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QUESTION 3 - FINANCING OPTIONS THE US COMPANY HAS VARIOUS OPTIONS TO FINANCE THIS ACQUISITION FOR ITS EXACT USD AMOUNT OPTION 1: A LOAN AT 7%, MATURITY 4 YEARS, WITH FIXED ANNUITIES. CALCULATE THE ANNUITY CAPITAL INTEREST RATE MATURITY ANNUITY 7% 2,610 13 pts OPTION 2: A LOAN AT 8% YEARLY INTEREST RATE, REIMBURSABLE AT MATURITY (4 YEARS) CAPITAL INTEREST RATE 8% MATURITY 4 PLEASE DETERMINE PAYMENTS CASHFLOWS Y1 Y2 Y3 Y4 12 pts OPTION 3: A LOAN AT 8% YEARLY INTEREST RATE, FULLY PAYABLE (INTEREST & CAPITAL) AT MATURITY (4 YEARS) CAPITAL INTEREST RATE 8% MATURITY 4 PLEASE DETERMINE PAYMENTS CASHFLOWS Y1 Y2 Y3 Y4 12 pts WHICH ONE OF THESE OPTIONS AND RESPECTIVE YEARLY LOAN PAYMENTS, COULD BE COVERED BY THE CASHFLOWS GENERATED BY THE GERMAN COMPANY ITSELF YEAR AFTER YEAR? WHICH OPTION? PLEASE EXPLAIN IN A FEW WORDS WHY EACH OPTION WOULD WORK/NOT WORK 10 pts HOW WOULD YOU CHANGE YOUR ANSWER TO THE PREVIOUS QUESTION, IF THE SPOT RATE WAS TO BECOME 0.9 IN Y1 AND THEN REMAIN AT THIS LEVEL OVER THE FOLLOWING 3 YEARS? PLEASE EXPLAIN 10 pts

          QUESTION 3 - FINANCING OPTIONS

THE US COMPANY HAS VARIOUS OPTIONS TO FINANCE THIS ACQUISITION FOR ITS EXACT USD AMOUNT

OPTION 1: A LOAN AT 7%, MATURITY 4 YEARS, WITH FIXED ANNUITIES. CALCULATE THE ANNUITY

CAPITAL
INTEREST RATE
MATURITY
ANNUITY
7%
2,610
13 pts

OPTION 2: A LOAN AT 8% YEARLY INTEREST RATE, REIMBURSABLE AT MATURITY (4 YEARS)
CAPITAL
INTEREST RATE
8%
MATURITY
4
PLEASE DETERMINE PAYMENTS CASHFLOWS
Y1	Y2	Y3	Y4
12 pts

OPTION 3: A LOAN AT 8% YEARLY INTEREST RATE, FULLY PAYABLE (INTEREST & CAPITAL) AT MATURITY (4 YEARS)
CAPITAL
INTEREST RATE
8%
MATURITY
4
PLEASE DETERMINE PAYMENTS CASHFLOWS
Y1	Y2	Y3	Y4
12 pts

WHICH ONE OF THESE OPTIONS AND RESPECTIVE YEARLY LOAN PAYMENTS, COULD BE COVERED BY THE CASHFLOWS GENERATED BY THE GERMAN COMPANY ITSELF YEAR AFTER YEAR?

WHICH OPTION? PLEASE EXPLAIN IN A FEW WORDS WHY EACH OPTION WOULD WORK/NOT WORK
10 pts

HOW WOULD YOU CHANGE YOUR ANSWER TO THE PREVIOUS QUESTION, IF THE SPOT RATE WAS TO BECOME 0.9 IN Y1 AND THEN REMAIN AT THIS LEVEL OVER THE FOLLOWING 3 YEARS?

PLEASE EXPLAIN
10 pts

QUESTION 3 - FINANCING OPTIONS

THE US COMPANY HAS VARIOUS OPTIONS TO FINANCE THIS ACQUISITION FOR ITS EXACT USD AMOUNT

OPTION 1: A LOAN AT 7%, MATURITY 4 YEARS, WITH FIXED ANNUITIES. CALCULATE THE ANNUITY

CAPITAL
INTEREST RATE
MATURITY
ANNUITY
7%
2,610
13 pts

OPTION 2: A LOAN AT 8% YEARLY INTEREST RATE, REIMBURSABLE AT MATURITY (4 YEARS)
CAPITAL
INTEREST RATE
8%
MATURITY
4
PLEASE DETERMINE PAYMENTS CASHFLOWS
Y1 Y2 Y3 Y4
12 pts

OPTION 3: A LOAN AT 8% YEARLY INTEREST RATE, FULLY PAYABLE (INTEREST & CAPITAL) AT MATURITY (4 YEARS)
CAPITAL
INTEREST RATE
8%
MATURITY
4
PLEASE DETERMINE PAYMENTS CASHFLOWS
Y1 Y2 Y3 Y4
12 pts

WHICH ONE OF THESE OPTIONS AND RESPECTIVE YEARLY LOAN PAYMENTS, COULD BE COVERED BY THE CASHFLOWS GENERATED BY THE GERMAN COMPANY ITSELF YEAR AFTER YEAR?

WHICH OPTION? PLEASE EXPLAIN IN A FEW WORDS WHY EACH OPTION WOULD WORK/NOT WORK
10 pts

HOW WOULD YOU CHANGE YOUR ANSWER TO THE PREVIOUS QUESTION, IF THE SPOT RATE WAS TO BECOME 0.9 IN Y1 AND THEN REMAIN AT THIS LEVEL OVER THE FOLLOWING 3 YEARS?

PLEASE EXPLAIN
10 pts

Added by Alyssa C.

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