditures − changes in NWC FCF (this year) =−$10,050,000FCF (for each of the next five years) = 513,500 + 2,010,000 = $2,523,500Evaluate: By recognizing the outflow from purchasing the equipment in year 0, we account for the fact that $10,050,000 left the firm at that time. By adding back the depreciation expenses in years 1 to 5, we adjust the incremental earnings to reflect the fact that the depreciation expense is not a cash outflow.92 Berk/DeMarzo/Harford • Fundamentals of Corporate Finance8. Plan: We can project the net working capital needed for this operation by adding cash, inventory,and receivables and subtracting payables.Execute: Net working capital in this problem is the sum of Cash, Accounts Receivable, and Inventory (Lines 1, 2, and 3 below) less Accounts Payable (Line 4). Line 5 is net workingcapital and Line 6 is the changes in working capital from year to year. For example, net working capital in year 1 was 14 and in year 2 it grew to 19, so the increase in NWC, as computed on Line 6 for year 2, is 5. The firm must add 5 to working capital in year 2, so it represents a reduction in cash flow available to investors.Year 0Year 1Year 2 Year 3 Year 4 Year 51 Cash 6 12 15 15 15 2 Accounts Receivable 21 22 24 24 24 3 I nventory 5 7 10 12 13 4 Accounts Payable18 22 24 25 30 5 Net working capital (1 + 2 + 3 − 4) 0 14 19 25 26 226 Increase in NWC−14−5−6−1 4Evaluate: Most projects will require the firm to invest in net working capital. We care about networking capital because it reflects a short-term investment that ties up cash flow that could be used elsewhere. Note that whenever net working capital increases, reflecting additional investment in net working capital, it represents a reduction in cash flow that year.9. Plan: In order to compute the net working capital for each year we need to compute the receivables and payables for each year as a percentage of sales and COGS (receivables are 15% of sales, and payables are 15% of COGS).Execute:0 1 2 3 4 Sales $23,500 $26,438 $23,794 $8,566COGS $ 9,500 $10,688 $ 9,619 $3,463 Receivables: $0 $ 3,525 $ 3,966 $ 3,569 $1,285Payables: $0 $ 1,425 $ 1,603 $ 1,443 $ 519 NWC: $0 $ 2,100 $ 2,363 $ 2,126 $ 765Δ NWC (Required Investment): $ 2,100$ 263−$ 236 −$1,364Evaluate: Most projects will require the firm to invest in net working capital. We care about networking capital because it reflects a short-term investment that ties up cash flow that could be used elsewhere. Note that whenever net working capital increases, reflecting additional investmentin net working capital, it represents a reduction in cash flow that year.Chapter 8 Fundamentals of Capital Budgeting 9310. Plan: We need four items to calculate incremental earnings: (1) incremental revenues,(2) incremental costs, (3) depreciation, and (4) the marginal tax rate.Earnings include non-cash charges, such as depreciation, but do not include the cost of capital investment. To determine the project’s free cash flow from its incremental earnings, we mustadjust for these differences. We need to add back depreciation to the incremental earnings torecognize the fact that we still have the cash flow associated with it.Execute:Solution: Note—we have assumed any incremental cost of goods sold is included as part ofoperating expenses.a.Year 1 2 Incremental Earnings Forecast ($000s)1 Sales 125.0 160.02 Operating Expenses (40.0) (60.0)3 Depreciation (25.0) (36.0)64.04 EBIT 60.05 Income tax at 35% (21.0) (22.4)6 Unlevered Net Income 39.0 41.6b.Free Cash Flow ($000s) 1 27 Plus: Depreciation 25.0 36.08 Less: Capital Expenditures (30.0) (40.0)9 Less: Increases in NWC (5.0) (8.0)10 Free Cash Flow32.0 29.6Evaluate: These incremental earnings are an intermediate step on the way to calculating theincremental cash flows that would form the basis of any analysis of the project. Earnings are an accounting measure of the firm’s performance. They do not represent real profits, and a firmneeds cash. Thus, to evaluate a capital budgeting decision, we must determine its consequences for the firm’s available cash.11. Plan: Earnings include non-cash charges, such as depreciation, but do not include the cost ofcapital investment. To determine the project’s free cash flow from its incremental earnings, we must adjust for these differences. We need to add back depreciation to the incremental earnings to recognize the fact that we still have the cash flow associated with it.Execute: FCF = Unlevered Net Income + Depreciation − CapEx − Increase in NWC = 250 +100 − 200 − 10 = $140 million.Evaluate: Earnings are an accounting measure of the firm’s performance. They do not represent real profits, and a firm needs cash. Thus, to evaluate a capital budgeting decision, we mustdetermine its consequences for the firm’s available cash.94 Berk/DeMarzo/Harford • Fundamentals of Corporate Finance12. This opportunity cost lowers the incremental earnings of Home net by the after-tax earnings thatthey would have otherwise earned had they rented out the space instead. This would be a decrease in incremental earnings of 200,000 × (1 − 0.40) = $120,000 per year for the 4 years.*13. Plan: Incremental revenues: 0 I ncremental costs: −150,000 Depreciation: $10,000 per year Capital Gain on Salvage: $50,000 − $0 = $50,000 Cash flow from salvage value: +50,000 − (50,000)(0.45) = 27,500Execute: Replacing the machine increases EBITDA by 40,000 − 20,000 = 20,000. Depreciationexpenses rises by $15,000 − $10,000 = $5,000. Therefore, FCF will increase by (20,000) × (1 − 0.45) + (0.45)(5,000) = $13,250 in years 1 through 10.In year 0, the initial cost of the machine is $150,000. Because the current machine has a book value of $110,000 − 10,000 (one year of depreciation) = $100,000, selling it for $50,000generates a capital gain of 50,000 − 100,000 = −50,000. This loss produces tax savings of 0.45 × 50,000 = $22,500, so that the after-tax proceeds from the sales including this tax savings is $72,500. Thus, the FCF in year 0 from replacement is −150,000 + 72,500 = −$77,500. NPV of replacement = −77,500 + 13,250 × (1/0.10)(1 − 1/1.1010) = $3,916. There is a small profit from replacing the machine.Evaluate: Even though the decision has no impact on revenues, it still matters for cash flows because it reduces costs. Further, both selling the old machine and buying the new machine involve cash flows with tax implication.*14. Plan: We can use Eq. (8.5) to evaluate the free cash flows associated with each alternative. Notethat we only need to include the components of free cash flows that vary across each alternative. For example, since NWC is the same for each alternative, we can ignore it.Execute: The spreadsheet below computes the relevant FCF from each alternative. Note that each alternative has a negative NPV—this represents the PV of the costs of each alternative. We should choose the one with the highest NPV (lowest cost), which in this case is purchasing the existing machine. a. See spreadsheet.12345678910Rent Machine1 Rent (50,000) (50,000)(50,000)(50,000)(50,000)(50,000)(50,000)(50,000) (50,000) (50,000)2 FCF (rent) (32,500) (32,500)(32,500)(32,500)(32,500)(32,500)(32,500)(32,500) (32,500) (32,500)3 NPV at 8%(218,078)Purchase Current Machine4 Maintenance (20,000) (20,000)(20,000)(20,000)(20,000)(20,000)(20,000)(20,000) (20,000) (20,000)5 Depreciation 21,429 21,42921,429 21,429 21,429 21,429 21,429 — — —6 Capital Expenditures (150,000)7 FCF (purchase current)(150,000) (5,500) (5,500)(5,500)(5,500)(5,500)(5,500)(5,500)(13,000) (13,000) (13,000)8 NPV at 8%(198,183)ContinuedChapter 8 Fundamentals of Capital Budgeting 950 1 2 3 4 5 6 7 8 9 10 Purchase Advanced Machine9 Maintenance (15,000)(15,000)(15,000)(15,000)(15,000)(15,000) (15,000) (15,000) (15,000)(15,000)10 Other Costs (35,000) 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,00011 Depreciation 35,714 35,714 35,714 35,714 35,714 35,714 35,714 — — —12 Capital Expenditures (250,000)13 FCF (purchase advanced) (272,750) 9,250 9,250 9,250 9,250 9,250 9,250 9,250 (3,250) (3,250)(3,250)14 NPV at 8%(229,478)b. See spreadsheet.Evaluate: When evaluating a capital budgeting project, financial managers should make thedecision that maximizes NPV. In this case Beryl’s Iced Tea should purchase the current machine because it has the lowest negative NPV.Plan: Compute the depreciation charges and the book value of the asset during each of the five 15.years of its life. Then compute the after tax proceeds if the asset is sold after three years.Execute:a. The MACRS 5-year schedule, along with the book value:Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 MACRS schedule: 20.00%32.00%19.20%11.52% 11.52% 5.76%Depreciation charge: $ 60,000 $ 96,000 $57,600 $34,560 $34,560 $17,280Remaining book value: $240,000 $144,000 $86,400 $51,840 $17,280 $ 0b. The profits on the sale would be $180,000 − 51,840 = 128,160. The taxes on this profitwould be 128,160 × 0.35 = 44,856. Thus, the total after tax proceeds from the sale are180,000 − 44,856 = 135,144.Evaluate: The book value of the asset after three years would be $51,840. If the asset were soldafter three years for $180,000 the firm would receive $135,144 net of taxes.Plan: If the company accepts the order and does not sell the machine, determine the cost to the 16.company.Execute: Yes, the cost of taking the order is the lost $135,144 in after tax cash flow that itwould have otherwise received by selling the equipment.Evaluate: By taking the order and not selling the machine the company is foregoing the$135,144 it would have received from the sale of the machine. This is therefore a cost of takingthe order.17. a. No, this is a sunk cost and will not be included directly. (But see part (f) below.)b. Yes, this is a cost of opening the new store.c. Yes, this loss of sales at the existing store should be deducted from the sales at the newstore to determine the incremental increase in sales that opening the new store will generatefor HBS.d. No, this is a sunk cost.96 Berk/DeMarzo/Harford • Fundamentals of Corporate Financee. This is a capital expenditure associated with opening the new store. These costs willtherefore increase HBS’s depreciation expenses.f. Yes, this