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Ghana’s inflation is forecasted to be 10.2% over the coming year whilst that of South Africa is forecasted to be 6.5%. The current exchange rate between Ghana Cedi and the South African Rand is 0.32 ZAR per 1 GHS. a) How should we quote the exchange rate between Ghana Cedi and the South African Rand (ZAR) in a year’s time to avoid arbitrage? b) A Ghanaian company is importing goods worth ZAR 20m in a year’s time, how much GHS will the company require to import the goods? c) If the actual rate at the end of the year is 0.35 ZAR per 1GHS, what is the absolute forecast error for the forecast in (a)?

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Ghana’s inflation is forecasted to be 10.2% over the coming year
whilst that of South

Africa is forecasted to be 6.5%. The current exchange rate between
Ghana Cedi and the

South African Rand is 0.32 ZAR per 1 GHS.

a) How should we quote the exchange rate between Ghana Cedi and the
South

African Rand (ZAR) in a year’s time to avoid arbitrage?

b) A Ghanaian company is importing goods worth ZAR 20m in a year’s
time, how

much GHS will the company require to import the goods?

c) If the actual rate at the end of the year is 0.35 ZAR per 1GHS,
what is the

absolute forecast error for the forecast in (a)?

Assume the following information: 90-day Ghana interest rate = 4% 90-day South African interest rate = 3% 90-day forward rate of South African rand = GHS 0.3500 Spot rate of South African rand = GHS 0.3550 Assume that the Osei Bonsu Co. in Ghana will need 300,000 rand in 90 days to pay for imports from South Africa. It wishes to hedge this payables position. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated costs for each type of hedge.

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Assume the following information:

90-day Ghana interest rate = 4%

90-day South African interest rate = 3%

90-day forward rate of South African rand = GHS 0.3500

Spot rate of South African rand = GHS 0.3550

Assume that the Osei Bonsu Co. in Ghana will need 300,000 rand in 90
days to pay for

imports from South Africa. It wishes to hedge this payables position.
Would it be better

off using a forward hedge or a money market hedge? Substantiate your
answer with

estimated costs for each type of hedge.

The value of the US Dollar today is GHS 6.1. Yesterday, the value of the US dollar was GHS 5.91. The Ghana Cedi ____ by ____%. b) Assuming that existing U.S. one year interest rate is 8% and the Canadian one-year interest rate is 9%. Also assume that interest rate parity exists. Should the forward rate of the Canadian dollar exhibit a discount or a premium? If U.S. investors attempt covered interest arbitrage, what will be their return? If Canadian investors attempt covered interest arbitrage what will be their return?

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The value of the US Dollar today is GHS 6.1. Yesterday, the value
of the US dollar was

GHS 5.91. The Ghana Cedi ____ by ____%.

b) Assuming that existing U.S. one year interest rate is 8% and the
Canadian one-year

interest rate is 9%. Also assume that interest rate parity exists.
Should the forward rate

of the Canadian dollar exhibit a discount or a premium? If U.S.
investors attempt

covered interest arbitrage, what will be their return? If Canadian
investors attempt

covered interest arbitrage what will be their return?

Cal Bank believes the Ghanaian Cedi will appreciate over the next five days from GHS 4.48 to GHS 4.50. Cal Bank has the capacity to borrow either GHS 10 million or $5 million. If Cal Bank’s forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)? The following annual interest rates apply Currency. Lending Rate Borrowing Rate Dollars 7.10% 7.50% Ghana Cedis. 6.80% 7.25%

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Cal Bank believes the Ghanaian Cedi will appreciate over the next five
days from GHS 4.48 to GHS 4.50. Cal Bank has the capacity to borrow
either GHS 10 million or $5 million. If Cal Bank’s forecast is
correct, what will its dollar profit be from speculation over the
five-day period (assuming it does not use any of its existing consumer
deposits to capitalize on its expectations)? The

following annual interest rates apply

Currency. Lending Rate Borrowing Rate Dollars 7.10% 7.50%

Ghana Cedis. 6.80% 7.25%

The following table indicates the number of covers served and the gross sales per server for one three – hour period in Sally ’ s Restaurant. Determine: (a) the average number of covers served per hour per server, and (b) the average sale per server for the three – hour period. Server Covers Served Gross Sales Per Server A 71 $237.40 B 66 $263.95 C 58 $188.25 13. Use the information about Sally ’ s Restaurant identified in Question 12 to complete the following: a. Calculate the average check. b. Calculate the turnover for the three – hour period if there are 65 seats in the restaurant.

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The following table indicates the number of covers served and the
gross sales per server for one three – hour period in Sally ’ s Restaurant.
Determine: (a) the average number of covers served per hour per server,
and (b) the average sale per server for the three – hour period.
Server Covers Served Gross Sales Per Server
A 71 $237.40
B 66 $263.95
C 58 $188.25
13. Use the information about Sally ’ s Restaurant identified in Question 12
to complete the following:
a. Calculate the average check.
b. Calculate the turnover for the three – hour period if there are 65 seats
in the restaurant.

