Capital Markets and Institutions
Test Preparation
Course Introduction
This course provides an in-depth examination of capital markets and the financial institutions that operate within them. Students will explore the structure and functioning of various capital markets, including equity, debt, and derivative markets, along with the major participants such as commercial banks, investment banks, insurance companies, and other institutional investors. Key topics include the role of financial intermediaries, the regulatory environment, risk management, market efficiency, and the impact of global events on capital flows. The course aims to equip students with a solid understanding of how capital markets and institutions facilitate the allocation of resources, support economic growth, and influence financial stability.
Recommended Textbook
Corporate Finance 3rd Edition by Jonathan Berk
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Chapter 1: The Corporation
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Q1) Explain the main differences between the NYSE and NASDAQ stock markets. Answer: Key points:
NYSE has physical location-NASDAQ is an electronic market. NYSE has one specialist in each stock and his role is to match buyers and sellers. NASDAQ has multiple market makers (dealers) in each stock who stand ready to trade on their own accounts.
Q2) An investment is said to be liquid if the investment:
A) has large day to day fluctuations in price. B) has a large bid-ask spread. C) can easily be converted into cash. D) is traded on a stock exchange.
Answer: C
Q3) What are your net proceeds if you purchased 2500 shares of XYZ stock on November 11th and then sold them a week later on November 18th?
Answer: buy at ask price 11/11 = 2500 × $25.25 = $63,125 sell at bid price 11/18 = 2500 × $25.93 = $64,825 now subtract the price paid for the shares so net proceeds = 64,825 - 63,125 = $1700
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Chapter 2: Introduction to Financial Statement Analysis
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Q1) If Moon Corporation has depreciation or amortization expense, which of the following is TRUE?
A) Its EBITDA /Interest Coverage ratio will be greater than its EBIT/Interest Coverage ratio.
B) Its EBITDA /Interest Coverage ratio will be less than its EBIT/Interest Coverage ratio.
C) Its EBITDA /Interest Coverage ratio will be equal to its EBIT/Interest Coverage ratio.
D) Not enough information to answer the question.
Answer: A
Q2) When using the book value of equity, the debt to equity ratio for Luther in 2009 is closest to:
A) 0.43
B) 2.29
C) 2.98
D) 3.57
Answer: B
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Chapter 3: Financial Decision Making and the Law of One
Price
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Q1) If the discount rate is 15%, the alternative with the highest NPV is:
A) #1 with an NPV of approximately $350,000
B) #2 with an NPV of approximately $341,300
C) #3 with an NPV of approximately $329,570
D) #2 with an NPV of approximately $400,000
E) None of the above
Answer: A
Q2) Suppose you have $500 today and the risk-free interest rate (r<sub>f</sub>) is 5%. The equivalent value in one year is closest to:
A) $475
B) $476
C) $500
D) $525
Answer: D
Q3) Assume that the ETF is trading for $366.00, what (if any) arbitrage opportunity exists? What (if any) trades would you make?
Answer: Value of ETF = 2 × 121.57 + 3 × 36.59 + 3 × 3.15 = $362.36, so an arbitrage opportunity exists. You should sell the EFT for $366.00 and buy 2 shares of IBM, 3 shares of MRK, and 3 shares of C.
Page 5
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Chapter 4: The Time Value of Money
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Q1) Dagny Taggart is a graduating college senior and she is considering the costs of going to medical school. Beginning next fall, Dagny expects medical school tuition to run $45,000 for the first year and she estimates that tuition will increase by 6% each year. If Dagny is able to invest her money in an account paying 8% interest per year, then the present value to Dagny of four years of medical school tuition is closest to:
A) $149,045
B) $155,930
C) $162,095
D) $180,000
Q2) How do you calculate (mathematically) the present value of a(n): (a) perpetuity
(b) annuity
(c) growing perpetuity
(d) growing annuity
Q3) Draw a timeline detailing Joe's cash flows from the sale of the family business.
Q4) Assuming that college costs continue to increase an average of 4% per year and that all her college savings are invested in an account paying 7% interest, then the amount of money she will need to have available at age 18 to pay for all four years of her undergraduate education is closest to:
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Chapter 5: Interest Rates
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Q1) Assuming that you have made all of the first 24 payments on time, then the outstanding principal balance on your SUV loan is closest to:
A) $14,808
B) $20,300
C) $22,212
D) $32,000
Q2) The total amount of interest that Dagny will pay during the first month of her mortgage is closest to:
A) $1,110
B) $1,785
C) $1,800
D) $2,245
Q3) Should you purchase the delivery truck or lease it? Why?