is an opportunity cost of opening the new store. (By opening the new store, HBSforgoes the after-tax proceeds it could have earned by selling the property. This loss is equalto the sale price less the taxes owed on the capital gain from the sale, which is the differencebetween the sale price and the book value of the property. The book value equals the initialcost of the property less accumulated depreciation.)g. While these financing costs will affect HBS’s actual earnings, for capital budgeting purposeswe calculate the incremental earnings without including financing costs to determine theproject’s unlevered net income.18. The incremental cash flows would increase in years 0 and 1, as the accelerated depreciationschedule would give Daily Enterprises a higher tax shield during those two years. In years 2through 5, the incremental free cash flows would be lower, since the depreciation expenses inthese years is lower than 20%. Overall, the present value of the free cash flows would increaseunder a MACRS depreciation schedule.19. a. $15 million/5 years = $3 million per year.b. $3 million × 35% = $1.05 million per year.c.Year0 1 2 3 4 5 MACRS DepreciationEquipment Cost 15,000MACRS Depreciation Rate 20.00%32.00% 19.20% 11.52% 11.52% 5.76%Depreciation Expense 3,000 4,800 2,880 1,728 1,728 864Depreciation Tax Shield1,050 1,680 1,008 605 605 302(at 35% tax rate)d. In both cases, its total depreciation tax shield is the same. But with MACRS, it receives thedepreciation tax shields sooner—thus, MACRS depreciation leads to a higher NPV ofMarkov’s FCF.e. If the tax rate will increase substantially, then Markov may be better off claiming higherdepreciation expenses in later years, since the tax benefit at that time will be greater.20. Plan: Under MACRS, we take the percentage in the table for each year and multiply it by theoriginal purchase price of the equipment to calculate the depreciation for that year.Execute:a. Free Cash Flows are:9…1021= Net income 4,875 4,875 4,875 4,875+ Overhead (after tax at 35%) 650 650 650 650+ Depreciation 2,500 2,500 2,500 2,500− Capex 25,000− Inc. in NWC 10,000–10000FCF −35,0008,025 8,025 …8,025 18,025Chapter 8 Fundamentals of Capital Budgeting 97b. NPV 9101118.025358.02519.5570.14 1.14 1.14⎛⎞=−+×−+=⎜⎟⎝⎠Evaluate: Compared with straight-line depreciation, the MACRS method allows for largerdepreciation deductions earlier in the asset’s life, which increases the present value of the depreciation tax shield and so will raise the project’s NPV.21. Plan: Compute the Free Cash Flow forecast for the next 10 years. Compute the NPV of the projectbased on the forecasted Free Cash Flows. Then compute the NPV under different assumptions about Initial Sales and Growth. Then compute the NPV of the project under a range of discount rates.Year 0 1 2 3 4 5 6 7 8 9 10Free Cash Flow Forecast($ millions)1 Sales — 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.02 Manufacturing — (35.0) (35.0) (35.0) (35.0) (35.0) (35.0) (35.0) (35.0) (35.0) (35.0)3 Marketing Expenses — (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0)4 Depreciation — (15.0) (15.0) (15.0) (15.0) (15.0) (15.0) (15.0) (15.0) (15.0) (15.0)5 EB I T — 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.06 Income tax at 35% —(14.0)(14.0) (14.0) (14.0)(14.0)(14.0) (14.0) (14.0) (14.0) (14.0)7 Unlevered Net Income— 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 8 Depreciation — 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 9 Inc. in NWC — (5.0) (5.0) (5.0) (5.0) (5.0) (5.0) (5.0) (5.0) (5.0) (5.0)10 Capital Expenditures(150.0) — — — — — — — — — — 11 Continuation value ——————————12.012 Free Cash Flow(150.0) 36.0 36.0 36.0 36.0 36.0 36.0 36.0 36.0 36.0 48.0 13 NPV at 12%57.3 — — — — — — — — — —Execute:a. The NPV of the estimate free cash flow is9101148NPV 1503610.12 1.12 1.12$57.3 million⎛⎞=−+×−+⎜⎟⎝⎠=b. I nitial Sales 90 100 110 NPV 20.5 57.3 94.0c. Growth Rate 0% 2% 5% NPV57.3 72.5 98.198 Berk/DeMarzo/Harford • Fundamentals of Corporate Financed. NPV is positive for discount rates below the IRR of 20.6%.Evaluate: Under the forecast assumptions the project has an NPV of $57.3 million and thereforeshould be accepted. Under various scenarios of assumed initial sales and growth the projectcontinues to have a positive NPV meaning that even if the forecast assumption proves toooptimistic or pessimistic, the project will still create firm value. Finally the discount rate used inthe forecast assumptions is 12%, but the project would have a positive NPV using any discountrate below 20.6%. The project is positive and the results are robust.*22. a. See spreadsheet.b. See spreadsheet.c. See spreadsheet.d. See data tables in spreadsheet.e. See data tables in spreadsheet.f. See spreadsheet—need additional sales of $11.384 million in years 3 to 10 for larger machineto have a higher NPV than XC-750.Incremental Effects(with vs. without XC-750)Year 0 1 2 3 4 5 6 7 8 9 10 11 Sales Revenues −5,000 10,000 10,00010,00010,00010,00010,00010,00010,000 10,000 10,000Cost of Goods Sold 3,500 −7,000 −7,000−7,000−7,000−7,000−7,000−7,000−7,000 −7,000 −7,000S, G, & A Expenses −2,000 −2,000−2,000−2,000−2,000−2,000−2,000−2,000 −2,000 −2,000 Depreciation −275 −275−275−275−275−275−275−275 −275 −275 EBIT −1,500 725 725725725725725725725 725 725 Taxes at 35% 525 −254 −254−254−254−254−254−254−254 −254 −254 Unlevered Net Income −975 471 471471471471471471471 471 471ContinuedChapter 8 Fundamentals of Capital Budgeting 99Incremental Effects(with vs. without XC-750)Year 0 1 2 3 4 5 6 7 8 9 10 11Depreciation 275275275275275275275 275 275 275Capital Expenditures −2,7501,000800Add. to Net Work. Cap. −600 −1,200000000 0 0FCF −4,325 −454746746746746746746 746 746 1,746800Cost of Capital 10.00% PV(FCF) −4,325 −413617561510463421383 348 316 673280NPV −164.6Net Working Capital Calculation810119 Year 01234567Receivables at 15% −750 1500150015001500150015001500 1500 1500 15000Payables at 10% 350 −700−700−700−700−700−700−700 −700 −700 −7000Inventory 1000 1000100010001000100010001000 1000 1000 00NWC 600 1800180018001800180018001800 1800 1800 8000Sensitivity Analysis: New SalesNew Sales (000s) 8 9 10 10.143 11 122142NPV −2472 −1318 −165 0 989Sensitivity Analysis: Cost of Goods Sold69.545%69% 70%71%COGS 67% 68%NPV 921 559 0 197 −165−526Incremental Effects(with vs. without XC-900)Year 0 1 2 3 4 5 6 7 8 9 10 11Sales Revenues −5,00010,00010,00011,38411,38411,38411,38411,38411,38411,38411,384Cost of Goods Sold 3,500−7,000−7,000−7,969−7,969−7,969−7,969−7,969−7,969−7,969−7,969S, G, & A Expenses −2,000−2,000−2,000−2,000−2,000−2,000−2,000−2,000−2,000−2,000Depreciation −400−400−400−400−400−400−400−400−400−400EBIT −1,5006006001,0151,0151,0151,0151,0151,0151,0151,015Taxes at 35% 525−210−210−355−355−355−355−355−355−355−355Unlevered Net Income −975390390660660660660660660660660Depreciation 400400400400400400400400400400Capital Expenditures −4,000Add. to Net Work. Cap. −600−1,2000−1110000001,000911FCF −5,575−4107909491,0601,0601,0601,0601,0601,0602,060911Continued100 Berk/DeMarzo/Harford • Fundamentals of Corporate FinanceIncremental Effects(with vs. without XC-900)Year 0 1 2 3 4 5 6 7 8 9 10 11Cost of Capital 10.00%PV(FCF) −5,575−373 653713724658598544494450 794319NPV 0.0Net Working Capital Calculation234567891011Year 0 1Receivables at 15% −7501500 15001708170817081708170817081708 17080Payables at 10% 350−700 −700−797−797−797−797−797−797−797 −7970Inventory 10001000 10001000100010001000100010001000 00NWC 6001800 18001911191119111911191119111911 9110New Sales8 9 10 10.40 11 12NPV −652 −326 0 129 326 652Cost of Goods Sold67% 68% 68.76% 69.00% 70% 71%NPV 1203 802 498 401 0 −40123.Real options must have positive value because they are only exercised when doing so wouldincrease the value of the investment. If exercising the real option would reduce value, managerscan allow the option to go unexercised. Thus, having the option but not the obligation to act isvaluable.24. The XC-900 allows Billingham the option to expand production starting in year 3. If it would bebeneficial to expand production, Billingham will increase production with the XC-900. If itwould be better if production remains the same, Billingham is under no obligation to utilize allof the XC-900 production capacity.25. This provides Billingham the option to abandon the investment.。
国际财务管理课后习题答案chapter 8
CHAPTER 8 MANAGEMENT OF TRANSACTION EXPOSURE SUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTER QUESTIONS ANDPROBLEMSQUESTIONS1. How would you define transaction exposure? How is it different from economic exposure?Answer: Transaction exposure is the sensitivity of realized domestic currency values of the firm’s contractual cash flows denominated in foreign currencies to unexpected changes in exchange rates. Unlike economic exposure, transaction exposure is well-defined and short-term.2. Discuss and compare hedging transaction exposure using the forward contract vs. money market instruments. When do the alternative hedging approaches produce the same result?Answer: Hedging transaction exposure by a forward contract is achieved by selling or buying foreign currency receivables or payables forward. On the other hand, money market hedge is achieved by borrowing or lending the present value of foreign currency receivables or payables, thereby creating offsetting foreign currency positions. If the interest rate parity is holding, the two hedging methods are equivalent.3. Discuss and compare the costs of hedging via the forward contract and the options contract.Answer: There is no up-front cost of hedging by forward contracts. In the case of options hedging, however, hedgers should pay the premiums for the contracts up-front. The cost of forward hedging, however, may be realized ex post when the hedger regrets his/her hedging decision.4. What are the advantages of a currency options contract as a hedging tool compared with the forward contract?Answer: The main advantage of using options contracts for hedging is that the hedger can decide whether to exercise options upon observing the realized future exchange rate. Options thus provide ahedge against ex post regret that forward hedger might have to