In June 2024
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Explain the association of the following diagram (hints: the association has directions; from sales order to customers, and from customers to sales orders)?
What is segregation of duties and why internal controls need segregation of duties?
a. The maturity of a futures contract on a stock market index is 1 year. The multiplier for the futures contract $50. The current level of the index is 30,000. The risk-free rate is 0.5% per month and dividend yield on the stock market index is 0.3% per month. The initial margin requirement is 10%.
i. What is the parity value of the futures price now?
ii. Assume the futures contract is fairly priced. How much initial margin you need to deposit if you long 1 contract?
iii. Calculate the two-month holding-period return for your long position in the futures contract if the stock market index increases to 31,000 two months later. Assume the futures contract keeps being priced fairly.
b. William sells six July futures contracts on coffee. Each contract is for the delivery of 37,500 pounds. The current futures price is $2.2565 per pound. The initial margin is $9,900 per contract and the maintenance margin is $9,000 per contract. What is the futures price per pound that would lead to a margin call?
Question 2 a. Peter buys a 3% annual coupon bond with five years to maturity. The bond has a yield-to-maturity of 8%. The par value is $1,000.
i. Calculate the duration and modified duration of the bond.
ii. If the yield decreases to 7.5%, what is the new bond price using the duration concept? ( b. At the end of next 2 years, you need to pay $100,000 and $150,000 respectively.
i. If the market interest rate is 6% per annum., what will be the duration of your payment obligation?
ii. Suppose you plan to fully fund the obligation using both 6-month zero coupon bonds and perpetuities. Determine how much of each of these bonds (in market value) you will hold in the portfolio.
Question 1 Assume the expected rate of return on the market is 11% and the risk-free rate is 4%.
a. NTF stock is now selling for $60 per share. It will pay a dividend of $2 per share at the end of the year. The expected price for NTF at the end of the year is $65.44. What is its beta?
b. Jacky is buying a firm with an expected perpetual cash flow of $4,000 but is unsure of its risk. If Jacky thinks the beta of the firm is 0.9, when the beta is really 1.2, how much more will he offer for the firm than it is truly worth? [Hint: Value of perpetual cash flow = CF/r]
If the national debt of a country (in trillions of dollars)tyears from now is given by the indicated function, find the relative rate of change of the debt12years from now. (Round your answer to two decimal places.)
N(t) =0.6+1.3e0.01t
To what extend does financial planning influences investors and business owner’s financing decision.?
Auto Insurance and the Black Box
The chapter talks about the lack of information regarding insurance. I found an article about installing a box from your auto insurance company that monitors your driving. The idea is, if you drive less or if you are a safe driver the insurance company will reduce your insurance premiums. In fact, in most cases the box may have been a prop, however, people still were driving safer.
Covid-19 has changed a lot of Americans driving habits. If you are no longer driving to work did your insurance company reduce your rates?
The article talks about how your insurance carrier can reduce rates based on how far you drive and how safe you drive.in some cases, the companies may give you an empty box without you knowing it and you will still modify your driving. What do you think about this and how would you tie it to the chapter? Do you believe these practices are good ways to reduce insurance rates?
The difference in returns between Treasury bills and the FTSE Bursa Malaysia (FBM) KLCI is 5.50%. The Treasury bill rate is 3% . Krogh Enterprise has a beta of 1.60. What's the market return?
What is the required rate of return of Krogh Enterprise?
The difference in returns between Treasury bills and the FTSE Bursa Malaysia (FBM) KLCI is 5.50%. The Treasury bill rate is 3% . Krogh Enterprise has a beta of 1.60. What's the market return?
An analyst believes that economic conditions during the next year will either be strong, normal, or weak, and she thinks that the Corrigan Company's returns will have the following probability distribution.
Conditions Probability (%) Return (%)
Strong 30 30
Normal 40 15
Weak 30 -10
What is Corrigan’s expected return?
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#340153 on Dec 2023