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Value of an annuity versus a single amount Assume that you just won the state lottery. Your prize can be taken either in the form of $40,000 at the end of each of the next 25 years (that is, $1,000,000 over 25 years) or as a single amount of $500,000 paid immediately.
a. If you expect to be able to earn 5% annually on your investments over the next 25 years, ignoring taxes and other considerations, which alternative should you take? Why?
Refer to the following estimation output and answer to the questions a-d.
a. Find the optimal level of experience for an academician.
5 points
b. Find the exact impact of age on the remuneration.
5 pts
c. Find the differences in Y, for two fully comparable academicians with d(age)=3 years. 5 points
d. Interpret the results for all elements discussed so far. 15 points
***The following regression captures the remuneration one Professor gets for getting engaged in research projects and scientific activities.
Log (Remuneration) = 2.301 + 0.022*Exper – 0.0003*Exper + 0.016*Age + 0.14*Time_spent_Preparing&Researching
P-value (Exper) = 0.011 & P-value (ExperSQ) = 0.00
P-value (Age) = 0.81 & P-value (Time_Spent_Preparing&Researching) = 0.95
how the following financial risks can be mitigated and managed by the financial institutions
- market risk
- operational risk
- credit risk
- Liquidity risk
- Insolvency risk
QUESTION ONE
(a) What are derivative instruments?
(b) Explain the types of derivative instruments.
(c) What are the advantages and disadvantages of using derivative instruments?
QUESTION TWO
Discuss the significance of stock markets like the Lusaka Stock Exchange (LuSE) in financial markets and the economy in general. What was the motivation for the Zambian Government to set up the LuSE?
Outline the securities and companies’ listing processes at the LuSE. What factors are taken into account when listing securities and companies on the LuSE?
QUESTION THREE
(a) Discuss in detail the roles played by financial institutions (FIs) in the economy with particular reference to Zambia citing particular examples of financial institutions that you are familiar with in Zambia.
(b) List and explain the major risks that financial institutions in general face? How do these risks manifest or affect the FIs?
QUESTION FOUR
Using appropriate illustrations discuss in detail the factors that affect demand for loanable funds according to the Loanable Funds Theory of interest rate determination.
What impact would these have on demand and supply of funds and on the interest rate?
QUESTION FIVE
(a) Discuss the term Monetary Policy in relation to the Zambian economy.
(b) Zambia as a developing country may have problems in establishing an effective operating Monetary Policy.
(i). Explain at least five major problems which may prevent Zambia from establishing an effective Monetary Policy.
(ii).Describe the main Monetary Policy tools which Zambia may use to influence economic growth.
QUESTION SIX
(a) What is risk management? Discuss the two major ways in which exposure can be managed and/or reduced.
(b) Financial institutions face a number of risks in their operations. How are these risks mitigated or managed? What techniques are used to mitigate each type of risk you have identified?
QUESTION ONE
One of the functions of the Bank of Zambia (BoZ) is to act as the bank of re-discount and lender of last resort.
Required:
a). In detail, demonstrate how the Central bank achieves these particular functions.
b). Identify and explain other central bank functions and illustrate how the Bank of Zambia performs these functions in the management of the financial system in Zambia.
c). Distinguish commercial banks and micro-finance institutions (MFIs) by function and objective
QUESTION TWO
a).What do you understand by the terms ‘financial intermediation’ and ‘financial dis-intermediation’? Explain in detail
b).Outline and explain the problems that would arise in the absence of financial intermediation. c).Explain how financial intermediation overcomes the problems identified in (b) above.
QUESTION THREE
a).Outline and discuss the main risks faced by financial institutions and how they manifest giving practical examples.
b).Discuss how these risks can be mitigated and managed.
QUESTION FOUR
The financial market is composed of products and services provided by financial institutions. Identify and describe the following financial institutions.
a).Identify and explain at least five financial instruments (for each) traded in money and capital markets.
b).distinguish the two types of markets in (a) above.
Every government is expected to perform some key economic roles to ensure sustainable development and improved welfare of the citizenry. Discuss the four key economic functions performed by the government of Ghana indicating how satisfactory or not (with sufficient evidence backing your stand) the current government of Ghana has performed each role.
Assume that your father is now 50. Years old that he plans to retire in 10years and that he expects to live for 25 years after he retire.that is until he is 85 years .he wants a fixed retirement income that has the same purchasing power at the time he retires as$40000 he has today. He realizes that the real value of his retirement income will decline year by year after he retires .his retirement income will begin the day he retires 10 years from today and he will get 24 additional annual payment.inflation is expected to be 5%per from today forward .he currently has $100000 saved up and he expects to earn a return on his saving of 8%per year annual compounding .to the nearest dollar how much must he save during each year of the next 10years with deposit being made at the end of each year to meet his retirement goal
1. Compute for the interest of a loan of P250,000 dated January 1, 2016 and payable on November 13, 2016 assuming the rate is 12% using the following: (20 points)
a. Actual Time-Exact Interest Method
b. Approximate Time-Exact Interest Method
c. Actual Time-Ordinary Interest Method
d. Approximate Time-Ordinary Interest Method
How much would you be willing to pay today for an investment that would return$ 800 each year at the end of each the next 6 years. Ausmus a discount rate of 5 percent
What is risk management? Discuss the two major ways in which exposure can be managed or reduced
