The entrepreneurial attitude of the firm prompts it to think out of the box. How? What? Carry trade pops up. After some research, Nanotronics assembles the following data with the aim of executing a carry trade practice on $65,000.00 of its cash in the first round. In the first round, the firm stays conservative and decides not to tie up more than $65,000.00, with the aim of having its final position in USD. The firm needs to decide whether to invest (or deposit) the funds in the U. S. or in Mexico. The firm is looking for a riskless investment activity. Its horizon is exactly 9 months. The following data are assembled. Note: Nanotronics is neither a banker nor an FX (foreign exchange) dealer. It takes the rates and figures in the market as they are given to it.

Spot rate: Buy rate MXN 19.235/USD;

Spot rate: Sell rate MXN 19.385/USD

Nine-month forward rate: Buy rate MXN 20.115/USD

Nine-month forward rate: Sell rate MXN 20.265/USD

U. S commercial interest rate (borrowing) 4.5 percent

U. S commercial interest rate (lending) 1.0 percent

Mexico commercial interest rate (borrowing or lending) 6.5 percent

What happens if Nanotronics relaxes its desire to stay riskless?

Discuss the pros and cons of such investment practice?

Would it be possible to forecast the outcome if the risk factor is left open (not managed)?

At the outset, how can a person check whether the U. S. and Mexican markets are in equilibrium or disequilibrium?

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Bridgeport company began operations at the beginning of 2018. the following information pertains to this company. 1. pretax financial income for 2018 is $115,000. 2. the tax rate enacted for 2018 and future years is 40%. 3. differences between the 2018 income statement and tax return are listed below: (a) warranty expense accrued for financial reporting purposes amounts to $7,500. warranty deductions per the tax return amount to $2,200. (b) gross profit on construction contracts using the percentage-of-completion method per books amounts to $94,700. gross profit on construction contracts for tax purposes amounts to $67,100. (c) depreciation of property, plant, and equipment for financial reporting purposes amounts to $61,800. depreciation of these assets amounts to $75,700 for the tax return. (d) a $3,600 fine paid for violation of pollution laws was deducted in computing pretax financial income. (e) interest revenue recognized on an investment in tax-exempt municipal bonds amounts to $1,500. 4. taxable income is expected for the next few years. (assume (a) is short-term in nature; assume (b) and (c) are long-term in nature.) (a) prepare the reconciliation schedule for 2017 and future years. (b) prepare the journal entry to record income tax expense for 2017. (c) prepare the income tax expense section of the income statement beginning with “income before income taxes.” (d) determine how the deferred taxes will appear on the balance sheet at the end of 2017.

Gulliver travel agencies thinks interest rates in europe are low. the firm borrows euros at 5 percent for one year. during this time period the dollar falls 11 percent against the euro. what is the effective interest rate on the loan for one year? (consider the 11 percent fall in the value of the dollar as well as the interest payment.)