suffer. Hedgers can only eliminate the downside risk while retaining the upside potential.5. Suppose your company has purchased a put option on the German mark to manage exchange exposure associated with an account receivable denominated in that currency. In this case, your company can be said to have an ‘insurance’ policy on its receivable. Explain in what sense this is so.Answer: Your company in this case knows in advance that it will receive a certain minimum dollar amount no matter what might happen to the $/€exchange rate. Furthermore, if the German mark appreciates, your company will benefit from the rising euro.6. Recent surveys of corporate exchange risk management practices indicate that many U.S. firms simply do not hedge. How would you explain this result?Answer: There can be many possible reasons for this. First, many firms may feel that they are not really exposed to exchange risk due to product diversification, diversified markets for their products, etc. Second, firms may be using self-insurance against exchange risk. Third, firms may feel that shareholders can diversify exchange risk themselves, rendering corporate risk management unnecessary.7. Should a firm hedge? Why or why not?Answer: In a perfect capital market, firms may not need to hedge exchange risk. But firms can add to their value by hedging if markets are imperfect. First, if management knows about the firm’s exposure better than shareholders, the firm, not its shareholders, should hedge. Second, firms may be able to hedge at a lower cost. Third, if default costs are significant, corporate hedging can be justifiable because it reduces the probability of default. Fourth, if the firm faces progressive taxes, it can reduce tax obligations by hedging which stabilizes corporate earnings.8. Using an example, discuss the possible effect of hedging on a firm’s tax obligations.Answer: One can use an example similar to the one presented in the chapter.9. Explain contingent exposure and discuss the advantages of using currency options to manage this type of currency exposure.Answer: Companies may encounter a situation where they may or may not face currency exposure. In this situation, companies need options, not obligations, to buy or sell a given amount of foreign exchange they may or may not receive or have to pay. If companies either hedge using forward contracts or do not hedge at all, they may face definite currency exposure.10. Explain cross-hedging and discuss the factors determining its effectiveness.Answer: Cross-hedging involves hedging a position in one asset by taking a position in another asset. The effectiveness of cross-hedging would depend on the strength and stability of the relationship between the two assets.PROBLEMS1. Cray Research sold a super computer to the Max Planck Institute in Germany on credit and invoiced €10 million payable in six months. Currently, the six-month forward exchange rate i s $1.10/€ and the foreign exchange advisor for Cray Research predicts that the spot rate is likely to be $1.05/€ in six months.(a) What is the expected gain/loss from the forward hedging?(b) If you were the financial manager of Cray Research, would you recommend hedging this euro receivable? Why or why not?(c) Suppose the foreign exchange advisor predicts that the future spot rate will be the same as the forward exchange rate quoted today. Would you recommend hedging in this case? Why or why not?Solution: (a) Expected gain($) = 10,000,000(1.10 – 1.05)= 10,000,000(.05)= $500,000.(b) I would recommend hedging because Cray Research can increase the expected dollar receipt by $500,000 and also eliminate the exchange risk.(c) Since I eliminate risk without sacrificing dollar receipt, I still would recommend hedging.2. IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed ¥250 million payable in three months. Currently, the spot exchange rate is ¥105/$ and the three-month forward rate is ¥100/$. The three-month money market interest rate is 8 percent per annum in the U.S. and 7 percent per annum in Japan. The management of IBM decided to use the money market hedge to deal with this yen account payable.(a) Explain the process of a money market hedge and compute the dollar cost of meeting the yen obligation.(b) Conduct the cash flow analysis of the money market hedge.Solution: (a). Let’s first compute the PV of ¥250 million, i.e.,250m/1.0175 = ¥245,700,245.7So if the above yen amount is invested today at the Japanese interest rate for three months, the maturity value will be exactly equal to ¥25 million which is the amount of payable.To buy the above yen amount today, it will cost:$2,340,002.34 = ¥250,000,000/105.The dollar cost of meeting this yen obligation is $2,340,002.34 as of today.(b)___________________________________________________________________Transaction CF0 CF1____________________________________________________________________1. Buy yens spot -$2,340,002.34with dollars ¥245,700,245.702. Invest in Japan - ¥245,700,245.70 ¥250,000,0003. Pay yens - ¥250,000,000Net cash flow - $2,340,002.34____________________________________________________________________3. You plan to visit Geneva, Switzerland in three months to attend an international business conference. You expect to incur the total cost of SF 5,000 for lodging, meals and transportation during your stay. As of today, the spot exchange rate is $0.60/SF and the three-month forward rate is $0.63/SF. You can buy the three-month call option on SF with the exercise rate of $0.64/SF for the premium of $0.05 per SF. Assume that your expected future spot exchange rate is the same as the forward rate. The three-month interest rate is 6 percent per annum in the United States and 4 percent per annum in Switzerland.(a) Calculate your expected dollar cost of buying SF5,000 if you choose to hedge via call option on SF.(b) Calculate the future dollar cost of meeting this SF obligation if you decide to hedge using a forward contract.(c) At what future spot exchange rate will you be indifferent between the forward and option market hedges?(d) Illustrate the future dollar costs of meeting the SF payable against the future spot exchange rate under both the options and forward market hedges.Solution: (a) Total option premium = (.05)(5000) = $250. In three months, $250 is worth $253.75 = $250(1.015). At the expected future spot rate of $0.63/SF, which is less than the exercise price, you don’t expect to exercise options. Rather, you expect to buy Swiss franc at $0.63/SF. Since you are going to buy SF5,000, you expect to spend $3,150 (=.63x5,000). Thus, the total expected cost of buying SF5,000 will be the sum of $3,150 and $253.75, i.e., $3,403.75.(b) $3,150 = (.63)(5,000).(c) $3,150 = 5,000x + 253.75, where x represents the break-even future spot rate. Solving for x, we obtain x = $0.57925/SF. Note that at the break-even future spot rate, options will not be exercised.(d) If the Swiss franc appreciates beyond $0.64/SF, which is the exercise price of call option, you will exercise the option and buy SF5,000 for $3,200. The total cost of buying SF5,000 will be $3,453.75 = $3,200 + $253.75.This is the maximum you will pay.4. Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €20 million which is payable in one year. The current spot exchange rate is $1.05/€ and the one -year forwa rd rate is $1.10/€. The annual interest rate is 6.0% in the U.S. and5.0% in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure.(a) It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borrow euros from the Credit Lyonnaise against the euro receivable. Which alternative would you recommend? Why?(b) Other things being equal, at what forward exchange rate would Boeing be indifferent between the two hedging methods?Solution: (a) In the case of forward hedge, the future dollar proceeds will be (20,000,000)(1.10) = $22,000,000. In the case of money market hedge (MMH), the firm has to first borrow the PV of its euro receivable, i.e., 20,000,000/1.05 =€19,047,619. Then the firm should exchange this euro amount into dollars at the current spot rate to receive: (€19,047,619)($1.05/€) = $20,000,000, which can be invested at the dollar interest rate for one year to yield:$20,000,000(1.06) = $21,200,000.Clearly, the firm can receive $800,000 more by using forward hedging.(b) According to IRP, F = S(1+i $)/(1+i F ). Thus the “indifferent” forward rate will be:$ Co st Options hedge Forward hedge $3,453.75 $3,150 0 0.579 0.64 (strike $/SF $253.75F = 1.05(1.06)/1.05 = $1.06/€.5. Suppose that Baltimore Machinery sold a drilling machine to a Swiss firm and gave the Swiss client a choice of paying either $10,000 or SF 15,000 in three months.(a) In the above example, Baltimore Machinery effectively gave the Swiss client a free option to buy up to $10,000 dolla rs using Swiss franc. What is the ‘implied’ exercise exchange rate?(b) If the spot exchange rate turns out to be $0.62/SF, which currency do you think the Swiss client will choose to use for payment? What is the value of this free option for the Swiss client?(c) What is the best way for Baltimore Machinery to deal with the exchange exposure?Solution: (a) The implied exercise (price) rate is: 10,000/15,000 = $0.6667/SF.(b) If the Swiss client chooses to pay $10,000, it will cost SF16,129 (=10,000/.62). Since the Swiss client has an option to pay SF15,000, it will choose to do so. The value of this option is obviously SF1,129 (=SF16,129-SF15,000).(c) Baltimore Machinery faces a contingent exposure in the sense that it may or may not receive SF15,000 in the future. The firm thus can hedge this exposure by buying a put option on SF15,000.6. Princess Cruise Company (PCC) purchased a ship from Mitsubishi Heavy Industry. PCC owes Mitsubishi Heavy Industry 500 million yen in one year. The current spot rate is 124 yen per dollar and the one-year forward rate is 110 yen per dollar. The annual interest rate is 5% in Japan and 8% in the U.S. PCC can also buy a one-year call option on yen at the strike price of $.0081 per yen for a premium of .014 cents per yen.(a) Compute the future dollar costs of meeting this obligation using the money market hedge and the forward hedges.