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    Problem Quiz CH 19,20,21

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    Steve Smith Finance
    The document contains 6 questions related to calculating financial metrics such as standard deviation of cash flows from affiliates, amounts received from banker's acceptances, effective tax rates, and increases in after-tax profits from adjusting transfer prices between affiliates. The questions assess understanding of concepts covered in Chapters 19-21 such as portfolio risk calculation, banker's acceptance discounts, tax implications of transfer prices, and optimizing transfer prices between affiliates.

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    Problem Quiz CH 19,20,21

    Uploaded by

    Steve Smith Finance
    35 views2 pages
    The document contains 6 questions related to calculating financial metrics such as standard deviation of cash flows from affiliates, amounts received from banker's acceptances, effective tax rates, and increases in after-tax profits from adjusting transfer prices between affiliates. The questions assess understanding of concepts covered in Chapters 19-21 such as portfolio risk calculation, banker's acceptance discounts, tax implications of transfer prices, and optimizing transfer prices between affiliates.

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    Problem Quiz 19-21

    Original Title

    Problem Quiz Ch 19,20,21

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    The document contains 6 questions related to calculating financial metrics such as standard deviation of cash flows from affiliates, amounts received from banker's acceptances, effective tax rates, and increases in after-tax profits from adjusting transfer prices between affiliates. The questions assess understanding of concepts covered in Chapters 19-21 such as portfolio risk calculation, banker's acceptance discounts, tax implications of transfer prices, and optimizing transfer prices between affiliates.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    35 views2 pages

    Problem Quiz CH 19,20,21

    Uploaded by

    Steve Smith Finance
    The document contains 6 questions related to calculating financial metrics such as standard deviation of cash flows from affiliates, amounts received from banker's acceptances, effective tax rates, and increases in after-tax profits from adjusting transfer prices between affiliates. The questions assess understanding of concepts covered in Chapters 19-21 such as portfolio risk calculation, banker's acceptance discounts, tax implications of transfer prices, and optimizing transfer prices between affiliates.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

     Question 1

    Assume that interaffiliate cash flows are uncorrelated with one another. Calculate the
    standard deviation (XXX.X, in thousands) of the portfolio of cash held by the centralized
    depository for the following affiliate members:
    Affiliate Expected Standard
    Transactions Deviation
    U.S. $98,000 $40,000
    Canada $147,000 $60,000
    Mexico $185,000 $32,000
    Chile $209,000 $71,000

    Hint: Please use thousands as your units (ignore the 000). This way your answer will be in
    thousands.

    Selected Answer: 106.1


    Correct Answer: 106.1 ± 0.5
    Response Feedback: Chapter 19 problem 1
     Question 2

    Assume the time from acceptance to maturity on a $104,000 banker’s acceptance is 90 days.
    Further assume that the importing bank’s acceptance commission is 1.14 percent and that the
    market rate for 90-day B/As is 7.0 percent. Determine the amount the exporter will receive if he
    holds the B/A until maturity (USD, no cents)
    Selected Answer: 103,704
    Correct Answer: 103,704 ± 1
    Response Feedback: Chapter 20 problem 1
    First question
     Question 3

    The time from acceptance to maturity on a $95,000 banker’s acceptance is 120 days. The
    importer’s bank’s acceptance commission is 1.66 percent and the market rate for 120-day B/As
    is 5.52 percent. What amount will the exporter receive if he discounts the B/A with the importer’s
    bank? (USD, no cents)
    Selected Answer: 92,726
    Correct Answer: 92,726 ± 1
    Response Feedback: Chapter 20 problem 2
    second question
     Question 4

    The time from acceptance to maturity on a $91,000 banker’s acceptance is 120 days. The
    importer’s bank’s acceptance commission is 1.76 percent and the market rate for 120-day B/As
    is 5.64 percent. Determine the bond equivalent yield the importer’s bank will earn from
    discounting the B/A with the exporter. (X.XX%)
    Selected Answer: 7.69%
    Correct Answer: 7.69 ± 0.01 (%)
    Response Feedback: Chapter 20 problem 2
    third question
     Question 5

    Affiliate A sells 4,000 units to Affiliate B per year. The marginal income tax rate for Affiliate A is
    23.5 percent and the marginal income tax rate for Affiliate B is 36.1 percent. Additionally,
    Affiliate B pays a tax-deductible tariff of 4.5 percent on imported merchandise. The transfer price
    per unit is currently $1806, but it can be set at any level between $1806 and $2122.
    Derive the effective marginal tax rate and calculate the increase in annual after-tax profits if the
    higher transfer price of $2122 per unit is used. (USD, no cents)
    Selected Answer: 122,918
    Correct Answer: 122,918 ± 1
    Response Feedback: Chapter 21 problem 5
     Question 6

    Affiliate X sells 8,000 units to Affiliate Y per year. The marginal tax rates for X and Y are 20.9
    percent and 29.7 percent, respectively. The transfer price per unit is currently set at $1155, but it
    can be set as high as $1261. Calculate the increase in annual after-tax profits if the higher
    transfer price of $1261 per unit is used. (USD, no cents)
    Selected Answer: 74,624
    Correct Answer: 74,624 ± 1
    Response Feedback: Chapter 21 problem 3

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