A german firm is attempting to determine the europound, Financial Management

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A german firm is attempting to determine the europound

1. Rappaport Industries has 5,750 perpetual bonds outstanding with a face value of $1,000 each. The bonds have a coupon rate of 6.4 percent and a yield to maturity of 6.7 percent. The tax rate is 35 percent. What is the present value of the interest tax shield? Please show work

2. A German firm is attempting to determine the euro/pound exchange rate and has the following exchange rate information:

–USD/pound = $1.5509/£

–USD/euro rate = $1.2194/€

• What should be the euro/pound exchange cross rate without an arbitrage?

• If the spot euro/pound exchange rate is 1.30, explain how you can profit from it.

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