(b) Assuming that the forward exchange rate is the best predictor of the future spot rate, compute the expected future dollar cost of meeting this obligation when the option hedge is used.(c) At what future spot rate do you think PCC may be indifferent between the option and forward hedge?Solution: (a) In the case of forward hedge, the dollar cost will be 500,000,000/110 = $4,545,455. In the case of money market hedge, the future dollar cost will be: 500,000,000(1.08)/(1.05)(124) = $4,147,465.(b) The option premium is: (.014/100)(500,000,000) = $70,000. Its future value will be $70,000(1.08) = $75,600.At the expected future spot rate of $.0091(=1/110), which is higher than the exercise of $.0081, PCC will exercise its call option and buy ¥500,000,000 for $4,050,000 (=500,000,000x.0081).The total expected cost will thus be $4,125,600, which is the sum of $75,600 and $4,050,000.(c) When the option hedge is used, PCC will spend “at most” $4,125,000. On the other hand, when the forward hedging is used, PCC will have to spend $4,545,455 regardless of the future spot rate. This means that the options hedge dominates the forward hedge. At no future spot rate, PCC will be indifferent between forward and options hedges.7. Airbus sold an aircraft, A400, to Delta Airlines, a U.S. company, and billed $30 million payable in six months. Airbus is concerned with the euro proceeds from international sales and would like to control exchange risk. The current spot exchange rate is $1.05/€ and six-month forward exchange rate is $1.10/€ at the moment. Airbus can buy a six-month put option on U.S. dollars with a strike price of €0.95/$ for a premium of €0.02 p er U.S. dollar. Currently, six-month interest rate is 2.5% in the euro zone and 3.0% in the U.S.pute the guaranteed euro proceeds from the American sale if Airbus decides tohedge using a forward contract.b.If Airbus decides to hedge using money market instruments, what action does Airbusneed to take? What would be the guaranteed euro proceeds from the American sale in this case?c.If Airbus decides to hedge using put options on U.S. dollars, what would be the ‘expected’euro proceeds from the American sale? Assume that Airbus regards the current forward exchange rate as an unbiased predictor of the future spot exchange rate.d.At what future spot exchange rate do you think Airbus will be indifferent between theoption and money market hedge?Solution:a. Airbus will sell $30 million forward for €27,272,727 = ($30,000,000) / ($1.10/€).b. Airbus will borrow the present value of the dollar receivable, i.e., $29,126,214 = $30,000,000/1.03, and then sell the dollar proceeds spot for euros: €27,739,251. This is the euro amount that Airbus is going to keep.c. Since the expected future spot rate is less than the strike price of the put option, i.e., €0.9091< €0.95, Airbus expects to exercise the option and receive €28,500,000 = ($30,000,000)(€0.95/$). Th is is gross proceeds. Airbus spent €600,000 (=0.02x30,000,000) upfront for the option and its future cost is equal to €615,000 = €600,000 x 1.025. Thus the net euro proceeds from the American sale is €27,885,000, which is the difference between the gross proceeds and the option costs.d. At the indifferent future spot rate, the following will hold:€28,432,732 = S T (30,000,000) - €615,000.Solving for S T, we obtain the “indifference” future spot exchange rate, i.e., €0.9683/$, or $1.0327/€. Note that €28,432,732 is the future value of the proceeds under money market hedging: €28,432,732 = (€27,739,251) (1.025).Suggested solution for Mini Case: Chase Options, Inc.[See Chapter 13 for the case text]Chase Options, Inc.Hedging Foreign Currency Exposure Through Currency OptionsHarvey A. PoniachekI. Case SummaryThis case reviews the foreign exchange options market and hedging. It presents various international transactions that require currency options hedging strategies by the corporations involved. Seven transactions under a variety of circumstances are introduced that require hedging by currency options. The transactions involve hedging of dividend remittances, portfolio investment exposure, and strategic economic competitiveness. Market quotations are provided for options (and options hedging ratios), forwards, and interest rates for various maturities.II. Case Objective.The case introduces the student to the principles of currency options market and hedging strategies. The transactions are of various types that often confront companies that are involved in extensive international business or multinational corporations. The case induces students to acquire hands-on experience in addressing specific exposure and hedging concerns, including how to apply various market quotations, which hedging strategy is most suitable, and how to address exposure in foreign currency through cross hedging policies.III. Proposed Assignment Solution1. The company expects DM100 million in repatriated profits, and does not want the DM/$ exchangerate at which they convert those profits to rise above 1.70. They can hedge this exposure using DM put options with a strike price of 1.70. If the spot rate rises above 1.70, they can exercise the option, while if that rate falls they can enjoy additional profits from favorable exchange rate movements.To purchase the options would require an up-front premium of:DM 100,000,000 x 0.0164 = DM 1,640,000.With a strike price of 1.70 DM/$, this would assure the U.S. company of receiving at least:DM 100,000,000 – DM 1,640,000 x (1 + 0.085106 x 272/360)= DM 98,254,544/1.70 DM/$ = $57,796,791by exercising the option if the DM depreciated. Note that the proceeds from the repatriated profits are reduced by the premium paid, which is further adjusted by the interest foregone on this amount.However, if the DM were to appreciate relative to the dollar, the company would allow the option to expire, and enjoy greater dollar proceeds from this increase.Should forward contracts be used to hedge this exposure, the proceeds received would be:DM100,000,000/1.6725 DM/$ = $59,790,732,regardless of the movement of the DM/$ exchange rate. While this amount is almost $2 million more than that realized using option hedges above, there is no flexibility regarding the exercise date; if this date differs from that at which the repatriate profits are available, the company may be exposed to additional further current exposure. Further, there is no opportunity to enjoy any appreciation in the DM.If the company were to buy DM puts as above, and sell an equivalent amount in calls with strike price 1.647, the premium paid would be exactly offset by the premium received. This would assure that the exchange rate realized would fall between 1.647 and 1.700. If the rate rises above 1.700, the company will exercise its put option, and if it fell below 1.647, the other party would use its call; for any rate in between, both options would expire worthless. The proceeds realized would then fall between:DM 100,00,000/1.647 DM/$ = $60,716,454andDM 100,000,000/1.700 DM/$ = $58,823,529.This would allow the company some upside potential, while guaranteeing proceeds at least $1 million greater than the minimum for simply buying a put as above.Buy/Sell OptionsDM/$ Sp otPutPayoff“Put”ProfitsCallPayoff“Call”ProfitsNetProfit1. 60(1,742,846)01,742,84660,716,45460,716,4541. 61(1,742,846)01,742,84660,716,45460,716,4541. 62(1,742,846)01,742,84660,716,45460,716,4541. 63(1,742,846)01,742,84660,716,45460,716,4541. 64(1,742,846)01,742,84660,716,45460,716,4541. 65(1,742,846)60,606,0611,742,846060,606,0611. 66(1,742,846)60,240,9641,742,846060,240,9641. 67(1,742,846)59,880,2401,742,846059,880,2401. 68(1,742,846)59,523,8101,742,846059,523,8101. 69(1,742,846)59,171,5981,742,846059,171,5981. 70(1,742,846)58,823,5291,742,846058,823,5291.(1,742,858,8231,742,8058,823,7146),529465291. 72(1,742,846)58,823,5291,742,846058,823,5291. 73(1,742,846)58,823,5291,742,846058,823,5291. 74(1,742,846)58,823,5291,742,846058,823,5291. 75(1,742,846)58,823,5291,742,846058,823,5291. 76(1,742,846)58,823,5291,742,846058,823,5291. 77(1,742,846)58,823,5291,742,846058,823,5291. 78(1,742,846)58,823,5291,742,846058,823,5291. 79(1,742,846)58,823,5291,742,846058,823,5291. 80(1,742,846)58,823,5291,742,846058,823,5291. 81(1,742,846)58,823,5291,742,846058,823,5291. 82(1,742,846)58,823,5291,742,846058,823,5291. 83(1,742,846)58,823,5291,742,846058,823,5291. 84(1,742,846)58,823,5291,742,846058,823,5291. 85(1,742,846)58,823,5291,742,846058,823,529Since the firm believes that there is a good chance that the pound sterling will weaken, locking them into a forward contract would not be appropriate, because they would lose the opportunity to profit from this weakening. Their hedge strategy should follow for an upside potential to match their viewpoint. Therefore, they should purchase sterling call options, paying a premium of:5,000,000 STG x 0.0176 = 88,000 STG.If the dollar strengthens against the pound, the firm allows the option to expire, and buys sterling in the spot market at a cheaper price than they would have paid for a forward contract; otherwise, the sterling calls protect against unfavorable depreciation of the dollar.Because the fund manager is uncertain when he will sell the bonds, he requires a hedge which will allow flexibility as to the exercise date. Thus, options are the best instrument for him to use. He can buy A$ puts to lock in a floor of 0.72 A$/$. Since he is willing to forego any further currency appreciation, he can sell A$ calls with a strike price of 0.8025 A$/$ to defray the cost of his hedge (in fact he earns a net premium of A$ 100,000,000 x (0.007234 –0.007211) = A$ 2,300), while knowing that he can’t receive less than 0.72 A$/$ when redeeming his investment, and can benefit from a small appreciation of the A$.Example #3:Problem: Hedge principal denominated in A$ into US$. Forgo upside potential to buy floor protection.I. Hedge by writing calls and buying puts1) Write calls for $/A$ @ 0.8025Buy puts for $/A$ @ 0.72# contracts needed = Principal in A$/Contract size100,000,000A$/100,000 A$ = 1002) Revenue from sale of calls = (# contracts)(size of contract)(premium)$75,573 = (100)(100,000 A$)(.007234 $/A$)(1 + .0825 195/360)3) Total cost of puts = (# contracts)(size of contract)(premium)$75,332 = (100)(100,000 A$)(.007211 $/A$)(1 + .0825 195/360)4) Put payoffIf spot falls below 0.72, fund manager will exercise putIf spot rises above 0.72, fund manager will let put expire5) Call payoffIf spot rises above .8025, call will be exercisedIf spot falls below .8025, call will expire6) Net payoffSee following Table for net payoff Australian Dollar Bond HedgeStrike PricePutPayoff“Put”PrincipalCallPayoff“Call”PrincipalNetProfit0. 