Demonstrate an awareness of the variety of financial instruments. Examine the role of the financial system in the economy and the rationale for financial intermediation.

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THE ROLE OF MONETARY POLICY IN FINANCIAL STABILITY

  • Demonstrate an awareness of the variety of financial instruments.
  • Examine the role of the financial system in the economy and the rationale for financial intermediation.

Assignment Question:   (10 Marks)

Students must use proper references to justify their assignment work.  

Assignment 2 is a Mini Project.

There is a topic “THE ROLE OF MONETARY POLICY IN FINANCIAL STABILITY” You have to select any country to explain how monetary policy helped country to stabilize financial system after a financial crisis.

 

Write your answer by following these headings:

  1. The functions of monetary policy (In general)(2marks)
  2. Role of monetary policy in financial stability (In general)(2marks)
  3. Describe the reasons for its financial crisis (about your selected country)(2marks)
  4. Impact of financial crisis on economy (about your selected country)(2marks)

How monetary policy contributed in stabilizing economy (about your selected country)

 

Describe the industry standard for attire in the Finance sector. What is your impression of this student and why? Do you hire this individual over others? Why?

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White Papers

Imagine you are the hiring manager for a Fortune 500 company in the Finance sector. Getting hired to this company is a very competitive endeavor. A candidate arrives for their interview with multiple piercings, hair that is dyed blue, visible tattoos, and casual attire. The student is in their senior year, maintains a 3.9 G.P.A. and participates in a number of school activities.

1) Describe the industry standard for attire in the Finance sector.

2) What is your impression of this student and why?

3) Do you hire this individual over others? Why?

4) Attire is changing in many industries. Why do you think this is so?

 

Should you buy or lease the car? What break-even resale price in four years would make you indifferent between buying and leasing? Construct a loan amortization table for the car loan.

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Answer all the following questions. must show all your work. If you use Excel to solve the problems, submit the actual spreadsheet. Do not cut and paste your spreadsheet into Word.

HIT IT FAR GOLF CORPORATION

2020 and 2021 Balance Sheets
Assets Liabilities and Owners’ Equity
  2020 2021   2020 2021
Current assets     Current liabilities    
Cash $12,157 $14,105 Accounts payable $46,382 $49,276
Accounts receivable $29,382 $32,815 Notes payable $18,246 $19,784
Inventory $54,632 $57,204 Total $64,628 $69,060
Total $96,171 $104,124 Long-term debt $49,000 $45,000
      Owners’ equity    
Fixed assets     Common stock & paid-in surplus $50,000 $50,000
Net plant & equipment $367,241 $375,830 Accumulated retained earnings $299,784 $315,894
      Total $349,784 $365,894
Total assets $463,412 $479,954 Total liabilities and owners’ equity $463,412 $479,954

Prepare the 2020 and 2021 common-size balance sheets for Hit it Far Golf.

Based on the balance sheets given for Hit it Far Golf, calculate the following financial ratios for each year:

  • a Current ratio.
  • b Quick ratio.
  • c Cash ratio.
  • d NWC to total assets ratio
  • e Debt-equity ratio and equity multiplier.
  • f Total debt ratio and long-term debt ratio.

Your investment adviser offers you two different investments. Plan A is an annual perpetuity of $35,000 per year. Plan B is an annuity for 15 years and an annual payment of $47,000. Both plans will make their first payment one year from today. At what discount rate would you be indifferent between these two plans?

It’s your birthday and you’ve decided that you should start saving for retirement. Your goal is to work 35 years and spend 25 years in retirement. You would like to have $300,000 a year in income during your retirement years. Assume that the interest rate is 7% and that you will not take your first withdraw until one year after you retire.

If you start saving one year from today, how much do you need to save each year in equal amounts?

Suppose you just inherited a large sum of money and you’ve decided to make one large deposit today. How much do you need to deposit to reach your goal?

Suppose your employer will contribute $1,500 to the account each year as part of a profit-sharing plan. You will also receive $50,000/year from a trust 20 years from now. How much do you need to save each year to reach you goal?

A 25-year bond was issued 7 years ago. The bond has a coupon rate of 7% matures and is selling for 98.50% of its par value. Assume that interest is paid semiannually. Find the yield to maturity for the bond.

After deciding to buy a new car, you can either lease the car or purchase it on a four-year loan. The car you wish to buy costs $38,000. The dealer has a special leasing arrangement where you pay $3,800 today and $350 per month for the next four years. If you purchase the car, you will pay it off in monthly payments over the next four years at an APR of 6.5 percent. You believe you will be able to sell the car for $26,500 in four years.

Should you buy or lease the car?

What break-even resale price in four years would make you indifferent between buying and leasing?

Construct a loan amortization table for the car loan.

 

What are the two project’s net present values, assuming the cost of capital is 5%? 10%? 15%? What are the two projects’ IRRs at these same costs of capital?

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The value of proposed investments projects

Assess the value of proposed investment projects.

Investment Project Value

This competency assessment addresses assessing the value of investment projects. The Arbitrage Pricing Theory helps calculate required stock returns considering a number of factors. In this Assignment, you will apply Arbitrage Pricing Theory to a business scenario.

Prepare this Assignment as a Word document. List each question followed by your answer.

