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Finance
Assume you are deciding whether or not to invest in a particular company. Discuss which elements of which financial statements you would want to carefully examine. Explain your rationale.
Finance
on 1 january 2008, bob jones received a lump sum of R200 000. he invested the full amount in a fixed deposit paying at 7% p.a. compounded monthly. the marturity date of this investment is 31 december 2010. the following annual inflation rates have been predicted for the given calender years: for 2008 - 8.3%; for 2009 - 8.5%; for 2010 - 8.7%
Bob regards the annual inflation rate as his personal required rate of return for that particular year.
required:
(a) without the use of interest tables (for this question only), calculate the net Present Value (NPV) of this investment.
(b) you wil notice that the nominal interest rate on his fixed deposit is lower than the discount rate (inflation rate) in all five years. however, the NPV almost ends up being positive. Explain why.
please help me...
Bob regards the annual inflation rate as his personal required rate of return for that particular year.
required:
(a) without the use of interest tables (for this question only), calculate the net Present Value (NPV) of this investment.
(b) you wil notice that the nominal interest rate on his fixed deposit is lower than the discount rate (inflation rate) in all five years. however, the NPV almost ends up being positive. Explain why.
please help me...
Finance
I've been working on a formula for a 401k program for hours and it doesn't really make sense to me. http://www.bankrate.com/calculators/...alculator.aspx the closest thing that i came up with is FV=PV*(((1+i)^years)-1/i) or 6000*((((1+.08))^35)-1/.8 6000 is added for the first year idk how to get 1000 that was previously in there to be added in also. I need the equation to work as the variables change as i substitute them in is this possible?
Finance
Imagine a startup company of your own and briefly trace its development from a sole proprietorship to a major corporation with a focus on how that development would be financed.
Finance
Financial Management (Explain how answer was reached)
5. Which of the following statements is NOT CORRECT?
a. When a corporation’s shares are owned by a few individuals and are not traded on public markets, we say that the firm is “closely, or privately, held."
b. “Going public” establishes a firm's true intrinsic value, and it also insures that a highly liquid market will always exist for the firm’s shares.
c. When stock in a closely held corporation is offered to the public for the first time, the transaction is called “going public,” and the market for such stock is called the new issue market.
d. Publicly owned companies have shares owned by investors who are not associated with management, and public companies must register with and report to a regulatory agency such as the SEC.
e. It is possible for a firm to go public and yet not raise any additional new capital at the time.
5. Which of the following statements is NOT CORRECT?
a. When a corporation’s shares are owned by a few individuals and are not traded on public markets, we say that the firm is “closely, or privately, held."
b. “Going public” establishes a firm's true intrinsic value, and it also insures that a highly liquid market will always exist for the firm’s shares.
c. When stock in a closely held corporation is offered to the public for the first time, the transaction is called “going public,” and the market for such stock is called the new issue market.
d. Publicly owned companies have shares owned by investors who are not associated with management, and public companies must register with and report to a regulatory agency such as the SEC.
e. It is possible for a firm to go public and yet not raise any additional new capital at the time.
Finance
Financial Management (Explain how answer was reached)
4. Which of the following statements is CORRECT?
a. A good goal for a firm’s management is maximization of expected EPS.
b. Most business in the U.S. is conducted by corporations, and corporations’ popularity results primarily from their favorable tax treatment.
c. Because most stock ownership is concentrated in the hands of a relatively small segment of society, firms' actions to maximize their stock prices have little benefit to society.
d. Corporations and partnerships have an advantage over proprietorships because a sole proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited.
e. The potential exists for agency conflicts between stockholders and managers.
4. Which of the following statements is CORRECT?
a. A good goal for a firm’s management is maximization of expected EPS.
b. Most business in the U.S. is conducted by corporations, and corporations’ popularity results primarily from their favorable tax treatment.
c. Because most stock ownership is concentrated in the hands of a relatively small segment of society, firms' actions to maximize their stock prices have little benefit to society.
d. Corporations and partnerships have an advantage over proprietorships because a sole proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited.
e. The potential exists for agency conflicts between stockholders and managers.
Finance
Financial Management (Explain how answer was reached)
3. Which of the following statements is CORRECT?
a. If General Electric were to issue new stock this year it would be considered a secondary market transaction since the company already has stock outstanding.
b. Capital market transactions only include preferred stock and common stock transactions.
c. The distinguishing feature between spot markets versus futures markets transactions is the maturity of the investments. That is, spot market transactions involve securities that have maturities of less than one year, whereas futures markets transactions involve securities with maturities greater than one year.
d. Both Nasdaq "dealers" and NYSE “specialists” hold inventories of stocks.
e. An electronic communications network (ECN) is a physical location exchange.