60(75,332)72,000,00075,573072,000,2410. 61(75,332)72,000,00075,573072,000,2410. 62(75,332)72,000,00075,573072,000,2410. 63(75,332)72,000,00075,573072,000,2410. 64(75,332)72,000,00075,573072,000,2410. 65(75,332)72,000,00075,573072,000,2410. 66(75,332)72,000,00075,573072,000,2410. 67(75,332)72,000,00075,573072,000,2410. 68(75,332)72,000,00075,573072,000,2410. 69(75,332)72,000,00075,573072,000,2410. 70(75,332)72,000,00075,573072,000,2410. 71(75,332)72,000,00075,573072,000,2410. 72(75,332)72,000,00075,573072,000,2410. 73(75,332)73,000,00075,573073,000,2410. 74(75,332)74,000,00075,573074,000,2410. 75(75,332)75,000,00075,573075,000,2410. 76(75,332)76,000,00075,573076,000,2410. 77(75,332)77,000,00075,573077,000,2410. 78(75,332)78,000,00075,573078,000,2410. 79(75,332)79,000,00075,573079,000,2410. 80(75,332)80,000,00075,573080,000,2410. 81(75,332)075,57380,250,00080,250,2410. 82(75,332)075,57380,250,00080,250,2410. 83(75,332)075,57380,250,00080,250,2410. 84(75,332)075,57380,250,00080,250,2410. 85(75,332)075,57380,250,00080,250,2414. The German company is bidding on a contract which they cannot be certain of winning. Thus, the need to execute a currency transaction is similarly uncertain, and using a forward or futures as a hedge is inappropriate, because it would force them to perform even if they do not win the contract.Using a sterling put option as a hedge for this transaction makes the most sense. For a premium of:12 million STG x 0.0161 = 193,200 STG,they can assure themselves that adverse movements in the pound sterling exchange rate will not diminish the profitability of the project (and hence the feasibility of their bid), while at the same time allowing the potential for gains from sterling appreciation.5. Since AMC in concerned about the adverse effects that a strengthening of the dollar would have on its business, we need to create a situation in which it will profit from such an appreciation. Purchasing a yen put or a dollar call will achieve this objective. The data in Exhibit 1, row 7 represent a 10 percent appreciation of the dollar (128.15 strike vs. 116.5 forward rate) and can be used to hedge against a similar appreciation of the dollar.For every million yen of hedging, the cost would be:Yen 100,000,000 x 0.000127 = 127 Yen.To determine the breakeven point, we need to compute the value of this option if the dollar appreciated 10 percent (spot rose to 128.15), and subtract from it the premium we paid. This profit would be compared with the profit earned on five to 10 percent of AMC’s sales (which would be lost as a result of the dollar appreciation). The number of options to be purchased which would equalize these two quantities would represent the breakeven point.Example #5:Hedge the economic cost of the depreciating Yen to AMC.If we assume that AMC sales fall in direct proportion to depreciation in the yen (i.e., a 10 percent decline in yen and 10 percent decline in sales), then we can hedge the full value of AMC’s sales. I have assumed $100 million in sales.1) Buy yen puts# contracts needed = Expected Sales *Current ¥/$ Rate / Contract size 9600 = ($100,000,000)(120¥/$) / ¥1,250,0002) Total Cost = (# contracts)(contract size)(premium)$1,524,000 = (9600)( ¥1,250,000)($0.0001275/¥)3) Floor rate = Exercise – Premium128.1499¥/$ = 128.15¥/$ - $1,524,000/12,000,000,000¥4) The payoff changes depending on the level of the ¥/$ rate. The following tablesummarizes the payoffs. An equilibrium is reached when the spot rate equals the floor rate.。
苏教数字版《初中英语阅读》八上Chapter8译文和答案
苏教数字版《初中英语阅读》八上Chapter8译文和答案一、译文Chapter 8: The Lost CityOnce upon a time, there was a beautiful city called Atlantis. It was said to be the most advanced city in the whole world. The people of Atlantis were known for their intelligence and creativity. They had made many scientific discoveries and built incredible structures.One day, a young boy named Tom was exploring near a river when he found an ancient map. The map showed the location of Atlantis, a city that had been lost for centuries. Tom was fascinated by the idea of discovering an ancient city, so he decided to embark on a journey to find Atlantis.Tom gathered a team of explorers and set off on an exciting adventure. They sailed across the ocean, facing many challenges along the way. Finally, they arrived at the coordinates indicated on the map.To their surprise, they found a hidden entrance to a vast underground city. The city was filled with beautiful buildings and advanced technology. The explorers were amazed by what they saw.However, thei r joy didn’t last long. As they explored the city, they discovered that it was abandoned. There were no signs oflife anywhere. It seemed that Atlantis had been deserted for centuries.Tom and his team continued to explore the city, hoping to find some clues about what had happened. They found ancient writings on the walls, but they could not decipher the language.After days of searching, they stumbled upon a room with a strange machine. They realized that it was a time machine. With excitement, they decided to activate it and see if they could travel back in time to the days when Atlantis was flourishing.As they stepped into the time machine, they felt a strange energy enveloping them. Suddenly, they found themselves transported back in time. They were in the middle of a bustling city filled with happy people.Tom and his team realized that they had indeed traveled back in time to the golden age of Atlantis. They were welcomed by the people who explained that Atlantis had suffered from a natural disaster and the survivors had escaped to other parts of the world.Tom and his team spent days exploring the city and learning about its rich history. They were amazed by the advanced knowledge and culture of the people of Atlantis.Finally, it was time for them to return to their own time. With heavy hearts, they bid farewell to the people of Atlantis and stepped back into the time machine. After a flash of light, they found themselves back in the present day.Although they were sad to leave, Tom and his team were grateful for the opportunity to witness the wonders of Atlantis. They knew that they had been part of something truly special.二、答案1.What was the name of the ancient city?The name of the ancient city was Atlantis.2.What were the people of Atlantis known for?The people of Atlantis were known for their intelligenceand creativity.3.How did Tom find the location of Atlantis?Tom found the location of Atlantis through an ancient map.4.What did Tom do after finding the map?After finding the map, Tom decided to embark on a journey to find Atlantis.5.What did the explorers find when they arrived at thecoordinates on the map?The explorers found a hidden entrance to a vastunderground city.6.What did the explorers discover about the city?The explorers discovered that the city was abandoned and had been deserted for centuries.7.What did Tom and his team find in a room in the city?Tom and his team found a strange machine, which turnedout to be a time machine.8.Where did the survivors of Atlantis go after the natural disaster?The survivors of Atlantis had escaped to other parts of the world.9.How did Tom and his team travel back in time? Tom and his team traveled back in time using the time machine they found in the city.10.What did Tom and his team learn during their time in Atlantis?Tom and his team learned about the rich history, advanced knowledge, and culture of the people of Atlantis.11.How did Tom and his team feel when they had to leave Atlantis?Tom and his team felt sad but grateful for the opportunity to witness the wonders of Atlantis.以上是《初中英语阅读》八上Chapter8的译文和答案。
国际财务管理课后习题答案chapter 8Word版
CHAPTER 8 MANAGEMENT OF TRANSACTION EXPOSURE SUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMSQUESTIONS1. How would you define transaction exposure? How is it different from economic exposure?Answer: Transaction exposure is the sensitivity of realized domestic currency values of the firm’s contractual cash flows denominated in foreign currencies to unexpected changes in exchange rates. Unlike economic exposure, transaction exposure is well-defined and short-term.2. Discuss and compare hedging transaction exposure using the forward contract vs. money market instruments. When do the alternative hedging approaches produce the same result?Answer: Hedging transaction exposure by a forward contract is achieved by selling or buying foreign currency receivables or payables forward. On the other hand, money market hedge is achieved by borrowing or lending the present value of foreign currency receivables or payables, thereby creating offsetting foreign currency positions. If the interest rate parity is holding, the two hedging methods are equivalent.3. Discuss and compare the costs of hedging via the forward contract and the options contract.Answer: There is no up-front cost of hedging by forward contracts. In the case of options hedging, however, hedgers should pay the premiums for the contracts up-front. The cost of forward hedging, however, may be realized ex post when the hedger regrets his/her hedging decision.4. What are the advantages of a currency options contract as a hedging tool compared with the forward contract?Answer: The main advantage of using options contracts for hedging is that the hedger can decide whether to exercise options upon observing the realized future exchange rate. Options thus provide a hedge against ex post regret that forward hedger might have to suffer. Hedgers can only eliminate the downside risk while retaining the upside potential.5. Suppose your