Q4) If the current inflation rate is 5%, then the nominal rate necessary for you to earn an 8% real interest rate on your investment is closest to:
A) 13.0%
B) 13.4%
C) 4.9%
D) 3.0%
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Chapter 6: Valuing Bonds
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Sample Questions
Q1) How much will each semiannual coupon payment be?
A) $60
B) $40
C) $120
D) $80
Q2) Which of the following statements is FALSE?
A) We can use the law of one price to compute the price of a coupon bond from the prices of zero-coupon bonds.
B) The plot of the yields of coupon bonds of different maturities is called the coupon-paying yield curve.
C) It is possible to replicate the cash flows of a coupon bond using zero-coupon bonds.
D) Because the coupon bond provides cash flows at different points in time, the yield to maturity of a coupon bond is the simple average of the yields of the zero-coupon bonds of equal and shorter maturities.
Q3) Assuming that this bond trades for $1,035.44, then the YTM for this bond is equal to:
Q4) Explain why the expected return of a corporate bind does not equal its yield to maturity?
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Chapter 7: Investment Decision Rules
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Sample Questions
Q1) Assume that projects Alpha and Beta are mutually exclusive. The correct investment decision and the best rational for that decision is to
A) invest in project Beta since NPV<sub>Beta</sub> > 0.
B) invest in project Alpha since NPV<sub>Beta</sub> < NPV<sub>Alpha.</sub>
C) invest in project Beta since IRR<sub>B</sub> > IRR<sub>A.</sub>
D) invest in project Beta since NPV<sub>Beta</sub> > NPV<sub>Alpha </sub>> 0.
Q2) Assuming that your capital is constrained, what is the fifth project that you should invest in?
A) Project H
B) Project I
C) Project B
D) Project A
Q3) The NPV for project alpha is closest to:
A) $20.96
B) $16.92
C) $24.01
D) $14.41
Q4) What is one of the incremental IRRs for project B over project A? Would you feel comfortable basing your decision on the incremental IRR?
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Chapter 8: Fundamentals of Capital Budgeting
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Q1) Which of the following statements is FALSE?
A) When evaluating a capital budgeting decision, the correct tax rate to use is the firm's average corporate tax rate.
B) To determine the capital budget, firms analyze alternative projects and decide which ones to accept through a process called capital budgeting.
C) A new product typically has lower sales initially, as customers gradually become aware of the product.
D) Sunk costs have been or will be paid regardless of the decision whether or not to proceed with the project.
Q2) Epiphany would like to know how sensitive the project's NPV is to changes in the discount rate. How much can the discount rate vary before the NPV reaches zero?
Q3) The NPV for Epiphany's Project is closest to:
A) $4,825
B) $39,000
C) $11,946
D) $20,400
Q4) What is the NPV of the Epiphany's project?
Q5) How does scenario analysis differ from sensitivity analysis?
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Chapter 9: Valuing Stocks
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Sample Questions
Q1) The enterprise value of CCM corporation is closest to:
A) $396 million
B) $290 million
C) $382 million
D) $350 million
Q2) Which of the following statements is FALSE?
A) In a share repurchase, the firm uses excess cash to buy back its own stock.
B) The discounted free cash flow model begins by determining the value of the firm's equity.
C) The discounted free cash flow model focuses on the cash flows to all of the firm's investors, both debt and equity holders, and allows us to avoid estimating the impact of the firm's borrowing decisions on earnings.
D) In recent years an increasing number of firms have replaced dividend payouts with share repurchases.
Q3) What do you anticipate will happen to Lockheed-Martin and Boeing's stock prices are a result of this surprise announcement?
Q4) If DM has $500 million of debt and 14 million shares of stock outstanding, then what is the price per share for DM Corporation?
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Page 11
Chapter 10: Capital Markets and the Pricing of Risk
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Q1) Assume that you purchased General Electric Company stock at the closing price on December 31, 2008 and sold it after the dividend had been paid at the closing price on January 26, 2009. Your dividend yield for this period is closest to:
A) -8.15%
B) 0.75%
C) 0.70%
D) -8.80%
Q2) Which of the following statements is FALSE?