3. Which of the following statements is CORRECT?
a. If General Electric were to issue new stock this year it would be considered a secondary market transaction since the company already has stock outstanding.
b. Capital market transactions only include preferred stock and common stock transactions.
c. The distinguishing feature between spot markets versus futures markets transactions is the maturity of the investments. That is, spot market transactions involve securities that have maturities of less than one year, whereas futures markets transactions involve securities with maturities greater than one year.
d. Both Nasdaq "dealers" and NYSE “specialists” hold inventories of stocks.
e. An electronic communications network (ECN) is a physical location exchange.
Finance
Financial Management (Explain how answer was reached)
2. Which of the following would be most likely to lead to higher interest rates on all debt securities in the economy?
a. Households start saving a larger percentage of their income.
b. The economy moves from a boom to a recession.
c. The level of inflation begins to decline.
d. Corporations step up their expansion plans and thus increase their demand for capital.
e. The Federal Reserve uses monetary policy in an attempt to stimulate the economy.
2. Which of the following would be most likely to lead to higher interest rates on all debt securities in the economy?
a. Households start saving a larger percentage of their income.
b. The economy moves from a boom to a recession.
c. The level of inflation begins to decline.
d. Corporations step up their expansion plans and thus increase their demand for capital.
e. The Federal Reserve uses monetary policy in an attempt to stimulate the economy.
Finance
Financial Management (Explain how answer was reached)
1. Which of the following statements is CORRECT?
a. One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability.
b. It is generally easier to transfer one’s ownership interest in a partnership than in a corporation.
c. One of the advantages of the corporate form of organization is that it avoids double taxation.
d. One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., “one person, one vote.”
e. Corporations of all types are subject to the corporate income tax.
1. Which of the following statements is CORRECT?
a. One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability.
b. It is generally easier to transfer one’s ownership interest in a partnership than in a corporation.
c. One of the advantages of the corporate form of organization is that it avoids double taxation.
d. One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., “one person, one vote.”
e. Corporations of all types are subject to the corporate income tax.
Finance
You are only allowed to use excel.
Question1
Test conditional asset pricing
The excel file contains:
Monthly returns (including dividends) of the three portfolios constructed .
o Monthly returns (including dividends) of the stock index.
o Monthly returns of a factor representing the exchange rate risk (a mimicking portfolio
constructed based on the SEK/USD exchange rate).
o The riskfree rate: the 30-day t-bill rate per year.
o The 10-year treasury bond yield to maturity, % per year.
1. Use the three equity portfolios as the test assets and perform a test of conditional
multifactor model with the market portfolio (market index) and the mimicking
portfolio for the exchange rate risk as factors and the lagged yield spread as the
instrument. Note that the yield spread is the difference between the yield on a long
term bond and the short term interest rate.
b) Plot the conditional betas in a diagram. What are the risk exposure of the different portfolios on the different factors.
Question2
The Excel file contains daily data on fixed rate swaps of different maturities
a)Compute the first three principal components for the interest rates.
b) Run a multiple regression of the annual interest rates of different maturities on the
computed principal components (one regression for each maturity).
Note: use the function LINEST in Excel to estimate the regressions.
c) For each swap compute the percentage of the total variance explained by each of
the principal components.
Question1
Test conditional asset pricing
The excel file contains:
Monthly returns (including dividends) of the three portfolios constructed .
o Monthly returns (including dividends) of the stock index.
o Monthly returns of a factor representing the exchange rate risk (a mimicking portfolio
constructed based on the SEK/USD exchange rate).
o The riskfree rate: the 30-day t-bill rate per year.
o The 10-year treasury bond yield to maturity, % per year.
1. Use the three equity portfolios as the test assets and perform a test of conditional
multifactor model with the market portfolio (market index) and the mimicking
portfolio for the exchange rate risk as factors and the lagged yield spread as the
instrument. Note that the yield spread is the difference between the yield on a long
term bond and the short term interest rate.
b) Plot the conditional betas in a diagram. What are the risk exposure of the different portfolios on the different factors.
Question2
The Excel file contains daily data on fixed rate swaps of different maturities
a)Compute the first three principal components for the interest rates.
b) Run a multiple regression of the annual interest rates of different maturities on the
computed principal components (one regression for each maturity).
Note: use the function LINEST in Excel to estimate the regressions.
c) For each swap compute the percentage of the total variance explained by each of
the principal components.