company has purchased a put option on the German mark to manage exchange exposure associated with an account receivable denominated in that currency. In this case, your company can be said to have an ‘insurance’ policy on its receivable. Explain in what sense this is so.Answer: Your company in this case knows in advance that it will receive a certain minimum dollar amount no matter what might happen to the $/€exchange rate. Furthermore, if the German mark appreciates, your company will benefit from the rising euro.6. Recent surveys of corporate exchange risk management practices indicate that many U.S. firms simply do not hedge. How would you explain this result?Answer: There can be many possible reasons for this. First, many firms may feel that they are not really exposed to exchange risk due to product diversification, diversified markets for their products, etc. Second, firms may be using self-insurance against exchange risk. Third, firms may feel that shareholders can diversify exchange risk themselves, rendering corporate risk management unnecessary.7. Should a firm hedge? Why or why not?Answer: In a perfect capital market, firms may not need to hedge exchange risk. But firms can add to their value by hedging if markets are imperfect. First, if management knows about the firm’s exposure better than shareholders, the firm, not its shareholders, should hedge. Second, firms may be able to hedge at a lower cost. Third, if default costs are significant, corporate hedging can be justifiable because it reduces the probability of default. Fourth, if the firm faces progressive taxes, it can reduce tax obligations by hedging which stabilizes corporate earnings.8. Using an example, discuss the possible effect of hedging on a firm’s tax obligations.Answer: One can use an example similar to the one presented in the chapter.9. Explain contingent exposure and discuss the advantages of using currency options to manage this type of currency exposure.Answer: Companies may encounter a situation where they may or may not face currency exposure. In this situation, companies need options, not obligations, to buy or sell a given amount of foreign exchange they may or may not receive or have to pay. If companies either hedge using forward contracts or do not hedge at all, they may face definite currency exposure.10. Explain cross-hedging and discuss the factors determining its effectiveness.Answer: Cross-hedging involves hedging a position in one asset by taking a position in another asset. The effectiveness of cross-hedging would depend on the strength and stability of the relationship between the two assets.PROBLEMS1. Cray Research sold a super computer to the Max Planck Institute in Germany on credit and invoiced €10 million payable in six months. Currently, the six-month forward exchange rate is $1.10/€ and the foreign exchange advisor for Cray Research predicts that the spot rate is likely to be $1.05/€ in six months.(a) What is the expected gain/loss from the forward hedging?(b) If you were the financial manager of Cray Research, would you recommend hedging this euro receivable? Why or why not?(c) Suppose the foreign exchange advisor predicts that the future spot rate will be the same as the forward exchange rate quoted today. Would you recommend hedging in this case? Why or why not?Solution: (a) Expected gain($) = 10,000,000(1.10 – 1.05)= 10,000,000(.05)= $500,000.(b) I would recommend hedging because Cray Research can increase the expected dollar receipt by $500,000 and also eliminate the exchange risk.(c) Since I eliminate risk without sacrificing dollar receipt, I still would recommend hedging.2. IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed ¥250 million payable in three months. Currently, the spot exchange rate is ¥105/$ and the three-month forward rate is ¥100/$. The three-month money market interest rate is 8 percent per annum in the U.S. and 7 percent per annum in Japan. The management of IBM decided to use the money market hedge to deal with this yen account payable.(a) Explain the process of a money market hedge and compute the dollar cost of meeting the yen obligation.(b) Conduct the cash flow analysis of the money market hedge.Solution: (a). Let’s first compute the PV of ¥250 million, i.e.,250m/1.0175 = ¥245,700,245.7So if the above yen amount is invested today at the Japanese interest rate for three months, the maturity value will be exactly equal to ¥25 million which is the amount of payable.To buy the above yen amount today, it will cost:$2,340,002.34 = ¥250,000,000/105.The dollar cost of meeting this yen obligation is $2,340,002.34 as of today.(b)___________________________________________________________________Transaction CF0 CF1____________________________________________________________________1. Buy yens spot -$2,340,002.34with dollars ¥245,700,245.702. Invest in Japan - ¥245,700,245.70 ¥250,000,0003. Pay yens - ¥250,000,000Net cash flow - $2,340,002.34____________________________________________________________________3. You plan to visit Geneva, Switzerland in three months to attend an international business conference. You expect to incur the total cost of SF 5,000 for lodging, meals and transportation during your stay. As of today, the spot exchange rate is $0.60/SF and the three-month forward rate is $0.63/SF. You can buy the three-month call option on SF with the exercise rate of $0.64/SF for the premium of $0.05 per SF. Assume that your expected future spot exchange rate is the same as the forward rate. The three-month interest rate is 6 percent per annum in the United States and 4 percent per annum in Switzerland.(a) Calculate your expected dollar cost of buying SF5,000 if you choose to hedge via call option on SF.(b) Calculate the future dollar cost of meeting this SF obligation if you decide to hedge using a forward contract.(c) At what future spot exchange rate will you be indifferent between the forward and option market hedges?(d) Illustrate the future dollar costs of meeting the SF payable against the future spot exchange rate under both the options and forward market hedges.Solution: (a) Total option premium = (.05)(5000) = $250. In three months, $250 is worth $253.75 = $250(1.015). At the expected future spot rate of $0.63/SF, which is less than the exercise price, y ou don’t expect to exercise options. Rather, you expect to buy Swiss franc at $0.63/SF. Since you are going to buy SF5,000, you expect to spend $3,150 (=.63x5,000). Thus, the total expected cost of buying SF5,000 will be the sum of $3,150 and $253.75, i.e., $3,403.75.(b) $3,150 = (.63)(5,000).(c) $3,150 = 5,000x + 253.75, where x represents the break-even future spot rate. Solving for x, we obtain x = $0.57925/SF. Note that at the break-even future spot rate, options will not be exercised.(d) If the Swiss franc appreciates beyond $0.64/SF, which is the exercise price of call option, you will exercise the option and buy SF5,000 for $3,200. The total cost of buying SF5,000 will be $3,453.75 = $3,200 + $253.75.This is the maximum you will pay.4. Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €20 million which is payable in one year. The current spot exchange rate is $1.05/€ and the one -year forward rate is $1.10/€. The annual interest rate is 6.0% in the U.S. and5.0% in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure.(a) It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borrow euros from the Credit Lyonnaise against the euro receivable. Which alternative would you recommend? Why?(b) Other things being equal, at what forward exchange rate would Boeing be indifferent between the two hedging methods?Solution: (a) In the case of forward hedge, the future dollar proceeds will be (20,000,000)(1.10) = $22,000,000. In the case of money market hedge (MMH), the firm has to first borrow the PV of its euro receivable, i.e., 20,000,000/1.05 =€19,047,619. Then the firm should exchange this euro amount into dollars at the current spot rate to receive: (€19,047,619)($1.05/€) = $20,000,000, which can be invested at the dollar interest rate for one year to yield:$ Cost Options hedge Forward hedge $3,453.75 $3,150 0 0.579 0.64 (strike price) $/SF$253.75$20,000,000(1.06) = $21,200,000.Clearly, the firm can receive $800,000 more by using forward hedging.(b) According to IRP, F = S(1+i$)/(1+i F). Thus the “indifferent” forward rate will be:F = 1.05(1.06)/1.05 = $1.06/€.5. Suppose that Baltimore Machinery sold a drilling machine to a Swiss firm and gave the Swiss client a choice of paying either $10,000 or SF 15,000 in three months.(a) In the above example, Baltimore Machinery effectively gave the Swiss client a free option to buy up to $10,000 dollars using Swiss franc. What is the ‘implied’ exercise exchange rate?(b) If the spot exchange rate turns out to be $0.62/SF, which currency do you think the Swiss client will choose to use for payment? What is the value of this free option for the Swiss client?(c) What is the best way for Baltimore Machinery to deal with the exchange exposure?Solution: (a) The implied exercise (price) rate is: 10,000/15,000 = $0.6667/SF.(b) If the Swiss client chooses to pay $10,000, it will cost SF16,129 (=10,000/.62). Since the Swiss client has an option to pay SF15,000, it will choose to do so. The value of this option is obviously SF1,129 (=SF16,129-SF15,000).(c) Baltimore Machinery faces a contingent exposure in the sense that it may or may not receive SF15,000 in the future. The firm thus can hedge this exposure by buying a put option on SF15,000.6. Princess Cruise Company (PCC) purchased a ship from Mitsubishi Heavy Industry. PCC owes Mitsubishi Heavy Industry 500 million yen in one year. The current spot rate is 124 yen per dollar and the one-year forward rate is 110 yen per dollar. The annual interest rate is 5% in Japan and 8% in the U.S. PCC can also buy a one-year call option on yen at the strike price of $.0081 per yen for a premium of .014 cents per yen.(a) Compute the future dollar costs of meeting this obligation using the money market hedge and the forward hedges.