A) Beta measures the sensitivity of a security to market wide risk factors.
B) Volatility measures total risk, while beta measures only systematic risk.
C) The beta is the expected percentage change in the excess return of the market portfolio for a 1% change in the excess return of a security.
D) Utilities tend to be stable and highly regulated, and thus are insensitive to fluctuations in the overall market.
Q3) Suppose that you want to use the 10 year historical average return on Stock B to forecast the expected future return on Stock B. Calculate the 95% confidence interval for your estimate of the expect return.
Q4) What is the market portfolio?
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Chapter 11: Optimal Portfolio Choice and the Capital Asset Pricing Model
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Q1) The Correlation between Stock X's and Stock Z's returns is closest to:
A) 0.71
B) 0.60
C) 0.62
D) 0.05
Q2) Suppose that Google Stock has a beta of 1.06 and Boeing stock has a beta of 1.31. If the risk-free interest rate is 4% and the expected return from the market portfolio is 12%, then the expected return on a portfolio that consists of 30% Google stock and 70% Boeing stock is closest to:
A) 12.5%
B) 13.1%
C) 13.5%
D) 13.9%
Q3) The weight on Abbott Labs in your portfolio is:
A) 50%
B) 40%
C) 30%
D) 20%
Q4) What is the efficient frontier and how does it change when more stocks are used to construct portfolios?
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Chapter 12: Estimating the Cost of Capital
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Q1) Which of the following statements is FALSE?
A) Many practitioners analyze other financial characteristics of a firm, when they forecast betas.
B) U.S. Treasuries are never subject to interest rate risk unless we select a maturity equal to our investment horizon.
C) If a firm where to change industries, using its historical beta would be inferior to using the beta of other firms in the new industry.
D) When using historical returns to forecast future betas, we must be mindful of changes in the environment that might cause the future to differ from the past.
Q2) The e<sub>i</sub> in the regression
A) measures the market risk in returns.
B) measures the deviation from the best fitting line and is zero on average.
C) measures the sensitivity of the security to market risk.
D) measures the historical performance of the security relative to the expected return predicted by the SML.
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Chapter 13: Investor Behavior and Capital Market Efficiency
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Q1) Which of the following is NOT an investment likely to be found in any proxy for the market portfolio?
A) Human capital
B) Stocks
C) Bonds
D) Precious metals
Q2) The tendency to hang on to losers and sell winners is known as the:
A) cascade effect.
B) disposition effect.
C) overconfidence bias.
D) systematic behavior bias.
Q3) The alpha that investors in Galt's fund expect to receive is closest to:
A) -.80%
B) 0.0%
C) 0.80%
D) 1.8%
Q4) Explain why the market portfolio proxy may not be efficient.
Q5) What does the existence of a positive alpha investment strategy imply?
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Chapter 14: Capital Structure in a Perfect Market
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Q1) Which of the following statements is FALSE?
A) Modigliani and Miller's conclusion verified the common view, which stated that even with perfect capital markets, leverage would affect a firm's value.
B) We can evaluate the relationship between risk and return more formally by computing the sensitivity of each security's return to the systematic risk of the economy.
C) Investors in levered equity require a higher expected return to compensate for its increased risk.
D) Leverage increases the risk of equity even when there is no risk that the firm will default.
Q2) Nielson's EPS if they choose not to change their capital structure is closest to:
A) $2.00
B) $2.30
C) $2.50
D) $2.90
Q3) What is the conservation of value principle?
Q4) Based upon the three comparable firms, what asset beta would you recommend using for your firm's new project?
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Chapter 15: Debt and Taxes
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Q1) The total of Rosewood's net income and interest payments is closest to:
A) $270 million
B) $355 million
C) $290 million
D) $450 million
Q2) The amount of Rosewood's interest tax shield is closest to:
A) $115 million
B) $290 million
C) $175 million
D) $60 million
Q3) Wyatt Oil has 25 million shares outstanding and has a marginal corporate tax rate of 40%. Wyatt Oil announces that it will payout $40 million in cash to investors through a special dividend. Shareholders had previously assumed that Wyatt Oil would retain this excess cash permanently. The amount that Wyatt Oil's share price can be expected to change upon this announcement is closest to:
A) $0.56
B) $0.64
C) $0.96
D) $1.56
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Chapter 16: Financial Distress, Managerial Incentives, and Information
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Q1) If its managers increase the risk of the firm, then the expected market value of Luther's assets is closest to:
A) $260
B) $240
C) $300 million
D) $280 million
Q2) Which of the following statements is FALSE?
