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Finance: Fair Markets and Assessing Risk

An important aspect of the decision-making process is the consideration of risks associated with the options in an opportunity set. Measuring the risk of available options can drastically alter the decisions made by an organization's senior management team. Are markets like the NYSE, NASDAQ, and CME fair markets? Why? Why is

Stock: The Rago Corporation

The Rago Corporation had the following stock outstanding from 2009 through 2012: Preferred stock: $100 par value, 8 percent cumulative, 5,000 shares authorized, issued, and outstanding Common stock: $10 par value, 100,000 shares authorized, issued, and outstanding The company paid $30,000, $30,000, $94,000, and $130,000 in di

Great Depression and Moral Hazard

How an understanding of adverse selection and moral hazard can help us better understand financial crises. The greatest financial crisis faced by the United States was the Great Depression, from 1929 to 1933. Go to http://www.amatecon.com/greatdepression.html. This site contains a brief discussion of the factors that led to the

Realignment, restructuring and lateral shift

Discuss the following terms related to structure and staffing: realignment, restructuring and lateral shift. Choose the term you believe to the most detrimental to the organization and staff. Why?

Finance: Sensitivity Analysis

You need to decide how to invest a graduation gift of $1000. The annual rate of return is given in the next table for each of the three different types of investments and three different states of the economy. Recession Stable Economy Expansion Investment A 2.5% 2.5%

Risk-Neutral Probability Models

Please see attached Show that the risk-neutral probabilities in the Cox-Ross-Rubinstein model are given by equations (6.15). ------------------------------------------------------------------------------------- (See attached pages for relevant information from the textbook) 188 Chapter 6 is preferable to taking

Consider a GNMA mortgage pool with principal of $20 million.

Consider a GNMA mortgage pool with principal of $20 million. The maturity is 30 years with a monthly mortgage payment of 10 percent per annum. Assume no prepayments. a. What is the monthly mortgage payment (100 percent amortizing) on the pool of mortgages? b. If the GNMA insurance fee is 6 basis points and the servicing fe

Investment Questions.

Question 1 The primary role of organized security exchanges is to raise capital (money) for firms. Answer TRUE FALSE Question 2 In an "underwriting" the investment banker guarantees the firm selling the securities a specified amount. Answer TRUE FALSE T Question 3 In a "best

Explain the issue of related party transactions

Explain the issue of related party transactions not being arm's length transactions and the risk that transactions with related parties might not be valued at the same amount as they would be with an independent third party. Is it simply because the actual amount of the transaction would be higher with a third party?


After you answer each question you must also explain whether your answer affects corporations and individuals positively or negatively. Please number your answer to match each question number. GENERAL FRAUDULENT PRACTICES 1. What measures do you have in place to help your organization fight fraud? 2. How, if at all, does yo

Break-even analysis

Airport Connection provides shuttle service between four hotels near a medical center and an international airport. Airport Connection uses two 10 passenger vans to offer 12 round trips per day. A recent month's activity in the form of a cost-volume-profit income statement is shown below. Fare revenues (1,440 fares) $36,000

Calculating the per capita cost of each police officer

The average cost of employing each police officer per year if $30,000 for a small twon. The current population of the town is 1,000. Calculate the per capita cost per police officer. Explain why the increase in population can result in increased per capita taxes, even though the per capita cost per police officer declines with p

Although appealing to more refined tastes, art as a collection

Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2003, Sotheby's sold a Edgar Degas' bronze sculpture at an auction for a price of $10,311,500. Unfortunately for the previous owner, he had purchased it in 1999 at a price of $12,377,500. What was his annual rate of

Calculating Risk-Adjusted Performance Using Sharpe

See the attached file. 1. Consider the following three investments. Assume that T-bills yielded a constant 3 percent. Calculate the risk-adjusted performance of each of the funds, using the Sharpe measure. Year A B C 2003 5% 4% 6% 2004 0% 1 1 2005 5 4 10 2006 8 10 18 2007 5 5 7.

Mr. Darden sold his house for $165,000. He bought it for $55,000 nine years ago. What is the annual return on his investment? (Convert this problem into a present value yield, by using the table in the back of your text. Show all work/calculations/formulas)

Mr. Darden sold his house for $165,000. He bought it for $55,000 nine years ago. What is the annual return on his investment? (Convert this problem into a present value yield, by using the table in the back of your text. Show all work/calculations/formulas)

Leverage Ratios and EPS

Earnings per share (EPS) for Valcor, Inc. are $3 at a sales level of $2 Million. If Valcor's degree of operating leverage is 2.0 and its degree of combined leverage is 8.0, what will happen to EPS if operating income increases by 3 percent?

Evaluating financial health of two banks

A security analyst calculates the following ratios for two banks. How should the analyst evaluate the financial health of the two banks? Bank A Bank B ROE 22% 24% ROA 2% 1.5% Equity Multiplier 11X

Finance: Carl's Custum Candles Capacity Requirements

See the attached file. 1) Carl's Custom Candles manufactures small batches of candles for local retail shops. Carl has established a relationship with 3 local shops, and needs to determine how many candle making machines to purchase. Details of the customers' order requirements are shown below. Analyze Carl's capacity require

Finance Question

Your great aunt Matilda put some money in an account for you on the day you were born. This account pays 8% interest per year. On your 21st birthday the account balance was $5,033.83. The amount of money that your great aunt Matilda originally put in the account is closest to: A. $1,200 B. $800 C. $600 D. $1,000

Calculating Bank Fees on a Loan

You take a loan on $500,000 for 30 years at the annual nominal interest rate of 6% compounded monthly. The loan installments also have to be paid monthly. The bank's APR is 6.7%. What is the amount of the fees the bank is charging you?

Principles of Knowing Your Customer

?What are the general principles of KYC (Knowing your customer)? ?Who should be verified, and what is meant by low risk and high risk when it comes to customers and products? Discuss at least three low risk and three high risk characteristics or types of each. ?When should it be done and how? Include the different data s

Coca-Cola Company and PepsiCo Stock Comparison

See attached file. The CEO of your organization has asked your Learning Team to analyze the companies listed in Problem BYP13-4, of Financial Accounting: Tools for Business Decision Making. Resources: Problem BYP13-4 (Ch. 13) of Financial Accounting: Tools for Business Decision Making; and Section 4.2 (Ch. 4) of Communicat