(b) Assuming that the forward exchange rate is the best predictor of the future spot rate, compute the expected future dollar cost of meeting this obligation when the option hedge is used.(c) At what future spot rate do you think PCC may be indifferent between the option and forward hedge?Solution: (a) In the case of forward hedge, the dollar cost will be 500,000,000/110 = $4,545,455. In the case of money market hedge, the future dollar cost will be: 500,000,000(1.08)/(1.05)(124)= $4,147,465.(b) The option premium is: (.014/100)(500,000,000) = $70,000. Its future value will be $70,000(1.08) = $75,600.At the expected future spot rate of $.0091(=1/110), which is higher than the exercise of $.0081, PCC will exercise its call option and buy ¥500,000,000 for $4,050,000 (=500,000,000x.0081).The total expected cost will thus be $4,125,600, which is the sum of $75,600 and $4,050,000.(c) When the option hedge is used, PCC will spend “at most” $4,125,000. On the other hand, when the forward hedging is used, PCC will have to spend $4,545,455 regardless of the future spot rate. This means that the options hedge dominates the forward hedge. At no future spot rate, PCC will be indifferent between forward and options hedges.7. Airbus sold an aircraft, A400, to Delta Airlines, a U.S. company, and billed $30 million payable in six months. Airbus is concerned with the euro proceeds from international sales and would like to control exchange risk. The current spot exchange rate is $1.05/€ and six-month forward exchange rate is $1.10/€ at the moment. Airbus can buy a six-month put option on U.S. dollars with a strike price of€0.95/$ for a premium of €0.02 per U.S. dollar. Currently, six-month interest rate is 2.5% in the euro zone and 3.0% in theU.S.pute the guaranteed euro proceeds from the American sale if Airbus decides tohedge using a forward contract.b.If Airbus decides to hedge using money market instruments, what action doesAirbus need to take? What would be the guaranteed euro proceeds from the American sale in this case?c.If Airbus decides to hedge using put options on U.S. dollars, what would be the‘expected’ euro proceeds from the American sale? Assume that Airbus regards the current forward exchange rate as an unbiased predictor of the future spot exchange rate.d.At what future spot exchange rate do you think Airbus will be indifferent betweenthe option and money market hedge?Solution:a. Airbus will sell $30 million forward for €27,272,727 = ($30,000,000) / ($1.10/€).b. Airbus will borrow the present value of the dollar receivable, i.e., $29,126,214 = $30,000,000/1.03, and then sell the dollar proceeds spot for euros: €27,739,251. This is the euro amount that Airbus is going to keep.c. Since the expected future spot rate is less than the strike price of the put option, i.e., €0.9091< €0.95, Airbus expects to exercise the option and receive €28,500,000 = ($30,000,000)(€0.95/$). This is gross proceeds. Airbus spent €600,000 (=0.02x30,000,000) upfront for the option and its future cost is equal to €615,000 = €600,000 x 1.025. Thus the net euro proceeds from the American sale is €27,885,000, which is the difference between the gross proceeds and the option costs.d. At the indifferent future spot rate, the following will hold:€28,432,732 = S T(30,000,000) - €615,000.Solving for S T, we obtain the “indifference” future spot exchange rate, i.e., €0.9683/$, or $1.0327/€. Note that €28,432,732 is the future value of the proceeds under money market hedging:€28,432,732 = (€27,739,251) (1.025).Suggested solution for Mini Case: Chase Options, Inc.[See Chapter 13 for the case text]Chase Options, Inc.Hedging Foreign Currency Exposure Through Currency OptionsHarvey A. PoniachekI. Case SummaryThis case reviews the foreign exchange options market and hedging. It presents various international transactions that require currency options hedging strategies by the corporations involved. Seven transactions under a variety of circumstances are introduced that require hedging by currency options. The transactions involve hedging of dividend remittances, portfolio investment exposure, and strategic economic competitiveness. Market quotations are provided for options (and options hedging ratios), forwards, and interest rates for various maturities.II. Case Objective.The case introduces the student to the principles of currency options market and hedging strategies. The transactions are of various types that often confront companies that are involved in extensive international business or multinational corporations. The case induces students to acquire hands-on experience in addressing specific exposure and hedging concerns, including how to apply various market quotations, which hedging strategy is most suitable, and how to address exposure in foreign currency through cross hedging policies.III. Proposed Assignment Solution1. The company expects DM100 million in repatriated profits, and does not want the DM/$ exchange rate at which they convert those profits to rise above 1.70. They can hedge this exposure using DM put options with a strike price of 1.70. If the spot rate rises above 1.70, they can exercise the option, while if that rate falls they can enjoy additional profits from favorable exchange rate movements.To purchase the options would require an up-front premium of:DM 100,000,000 x 0.0164 = DM 1,640,000.With a strike price of 1.70 DM/$, this would assure the U.S. company of receiving at least:DM 100,000,000 – DM 1,640,000 x (1 + 0.085106 x 272/360)= DM 98,254,544/1.70 DM/$ = $57,796,791by exercising the option if the DM depreciated. Note that the proceeds from the repatriated profits are reduced by the premium paid, which is further adjusted by the interest foregone on this amount.However, if the DM were to appreciate relative to the dollar, the company would allow the option to expire, and enjoy greater dollar proceeds from this increase.Should forward contracts be used to hedge this exposure, the proceeds received would be:DM100,000,000/1.6725 DM/$ = $59,790,732,regardless of the movement of the DM/$ exchange rate. While this amount is almost $2 million more than that realized using option hedges above, there is no flexibilityregarding the exercise date; if this date differs from that at which the repatriate profits are available, the company may be exposed to additional further current exposure. Further, there is no opportunity to enjoy any appreciation in the DM.If the company were to buy DM puts as above, and sell an equivalent amount in calls with strike price 1.647, the premium paid would be exactly offset by the premium received. This would assure that the exchange rate realized would fall between 1.647 and 1.700. If the rate rises above 1.700, the company will exercise its put option, and if it fell below 1.647, the other party would use its call; for any rate in between, both options would expire worthless. The proceeds realized would then fall between:DM 100,00,000/1.647 DM/$ = $60,716,454andDM 100,000,000/1.700 DM/$ = $58,823,529.This would allow the company some upside potential, while guaranteeing proceeds at least $1 million greater than the minimum for simply buying a put as above.Buy/Sell OptionsDM/$Spot Put Payoff “Put”ProfitsCallPayoff“Call”Profits Net Profit1.60(1,742,846)01,742,84660,716,45460,716,4541.61(1,742,846)01,742,84660,716,45460,716,454 1.62(1,742,846)01,742,84660,716,45460,716,4541.63(1,742,846)01,742,84660,716,45460,716,4541.64(1,742,846)01,742,84660,716,4560,716,45441.65(1,742,846)60,606,061,742,846060,606,06111.66(1,742,846)60,240,961,742,846060,240,96441,742,846059,880,240 1.67(1,742,846)59,880,241.68(1,742,846)59,523,811,742,846059,523,8101,742,846059,171,598 1.69(1,742,846)59,171,5981.70(1,742,846)58,823,521,742,846058,823,52991,742,846058,823,529 1.71(1,742,846)58,823,5291.72(1,742,846)58,823,521,742,846058,823,52991,742,846058,823,529 1.73(1,742,846)58,823,5291.74(1,742,846)58,823,521,742,846058,823,52991,742,846058,823,529 1.75(1,742,846)58,823,5291.76(1,742,846)58,823,521,742,846058,823,52991.77(1,742,846)58,823,521,742,846058,823,52991.78(1,742,846)58,823,521,742,846058,823,52991.79(1,742,846)58,823,521,742,846058,823,52991,742,846058,823,5291.80(1,742,846)58,823,5291,742,846058,823,5291.81(1,742,846)58,823,5291.82(1,742,846)58,823,521,742,846058,823,52991,742,846058,823,5291.83(1,742,846)58,823,5291.84(1,742,846)58,823,521,742,846058,823,52991,742,846058,823,5291.85(1,742,846)58,823,529Since the firm believes that there is a good chance that the pound sterling will weaken, locking them into a forward contract would not be appropriate, because they would lose the opportunity to profit from this weakening. Their hedge strategy should follow for an upside potential to match their viewpoint. Therefore, they should purchase sterling call options, paying a premium of:5,000,000 STG x 0.0176 = 88,000 STG.If the dollar strengthens against the pound, the firm allows the option to expire, and buys sterling in the spot market at a cheaper price than they would have paid for a forward contract; otherwise, the sterling calls protect against unfavorable depreciation of the dollar.Because the fund manager is uncertain when he will sell the bonds, he requires a hedge which will allow flexibility as to the exercise date. Thus, options are the best instrument for him to use. He can buy A$ puts to lock in a floor of 0.72 A$/$. Since he is willing to forego any further currency appreciation, he can sell A$ calls with a strike price of 0.8025 A$/$ to defray the cost of his hedge (in fact he earns a net premium of A$ 100,000,000 x (0.007234 – 0.007211) = A$ 2,300), while knowing that he can’t receive less than 0.72 A$/$ when redeeming his investment, and can benefit from a small appreciation of the A$.Example #3:Problem: Hedge principal denominated in A$ into US$. Forgo upside potential to buy floor protection.I. Hedge by writing calls and buying puts1) Write calls for $/A$ @ 0.8025Buy puts for $/A$ @ 0.72# contracts needed = Principal in A$/Contract size100,000,000A$/100,000 A$ = 1002) Revenue from sale of calls = (# contracts)(size of contract)(premium)$75,573 = (100)(100,000 A$)(.007234 $/A$)(1 + .0825 195/360)3) Total cost of puts = (# contracts)(size of contract)(premium)$75,332 = (100)(100,000 A$)(.007211 $/A$)(1 + .0825 195/360)4) Put payoffIf spot falls below 0.72, fund manager will exercise putIf spot rises above 0.72, fund manager will let put expire5) Call payoffIf spot rises above .8025, call will be exercised If spot falls below .8025, call will expire6) Net payoffSee following Table for net payoffAustralian Dollar Bond HedgeStrikePrice Put Payoff “Put”PrincipalCallPayoff“Call”Principal Net Profit0.60(75,332)72,000,0075,573072,000,2410.61(75,332)72,000,0075,573072,000,2410.62(75,332)72,000,0075,573072,000,2410.63(75,332)72,000,0075,573072,000,2410.64(75,332)72,000,0075,573072,000,2410.65(75,332)72,000,0075,573072,000,2410.66(75,332)72,000,0075,573072,000,2410.67(75,332)72,000,0075,573072,000,2410.68(75,332)72,000,0075,573072,000,2410.69(75,332)72,000,0075,573072,000,2410.70(75,332)72,000,0075,573072,000,2410.71(75,332)72,000,0075,573072,000,2410.72(75,332)72,000,0075,573072,000,2410.73(75,332)73,000,0075,573073,000,2410.74(75,332)74,000,0075,573074,000,2410.75(75,332)75,000,0075,573075,000,2410.76(75,332)76,000,0075,573076,000,24175,573077,000,2410.77(75,332)77,000,000.78(75,332)78,000,0075,573078,000,24175,573079,000,2410.79(75,332)79,000,000.80(75,332)80,000,0075,573080,000,24180,250,2410.81(75,332)075,57380,250,000.82(75,332)075,57380,250,0080,250,24180,250,2410.83(75,332)075,57380,250,000.84(75,332)075,57380,250,0080,250,24180,250,2410.85(75,332)075,57380,250,004. The German company is bidding on a contract which they cannot be certain of winning. Thus, the need to execute a currency transaction is similarly uncertain, and using a forward or futures as a hedge is inappropriate, because it would force them to perform even if they do not win the contract.Using a sterling put option as a hedge for this transaction makes the most sense. Fora premium of:12 million STG x 0.0161 = 193,200 STG,they can assure themselves that adverse movements in the pound sterling exchange rate will not diminish the profitability of the project (and hence the feasibility oftheir bid), while at the same time allowing the potential for gains from sterling appreciation.5. Since AMC in concerned about the adverse effects that a strengthening of the dollar would have on its business, we need to create a situation in which it will profit from such an appreciation. Purchasing a yen put or a dollar call will achieve this objective. The data in Exhibit 1, row 7 represent a 10 percent appreciation of the dollar (128.15 strike vs. 116.5 forward rate) and can be used to hedge against a similar appreciation of the dollar.For every million yen of hedging, the cost would be:Yen 100,000,000 x 0.000127 = 127 Yen.To determine the breakeven point, we need to compute the value of this option if the dollar appreciated 10 percent (spot rose to 128.15), and subtract from it the premium we paid. This profit would be compared with the profit earned on five to 10 percent of AMC’s sales (which would be lost as a result of the dollar appreciation). The number of options to be purchased which would equalize these two quantities would represent the breakeven point.Example #5:Hedge the economic cost of the depreciating Yen to AMC.If we assume that AMC sales fall in direct proportion to depreciation in the yen (i.e., a 10 percent decline in yen and 10 percent decline in sales), then we can hedge the full value of AMC’s sales. I have a ssumed $100 million in sales.1) Buy yen puts# contracts needed = Expected Sales *Current ¥/$ Rate / Contract size9600 = ($100,000,000)(120¥/$) / ¥1,250,0002) Total Cost = (# contracts)(contract size)(premium)$1,524,000 = (9600)( ¥1,250,000)($0.0001275/¥)3) Floor rate = Exercise – Premium128.1499¥/$ = 128.15¥/$ - $1,524,000/12,000,000,000¥4) The payoff changes depending on the level of the ¥/$ rate. The following tablesummarizes the payoffs. An equilibrium is reached when the spot rate equals the floor rate.AMC ProfitabilityYen/$ Spot Put Payoff Sales Net Profit 120(1,524,990)100,000,00098,475,010 121(1,524,990)99,173,66497,648,564 122(1,524,990)98,360,65696,835,666 123(1,524,990)97,560,97686,035,986 124(1,524,990)96,774,19495,249,204 125(1,524,990)96,000,00094,475,010 126(1,524,990)95,238,09593,713,105 127(847,829)94,488,18993,640,360 128(109,640)93,750,00093,640,360 129617,10493,023,25693,640,360 1301,332,66892,307,69293,640,360 1312,037,30791,603,05393,640,360 1322,731,26990,909,09193,640,360 1333,414,79690,225,66493,640,360 1344,088,12289,552,23993,640,360 1354,751,43188,888,88993,640,360 1365,405,06688,235,29493,640,360 1376,049,11887,591,24193,640,360 1386,683,83986,966,52293,640,360 1397,308,42586,330,93693,640,360 1407,926,07585,714,28693,640,360 1418,533,97785,106,38393,640,360 1429,133,31884,507,04293,640,360 1439,724,27683,916,08493,640,360 14410,307,02783,333,33393,640,360 14510,881,74082,758,62193,640,360 14611,448,57982,191,78193,640,360。
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Chapter 8 课后答案Sociolinguistics1.Define the following terms briefly.(1)sociolinguistics: the study of the relationship between language and society,that is, how social factors influence the structure and use of language.(2)standard language: the variety of a language which has the highest status in acommunity or nation and which is usually based on the speech and writingof educated native speakers of the language.(3)dialect: a language variety characteristic of a particular social group; dialectscan be characteristic of regional, social, temporal, occupational or gendergroups.(4)register: a language variety associated with a particular situation of use, e.g.baby talk and legal language.(5) pidgin: a variety of language that is not a native language of anyone, but islearned in contact situations.(6)creole: a language that begins as a pidgin and eventually becomes the firstlanguage of a speech community through its being learned by children.(7) language planning: planning, usually by a government or government agency,concerning choice of national or official language(s), ways of spreadingthe use of a language, spelling reforms, the addition of new words to the language,and other language problems.(8)diglossia: a situation when two distinct varieties of the same language areused, side by side, for two different sets of functions.(9)bilingualism: the use of at least two languages either by an individual or by agroup of speakers, such as the inhabitants of a particular region or a nation.(10) code-switching: the movement back and forth between two languages ordialects within the same sentence or discourse.(11) taboo: a word or expression that is prohibited by the polite society from generaluse.(12) euphemism: a word or phrase that replaces a taboo word or is used to avoidreference to certain acts or subjects, e. g. “powder room” for “toilet”.2.Idiolects are varieties of a language used by individual speakers, with peculiaritiesof pronunciation, grammar and vocabulary.3.A president who did not have an accent may refer to a president who speaks thestandard language. The standard language is a particular variety of a languagethat is officially given a status higher than any other, and therefore a dominantor prestigious variety. The standard language is usually based on the speech andwriting of educated native speakers of the language and is generally used in governmentdocuments, education, broadcasting and printing. A good president isexpected to speak the prestigious variety of his language.4.Language planning is usually done by a government or government agency whichconcerns the choice of national or official language(s), ways of spreading the useof the language(s), spell reforms, the addition of new words to the language, andother language problems. In order to carry it out effectively, the official attemptmay concentrate on either the status of a language with regard to some otherlanguage or variety or its internal condition with a view to changing it. Languageplanning usually involves two aspects: status planning and corpus planning. Statusplanning changes the function of a language or a variety of a language and theright of those who use it. And corpus planning seeks to develop a variety of languageor a language, usually to standardize it, that is, to provide it with the meansfor serving most language functions in society. Governments may take both sidesinto consideration.5.A pidgin is a special language variety that mixes or blends languages and it is used bypeople who speak different languages for restricted purposes such as trading. Pidginarose from a blending of several languages such as Chinese dialects and English. Typicallypidgins have a limited vocabulary and a much reduced grammatical structurecharacterized by the loss of inflections, gender and case. When a pidgin has becomethe primary language of a speech community, and is acquired by the children of thatspeech community as their native language, it is said to have become a creole. Thestructure of the original pidgin is expanded to enable it to fulfill its new functions.The vocabulary is vastly enriched, and new syntactic-semantic concepts developed.Notable examples of creole are the English-based creole of Haiti.6.There are many euphemis ms for toilet, such as WC, powder room, Men’s room,Ladies’ room, Gentlemen, bathroom, restroom and so on. In many cultures, peopleavoid referring to this place by “toilet” or “lavatory” because they are unpleasantto the ear. The use of euphemisms reflects social attitudes or social customs.We choose the words or expressions of euphemism because they are more politeor pleasant to use without embarrassing others.7.There are two possible reasons. One reason is that women are usually morestatus-conscious than men and they are aware of their lower status in society andas a result, they may use more standard speech forms in their attempt to claimequality or even achieve a higher social status. The other reason might be attributedto the education. Women a re educated to behave “like a lady” when they arelittle girls, and such education may influence their speech as well. (The answersare quite open)8.a—S b—F c—L d—K e—Qf—T g—A h—P i—N j—Gk—E l—C m—H n—R o—D p—I q—B r—J s—M t—O。