A) Equity holders expect to receive dividends and the firm is legally obligated to pay them.
B) A firm that fails to make the required interest or principal payments on the debt is in default.
C) In the extreme case, the debt holders take legal ownership of the firm's assets through a process called bankruptcy.
D) After a firm defaults, debt holders are given certain rights to the assets of the firm.
Q3) Assume that in the event of default, 20% of the value of MI's assets will be lost in bankruptcy costs and suppose that MI has zero-coupon debt with a $140 million face value due next year. Calculate the value of levered equity, the value of debt, and the total value of MI with leverage.
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Chapter 17: Payout Policy
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Q1) If Wyatt Oil distributes the $70 million as a dividend, then its stock price after the dividend will be closest to:
A) $12.50
B) $14.00
C) $17.50
D) $26.50
Q2) Which of the following statements is FALSE?
A) With a stock dividend, a firm does not pay out any cash to shareholders. As a result, the total market value of the firm's assets and liabilities, and therefore of its equity, is unchanged.
B) If the price of the stock falls too low, a company can engage in a reverse split and reduce the number of shares outstanding.
C) Stock dividends of 50% or higher are generally referred to as stock splits.
D) Rather than pay a dividend using cash or shares of its own stock, a firm can also distribute shares of a subsidiary in a transaction referred to as a off-shoot.
Q3) Calculate the effective tax disadvantage for retaining cash in 1999, 2001, and 2005.
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Chapter 18: Capital Budgeting and Valuation With Leverage
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Q1) The interest tax shield provided by Omicron's new project in year 1 is closest to:
A) $3.00
B) $1.05
C) $50.25
D) $17.60
Q2) The weighted average cost of capital for "Eenie" is closest to:
A) 6.0%
B) 6.5%
C) 7.5%
D) 5.5%
Q3) The Debt Capacity for Iota's new project in year 0 is closest to:
A) $263.25
B) 87.75
C) $50.25
D) $118.00
Q4) Based upon the three comparable firms, calculate that most appropriate unlevered cost of capital for Aardvark to use on this new product.
Q5) Describe the key steps in the flow to equity method for valuing a levered investment.
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Chapter 19: Valuation and Financial Modeling: a Case Study
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Q1) Based upon the average EV/EBITDA ratio of the comparable firms, if Ideko holds $6.5 million of cash in excess of its working capital needs, then Ideko's target market value of equity is closest to:
A) $155 million
B) $157 million
C) $165 million
D) $193 million
Q2) Based upon Ideko's Sales and Operating Cost Assumptions, what production capacity will Ideko require in 2008?
A) 1,702 units
B) 1,323 units
C) 1,505 units
D) 1,914 units
Q3) What range for the market value of equity for Ideko is implied by the range of P/E multiples for the comparable firms?
Q4) What range for the market value of equity for Ideko is implied by the range of EV/Sales multiples for the comparable firms if Ideko holds $6.5 million of cash in excess of its working capital needs?
Q5) What is the purpose of the sensitivity analysis?
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Chapter 20: Financial Options
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Q1) Which of the following statements is FALSE?
A) A holder would not exercise an in-the-money option.
B) The option seller, also called the option writer, sells (or writes) the option and has a short position in the contract.
C) Because the long side has the option to exercise, the short side has an obligation to fulfill the contract.
D) When the exercise price of an option is equal to the current price of the stock, the option is said to be at-the-money.
Q2) How many of the January 2009 put options are in the money?
A) 1
B) 3
C) 2
D) 4
Q3) In describing Galt's equity as a call option, the strike price of the call option is:
A) $200 million
B) $300 million
C) $500 million
D) $700 million
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22
Chapter 21: Option Valuation
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Q1) Which of the following statements is FALSE?
A) In both the Binomial and Black-Scholes Pricing Models, we need to know the risk neutral probability of each possible future stock price to calculate the option price.
B) In the real world, investors are risk averse. Thus, the expected return of a typical stock includes a positive risk premium to compensate investors for risk.
C) Because no assumption on the risk preferences of investors is necessary to calculate the option price using either the Binomial Model or the Black-Scholes formula, the models must work for any set of preferences, including risk-neutral investors.