You had a chat with the relationship manager of your bank, and they are willing to lend $50 million to you for 1 year at an interest rate of 7.5% which appears to be far better than the current 1-year cedi lending rate of 18.01% on the domestic market. Your intention is to borrow in USD and convert this to Ghana Cedis and use for your expansion program. The current exchange rate is 5.20 per USD and is forecasted to be 5.75per USD in a year’s time. a) Calculate the effective annual Financing Cost of the USD Loan and advise Yogobozz whether it is prudent to borrow USD at this stage. b) Assume that Interest rate Parity (IRP) holds and that you intend to hedge the exchange rate risk by entering into a 1 year Forward transaction with your Bank. What will be the effective annual interest rate in this case?

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You had a chat with the relationship manager of your bank, and they
are willing to lend $50 million to you for 1 year at an interest rate
of 7.5% which appears to be far better than the current 1-year cedi
lending rate of 18.01% on the domestic market. Your intention is to
borrow in USD and convert this to Ghana Cedis and use for your
expansion program. The current exchange rate is 5.20 per USD and is
forecasted to be 5.75per USD in a year’s time.

a) Calculate the effective annual Financing Cost of the USD Loan and
advise Yogobozz whether it is prudent to borrow USD at this stage.

b) Assume that Interest rate Parity (IRP) holds and that you intend to
hedge the exchange rate risk by entering into a 1 year Forward
transaction with your Bank. What will be the effective annual interest
rate in this case?

Consider the following information about a risky portfolio that you manage, and a risk-free asset: E(rP ) = 11%, σP = 15%, rf = 5%. a) Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her overall or complete portfolio equal to 8%. What proportion should she invest in the risky portfolio, P, and what proportion in the risk-free asset? [5 marks] b) What will be the standard deviation of the rate of return on her portfolio? [5 marks] c) Another client wants the highest return possible subject to the constraint that you limit his standard deviation to be no more than 12%. Which client is more risk averse? [5 marks]

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Consider the following information about a risky portfolio that you
manage, and a risk-free asset: E(rP ) = 11%, σP = 15%, rf = 5%.
a) Your client wants to invest a proportion of her total investment budget in your risky
fund to provide an expected rate of return on her overall or complete portfolio equal to
8%. What proportion should she invest in the risky portfolio, P, and what proportion
in the risk-free asset? [5 marks]
b) What will be the standard deviation of the rate of return on her portfolio? [5 marks]
c) Another client wants the highest return possible subject to the constraint that you limit
his standard deviation to be no more than 12%. Which client is more risk averse?
[5 marks]

Stocks offer an expected rate of return of 18%, with a standard deviation of 22%. Gold offers an expected return of 10% with a standard deviation of 30%. a) In light of the apparent inferiority of gold with respect to both mean return and volatil- ity, would anyone hold gold? If so, demonstrate graphically why one would do so. [10 marks] b) Given the data above, reanswer a) with the additional assumption that the correlation coefficient between gold and stocks equals 1. Draw a graph illustrating why one would or would not hold gold in one’s portfolio. Could this set of assumptions for expected returns, standard deviations, and correlation represent an equilibrium for the security market? [10 marks]

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Stocks offer an expected rate of return of 18%, with a standard
deviation of 22%. Gold offers an expected return of 10% with a standard deviation of 30%.

a) In light of the apparent inferiority of gold with respect to both mean return and volatil-
ity, would anyone hold gold? If so, demonstrate graphically why one would do so.

[10 marks]
b) Given the data above, reanswer a) with the additional assumption that the correlation
coefficient between gold and stocks equals 1. Draw a graph illustrating why one would
or would not hold gold in one’s portfolio. Could this set of assumptions for expected
returns, standard deviations, and correlation represent an equilibrium for the security
market? [10 marks]

In the past four years, the annual returns of one company’s stock are 12%, 18%, and –14%, and 7%. a) What is the geometric average return? [5 marks] b) What is the arithmetic average of the returns? [5 marks] c) According to an economist’ forecast on the Year 2020, the probabilities of repeating the performances of the former four years are 30%, 30%, 20%, and 20%, respectively. What is the expected return of the stock in the Year 2020? [5 marks]

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In the past four years, the annual returns of one company’s stock
are 12%, 18%, and –14%, and 7%.
a) What is the geometric average return? [5 marks]
b) What is the arithmetic average of the returns? [5 marks]
c) According to an economist’ forecast on the Year 2020, the probabilities of repeating
the performances of the former four years are 30%, 30%, 20%, and 20%, respectively.
What is the expected return of the stock in the Year 2020? [5 marks]

Mahesh wants to start his business and for that he decides that he will take loan for Rupees 7 Lakhs from the Bank of Baroda. He also decides to use his saving worth 3 lakhs in the bank account to start the business. Discuss how these two transactions will be recorded in the books of accounts by passing the relevant journal entries? How these transactions will be reflected in the Books of accounts (that’ is in the financial statements)? Lastly, conclude your answer by stating the applicability of which accounting assumption/s you did the above mentioned accounting treatment/ recognition and presentation in the books of accounts.

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Mahesh wants to start his business and for that he decides that he
will take loan for

Rupees 7 Lakhs from the Bank of Baroda. He also decides to use his
saving worth 3 lakhs

in the bank account to start the business. Discuss how these two
transactions will be

recorded in the books of accounts by passing the relevant journal
entries? How these

transactions will be reflected in the Books of accounts (that’ is in
the financial statements)?

Lastly, conclude your answer by stating the applicability of which
accounting

assumption/s you did the above mentioned accounting treatment/
recognition and

presentation in the books of accounts.