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Finance
4. Answer the following questions based on the following quotation, which is October 1 price quotation on light sweet crude oil (source: New York Mercantile Exchange). (Each part is worth 5 points, 25 points total)
Last Open High Open Low High Low Most Recent Change
Nov 2007 80.25 81.55 81.45 82.02 79.45 80.24s 0.01
Dec 2007 79.28 80.35 80.3 80.8 78.5 79.28s 0.00
Jan 2008 78.44 n/a 79.58 79.9 77.75 78.50s -0.06
Feb 2008 77.68 n/a 78.85 78.86 77.22 77.87s -0.19
Mar 2008 77.32 n/a 78.25 78.62 76.75 77.34s -0.02
April 2008 76.83 n/a 77.61 77.61 76.28 76.86s -0.03
(a) Here the futures price is lower the greater the time to expiration; what does this imply about the convenience yield of oil? Specifically, is it greater than the cost of carrying oil? (Hint: carry cost model).
Last Open High Open Low High Low Most Recent Change
Nov 2007 80.25 81.55 81.45 82.02 79.45 80.24s 0.01
Dec 2007 79.28 80.35 80.3 80.8 78.5 79.28s 0.00
Jan 2008 78.44 n/a 79.58 79.9 77.75 78.50s -0.06
Feb 2008 77.68 n/a 78.85 78.86 77.22 77.87s -0.19
Mar 2008 77.32 n/a 78.25 78.62 76.75 77.34s -0.02
April 2008 76.83 n/a 77.61 77.61 76.28 76.86s -0.03
(a) Here the futures price is lower the greater the time to expiration; what does this imply about the convenience yield of oil? Specifically, is it greater than the cost of carrying oil? (Hint: carry cost model).
Finance
Assume that the following interest rates at which firms A and B can borrow:
Fixed rate Floating rate
Firm A 8% LIBOR + 1%
Firm B 9% LIBOR + 1.4%
Premium paid by B over A 1% 0.4%
Also assume that A ultimately wants a floating rate loan while B wants a fixed rate loan. Design an interest rate swap so that both can benefit, assuming that no swap bank is involved
Fixed rate Floating rate
Firm A 8% LIBOR + 1%
Firm B 9% LIBOR + 1.4%
Premium paid by B over A 1% 0.4%
Also assume that A ultimately wants a floating rate loan while B wants a fixed rate loan. Design an interest rate swap so that both can benefit, assuming that no swap bank is involved
Finance
Answer the following questions based on the following quotation. On October 1, 2007, S&P 500 closed at 1547 where the quotation of CALL options on S&P 500 was as follows. Those contracts expire in October 2007
Strike Price Open High Low Last sett
1540 -- -- -- -- 31.70
1600 1.70 3.60 1.70 3.00 3.35
(a) Which option is in the money?
(b) Decompose the value of 1540 call, $31.7, into intrinsic value and time value.
(c) Again using the call with exercise price of 1540, what would be your cash proceeds if you exercise the option on October 1 (index options are settled by cash)? Assume that both dividends and transaction costs are small enough to be ignored. Based on this answer and answer on (b), does it make sense to exercise an American call before expiration?
(d) Assume that put-call parity holds for these options. What should be the value of a PUT on S&P 500 with exercise price of 1600? Assume that the annual risk-free rate is 5%
Strike Price Open High Low Last sett
1540 -- -- -- -- 31.70
1600 1.70 3.60 1.70 3.00 3.35
(a) Which option is in the money?
(b) Decompose the value of 1540 call, $31.7, into intrinsic value and time value.
(c) Again using the call with exercise price of 1540, what would be your cash proceeds if you exercise the option on October 1 (index options are settled by cash)? Assume that both dividends and transaction costs are small enough to be ignored. Based on this answer and answer on (b), does it make sense to exercise an American call before expiration?
(d) Assume that put-call parity holds for these options. What should be the value of a PUT on S&P 500 with exercise price of 1600? Assume that the annual risk-free rate is 5%
Finance
I need to take a class online FIN534, which begins next week july 2nd, can you take the class for me for the next 8 weeks? I will pay weekly- there would be 2 discussions per week and/either a quiz or assignment not every week. Please inform if possible to take this class for me. I will be taking two classes in classromm and would like to cover this class as well. Hope you can help.
Finance
why there is unemployment rate in china?
Finance
The comparison of unemployment rate between two countries & its reasons.
Finance
Suppose one year ago, Hein Company had inventory in Britain valued at 240,000 pounds. The exchange rate for dollars to pounds was 1£ = 2 U.S. dollars. This year the exchange rate is 1£ = 1.82 U.S. dollars. The inventory in Britain is still valued at 240,000 pounds. What is the gain or loss in inventory value in U.S. dollars as a result of the change in exchange rates?
Finance
please help with the below assignment
http://www.homeworkmarket.com/sites/default/files/schnappauf_2010_ta_return_information.pdf
http://www.homeworkmarket.com/sites/default/files/schnappauf_2010_ta_return_information.pdf
Finance
Sometimes one’s choices may involve catastrophic decisions and bear great risk and yet there can be no clear answer. For example, if a person gets a divorce, shutters a plant, sells a losing investment, or closes their business, will he or she be better off? The following case incorporates nearly all of the material you have covered this far and presents an example of one such choice where nearly all of the alternatives have a significant downside risk.