D) If all market participants were risk neutral, then all financial assets (including options) would have the same cost of capital-the risk free rate of interest.
Q2) Using the binomial pricing model, calculate the price of a two-year call option on Kinston stock with a strike price of $9.
Q3) Using risk neutral probabilities, calculate the price of a two-year put option on Kinston stock with a strike price of $9.
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Chapter 22: Real Options
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Q1) The rate on a risk-free annuity that can be called at any time is known as the:
A) callable annuity rate.
B) callable auction rate.
C) callable hurdle rate.
D) risk-free rate.
Q2) Mutually dependent investments occur when:
A) the value of one project depends upon the outcome of one or other projects.
B) the value of one project is independent of any other projects.
C) a firm depends on another firm to provide materials for a project.
D) consumers and producers depend on each other's investments.
Q3) Assume that it will cost you $1 million to shut down the plant, but you are able to sell the plant for $5 million at any time. The value of the option to sell the plant will be closest to:
A) $3.0 million
B) $6.0 million
C) $5.0 million
D) $0.5 million
Q4) Can value be created by waiting for uncertainty to resolve?
Q5) Assuming you are able to see the plant, draw a decision tree detailing this problem.
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Chapter 23: Raising Equity Capital
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Q1) Which of the following statements is FALSE?
A) In recent years, the investment banking firm of W.R. Hambrecht and Company has attempted to change the IPO process by selling new issues directly to the public using an online auction IPO mechanism called Open IPO.
B) The lead underwriter is the primary banking firm responsible for managing the deal. The lead underwriter provides most of the advice and arranges for a group of other underwriters, called the syndicate, to help market and sell the issue.
C) Because of the potential conflict of interest, the underwriter will not make a market in the stock after the issue.
D) The SEC requires that companies prepare a registration statement, a legal document that provides financial and other information about the company to investors, prior to an IPO. Company managers work closely with the underwriters to prepare this registration statement and submit it to the SEC.
Q2) The amount of money the underwriter will earn on this transaction is closest to:
A) $4 million
B) $6 million
C) $9 million
D) $15 million
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Chapter 24: Debt Financing
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Q1) Galt Industries has just issued a callable, $1000 par value, five-year, 6% coupon bond with semiannual coupon payments. The bond can be called at par in three years or anytime thereafter on a coupon payment date. If the bond is currently trading for $978.94, then its yield to maturity is closest to:
A) 3.4%
B) 6.0%
C) 6.5%
D) 6.8%
Q2) Which of the following does NOT issue asset-backed securities?
A) Government National Mortgage Association
B) Federal National Mortgage Association
C) Student Loan Marketing Association
D) Federal Reserve
Q3) Treasury securities that are semiannual coupon bonds with original maturities of between 1 and 10 years are called:
A) Treasury bonds.
B) Treasury bills.
C) Treasury notes.
D) TIPS.
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Page 26
Chapter 25: Leasing
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Q1) A lease where ownership of the asset transfers to the lessee at the end of the lease for a nominal cost is called a:
A) fair market value cap lease.
B) fixed price lease.
C) $1.00 out lease.
D) fair market value lease.
Q2) If Luther acquires the new fleet of delivery trucks using a capital lease, Luther's Debt to Equity ratio will be closest to:
A) 0.66
B) 1.5
C) 0.80
D) 2.0
Q3) What will Luther's balance sheet look like if they acquire the new fleet of delivery trucks using an operating lease?
Q4) Calculate the monthly lease payments for a four year $1.00 out lease of the Bulldozer.
Q5) Is St. Martin's better off leasing the CT scanner or financing the purchase of the CT scanner with a lease-equivalent loan and by how much is St Martin's better off?
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Chapter 26: Working Capital Management
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Q1) Your firm purchases goods from its supplier on terms of 1/10, net 30. The effective annual cost to your firm if it chooses not to take advantage of the trade discount offered and stretches the accounts payable to 45 days is closest to:
A) 13.0%
B) 11.1%
C) 15.9%
D) 20.1%
Q2) The percentage of Wyatt's receivables that are still eligible to take the discount is closest to:
A) 20.1%
B) 32.1%
C) 38.3%
D) 42.2%
Q3) Describe "just-in-time" inventory management.
Q4) The difference between a firm's operating cycle and its cash cycle is:
A) there is no difference between the cash and operating cycles. B) its account receivable days.
