Suppose in the spot market 1 U.S. dollar equals 1.60 Canadian dollars. 6-month Canadian securities have an annualized return of 6% (and thus a 6-month periodic return of 3%). 6-month U.S. securities have an annualized return of 6.5% and a periodic return of 3.25%. If interest rate parity holds, what is the U.S. dollar-Canadian dollar exchange rate in the 180-day forward market? (a) 1 U.S. dollar = 0.6235 Canadian dollars (b) 1 U.S. dollar = 0.6265 Canadian dollars (c) 1 U.S. dollar = 1.0000 Canadian dollars (d) 1 U.S. dollar = 1.5961 Canadian dollars (e) 1 U.S. dollar = 1.6039 Canadian dollars Banerjee Inc. wants to maintain a target capital structure with 30% debt and 70% equity. Its forecasted net income is $550,000, and its board of directors has decreed that no new stock can be issued during the coming year. If the firm follows the residual dividend policy, what is the maximum capital budget that is consistent with maintaining the target capital structure? (a) $673,652 (b) $709,107 (c) $746,429 (d) $785,714 (e) $825,000 Upstate Water Company just sold a bond with 50 warrants attached. The bonds have a 20-year maturity and an annual coupon of 12%, and they were issued at their $1,000 par value. The current yield on similar straight bonds is 15%. What is the implied value of each warrant? (a) $3.76 (b) $3.94 (c) $4.14 (d) $4.35 (e) $4.56