Review the following information from the article “A Cost-Benefit Analysis of the New Orleans Flood Protection System” by Stéphane Hallegatte (2005):
• Hallegatte, an environmentalist, assigns a probability (p) of a Katrina-like hurricane of 1/130 in his cost-benefit analysis for flood protection. However, the levees that protect New Orleans also put other regions at greater risk. You may assume the frequency of other floods is greater than Katrina-like events (Vastag & Rein, 2011).
• The new levees that were built in response to Katrina cost approximately fourteen billion dollars (in 2010). This is in addition to the direct costs of Katrina (eighty-one billion dollars in 2005).
• 50 percent of New Orleans is at or below sea level.
• A 100-year event means that there is a 63 percent chance that such an event will occur within a 100-year period.
• The following are the interested (anchored and/or biased) constituencies:
o Residents of New Orleans—both those that can move and those who cannot move
o Residents of the surrounding floodplains at risk from New Orleans levees
o The Mayor of New Orleans
o The federal government—specifically taxpayers and the Federal Emergency Management Agency (FEMA)
Assume that the availability heuristics makes people more risk averse (populations drop, at least in the short term). Consider how this would affect the local economy.
You are an analyst at FEMA and are in charge of developing a recommendation for both the state and the local governments on whether or not to redevelop New Orleans.
Write a report with your recommendation. Address the following in your report:
Part A
• Analyze the economics of New Orleans in light of the above parameters and develop your own Cost-Benefit Analysis (CBA) for rebuilding.
• Evaluate the value of the CBA for each constituency and integrate these estimates into a scenario model and/or decision tree. Analyze the results.
• Clearly each of these constituencies may both overlap and be prey to a variety of group dynamics internally. For one of these options, discuss the decision pitfalls to which they may be susceptible to and make a recommendation on how to alleviate these pressures.
• Starting with your CBA, estimate the relevant expected utility for theinterested constituencies.
Note: You need not have absolute amounts but your relevant utilities should be proportional to one another.
Hint: If you assume that your total CBA for New Orleans is fixed for each constituency (do not forget the overlaps), then each constituency will have a piece of the utility pie.
Part B
• Make a case for or against rebuilding the city of New Orleans. This should be an executive summary; be concise and brief. Include exhibits.
• Whether you are for or against, discuss how social heuristics could be used to your advantage, both ethically and unethically, in making your case. You may choose to fill the role of one of the constituents, if you prefer.
Write an 8–10-page report in Word format. Apply APA standards to citation of sources. Use proper spelling and grammar throughout, and keep the text legible and balanced with visuals.
Review the following information from the article “A Cost-Benefit Analysis of the New Orleans Flood Protection System” by Stéphane Hallegatte (2005):
• Hallegatte, an environmentalist, assigns a probability (p) of a Katrina-like hurricane of 1/130 in his cost-benefit analysis for flood protection. However, the levees that protect New Orleans also put other regions at greater risk. You may assume the frequency of other floods is greater than Katrina-like events (Vastag & Rein, 2011).
• The new levees that were built in response to Katrina cost approximately fourteen billion dollars (in 2010). This is in addition to the direct costs of Katrina (eighty-one billion dollars in 2005).
• 50 percent of New Orleans is at or below sea level.
• A 100-year event means that there is a 63 percent chance that such an event will occur within a 100-year period.
• The following are the interested (anchored and/or biased) constituencies:
o Residents of New Orleans—both those that can move and those who cannot move
o Residents of the surrounding floodplains at risk from New Orleans levees
o The Mayor of New Orleans
o The federal government—specifically taxpayers and the Federal Emergency Management Agency (FEMA)
Assume that the availability heuristics makes people more risk averse (populations drop, at least in the short term). Consider how this would affect the local economy.
You are an analyst at FEMA and are in charge of developing a recommendation for both the state and the local governments on whether or not to redevelop New Orleans.
Write a report with your recommendation. Address the following in your report:
Part A
• Analyze the economics of New Orleans in light of the above parameters and develop your own Cost-Benefit Analysis (CBA) for rebuilding.
• Evaluate the value of the CBA for each constituency and integrate these estimates into a scenario model and/or decision tree. Analyze the results.
• Clearly each of these constituencies may both overlap and be prey to a variety of group dynamics internally. For one of these options, discuss the decision pitfalls to which they may be susceptible to and make a recommendation on how to alleviate these pressures.
• Starting with your CBA, estimate the relevant expected utility for theinterested constituencies.
Note: You need not have absolute amounts but your relevant utilities should be proportional to one another.
Hint: If you assume that your total CBA for New Orleans is fixed for each constituency (do not forget the overlaps), then each constituency will have a piece of the utility pie.
Part B
• Make a case for or against rebuilding the city of New Orleans. This should be an executive summary; be concise and brief. Include exhibits.
• Whether you are for or against, discuss how social heuristics could be used to your advantage, both ethically and unethically, in making your case. You may choose to fill the role of one of the constituents, if you prefer.
Write an 8–10-page report in Word format. Apply APA standards to citation of sources. Use proper spelling and grammar throughout, and keep the text legible and balanced with visuals.
Finance
define public finance.