C) its accounts payable days.
D) its inventory days.
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Chapter 27: Short-Term Financial Planning
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Q1) Which of the following statements is FALSE?
A) With a discount loan, the borrower is required to pay the interest at the end of the loan period.
B) Bridge loans are often quoted as discount loans with fixed interest rates.
C) A bridge loan is another type of short-term bank loan that is often used to "bridge the gap" until a firm can arrange for long-term financing.
D) After a natural disaster, lenders may provide businesses with short-term loans to serve as bridges until they receive insurance payments or long-term disaster relief.
Q2) Kinston Industries issued $4,000,000 in commercial paper which matures in six months and received $3,876,000. Calculate the effective annual rate that Kinston is paying.
Q3) The effective annual rate for Taggart if they choose alternative #3 is closest to:
A) 13.9%
B) 18.8%
C) 27.0%
D) 27.9%
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Chapter 28: Mergers and Acquisitions
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Q1) When a hostile takeover appears to be inevitable, a target company will sometimes look for another, friendlier company to acquire it called a:
A) poison pill.
B) classified board.
C) golden parachute.
D) white knight.
Q2) Which of the following statements is FALSE?
A) In practice, most acquirers pay a substantial acquisition premium, which is the percentage difference between the acquisition price and the premerger price of the target firm.
B) When a bid is announced, the target shareholders enjoy a gain of 16% on average in their stock price.
C) In most U.S. states, the law requires that when existing shareholders of a target firm are forced to sell their shares, they receive the market price for their shares. In most cases, this concept is interpreted as the value inclusive of any value that arises because of the merger itself.
D) A bidder is unlikely to acquire a target company for less than its current market value.
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Chapter 29: Corporate Governance
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Q1) Directors who are not employees, former employees, or family members of employees and who do not have existing or potential business relationships with the firm are called:
A) monitoring directors.
B) independent directors.
C) gray directors.
D) inside directors.
Q2) The Sarbanes-Oxley Act requires all of the following EXCEPT:
A) that audit partners rotate every five years to limit the likelihood that auditing relationships become too cozy over long periods of time.
B) strict limits on the amount of non-audit fees (consulting or otherwise) that an accounting firm can earn from the same firm that it audits.
C) that senior management and the boards of public companies to be comfortable enough with the process through which funds are allocated and controlled, and outcomes monitored throughout the firm, to be willing to attest to their effectiveness and validity.
D) the auditor must personally attest to the accuracy of the financial statements presented to shareholders and to sign a statement to that effect.
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Chapter 30: Risk Management
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Q1) What are some of the disadvantages of long-term supply contracts?
Q2) Which of the following statements is FALSE?
A) Horizontal integration entails the merger of a firm and its supplier or a firm and its customer.
B) Like insurance, hedging involves contracts or transactions that provide the firm with cash flows that offset its losses from price changes.
C) For many firms, changes in the market prices of the raw materials they use and the goods they produce may be the most important source of risk to their profitability.
D) Because an increase in the price of the commodity raises the firm's costs and the supplier's revenues, these firms can offset their risks by merging.
Q3) The duration of SFTSL's equity is closest to:
A) 6 years
B) 8 years
C) 10 years
D) 14 years
Q4) What is the actuarially fair cost of full insurance?
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32
Chapter 31: International Corporate Finance
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Q1) Which of the following statements is FALSE?
A) When the foreign tax rate is less than the U.S. tax rate, deferral can provide significant benefits.
B) The U.S. tax liability is not incurred until the profits are brought back home if the foreign operation is set up as a foreign branch rather than as a separately incorporated subsidiary.
C) If a company chooses not to repatriate £12.5 million in pre-tax earnings, for example, it effectively reinvests those earnings abroad and defers its U.S. tax liability.
D) When the foreign tax rates exceed the U.S. tax rates, there are no benefits to deferral because in such a case there is no additional U.S. tax liability.
Q2) How do we make adjustments when a project has inputs and outputs in different currencies?
Q3) Suppose the interest rate on Russian government bonds is 7.8%, and the current exchange rate is 26.8 rubles per dollar. If the forward exchange rate is 27.2 rubles per dollar, and the current U.S. risk-free interest rate is 4.6%, what is the implied credit spread for the Russian government bonds?
Q4) Calculate the pound denominated cost of capital for Luther's project.
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