Complete problem: Cost of Equity-CAPM

XYZ, Inc. has a beta of 0.8. The yield on a 3-month T-bill is 5%, and the yield on a 10-year T-bond is 7%. The market risk premium is 5.5%, and the return on an average stock in the market last year was 20%. What is the estimated cost of common equity using the CAPM? Show your work.
Complete problems: NPV, IRR, MIRR, Profitability Index, Payback, Discounted Payback

A project has an initial cost of $60,000, expected net cash inflows of $10,000 per year for 8 years, and a cost of capital of 12%. Show your work.
What is the project’s NPV? (Hint: Begin by constructing a timeline).
What is the project’s IRR?
What is the project’s MIRR?
What is the project’s PI?
What is the project’s payback period?
What is the project’s discounted payback period?
Your division is considering two investment projects, each of which requires an up-front expenditure of 20 million. You estimate that the investment will produce the following net cash flows:
Year Project A Project B

1 $5,000,000 $20,000,000

2 10,000,000 10,000,000

3 20,000,000 6,000,000

What are the two project’s net present values, assuming the cost of capital is 5%? 10%? 15%?
What are the two projects’ IRRs at these same costs of capital?
Show your work.

Prepare this Assignment responding to the problems as an Excel® or Microsoft® Word®, showing all necessary formulas and steps. List each question, followed by your answer. Please submit this Assignment through the Dropbox.

The Module 3 Competency Assessment has 3 parts:

Part 1 Analyze the discounted cash flow approach

Calculate cost of equity using CAPM

Part 2 Apply the NPV equations of an investment to project its NPV

Calculate a project’s NPV
Calculate a project’s discounted payback period
Calculate a project’s IRR

Part 3 Estimate an investments Net Present Values

Demonstrate a project’s NPV assuming cost of capital at different percentages

If you want to accumulate $500,000 in 20 years, how much do you need to deposit today that pays an interest rate of 15%? What is the future value if you plan to invest $200,000 for 5 years and the interest rate is 5%?

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The purpose of this assignment is to allow the student to calculate the project cash flow using net present value (NPV), internal rate of return (IRR), and the payback methods.

Assignment Steps

Resources: Corporate Finance

Create a 350-word memo to management including the following:

  • Describe the use of internal rate of return (IRR), net present value (NPV), and the payback method in evaluating project cash flows.
  • Describe the advantages and disadvantages of each method.

Calculate the following time value of money problems:

  1. If you want to accumulate $500,000 in 20 years, how much do you need to deposit today that pays an interest rate of 15%?
  2. What is the future value if you plan to invest $200,000 for 5 years and the interest rate is 5%?
  3. What is the interest rate for an initial investment of $100,000 to grow to $300,000 in 10 years?
  4. If your company purchases an annuity that will pay $50,000/year for 10 years at a 11% discount rate, what is the value of the annuity on the purchase date if the first annuity payment is made on the date of purchase?
  5. What is the rate of return required to accumulate $400,000 if you invest $10,000 per year for 20 years. Assume all payments are made at the end of the period.

Calculate the project cash flow generated for Project A and Project B using the NPV method.

  • Which project would you select, and why?
  • Which project would you select under the payback method? The discount rate is 10% for both projects.
  • Use Microsoft® Excel® to prepare your answer.
  • Note that a similar problem is in the textbook in Section 5.1.

Sample Template for Project A and Project B:

 

What are the different types of risks the banks and other financial institutions are exposed to? What are the Asset-Liability Management Strategies? Explain.

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Assignment Questions [10 Marks

  1. What are the different types of risks the banks and other financial institutions are exposed to?    [2 Marks]
  2. What are the Asset-Liability Management Strategies? Explain. [2 Marks]
  3. Explain the loanable fund theory of Interest Rate Determination. [2 Marks]
  4. What are the different types of derivatives? Take an example and explain Interest rate swaps.    [2 Marks]
  5. Calculate the interest-sensitive GAP (IS GAP) and Relative IS GAP ratio for a financial institution if interest-sensitive assets (ISA) are $100 million and interest-sensitive liabilities (ISL) are $125 million. Is that firm an Asset sensitive? Explain.[2 Marks]

 

What are the alternative maturity strategies for managing Investment Portfolios? What are the key banking services under lifeline banking for low-income individuals?

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Banking products

What are the alternative maturity strategies for managing Investment Portfolios? [2Marks]

What are the key banking services under lifeline banking for low-income individuals? [2Marks]

Explain non-deposit sources of funds. [3Marks]

Suppose a banking company decides to add insurance services to its existing products menu It expects to earn a 15 percent average return from sales of its traditional banking products and a 25 percent return from selling or underwriting insurance services. These two service lines are equally risky in the variance of their cash flows (with a standard deviation of about 5 percent each). The banking firm expects to receive 40 percent of its revenues from insurance sales and 60 percent from sales of traditional banking products. Calculate the bank’s overall return from sales of traditional and non-traditional products in this case. [3Marks]

 

Write an essay explaining factors contributing to increase in forclosure in the residential property market in UK.

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Increase in forclosure in the residential property market in UK

Write an essay explaining factors contributing to increase in forclosure in the residential property market in UK.

Describe the three alternative strategies that Parkinson is considering, and evaluate each with respect to their level of market risk and credit risk. Interpret their correlations with the S&P 500 and the Lehman Government/Corporate Bond indices as presented in the table above.

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Direct versus indirect investment in real estate

  1. Compare the relative liquidity characteristics of direct versus indirect investment in real estate. Discuss three factors that affect the liquidity of both forms of investment.

Q.2. Ian Parkinson, as chief pension officer of a large defined-benefit plan, is considering presenting a recommendation that the pension plan make its first investments in three different types of hedge funds: 1) market neutral, 2) convertible arbitrage, and 3) global macro.

 

An analyst who works for Parkinson comes by with the table given below and makes the following comment: “The returns for global macro are very impressive. In fact, there are other strategies that have significantly outperformed the S&P 500, equity market-neutral, and convertible arbitrage over the past 15 years. I think that, based on their returns, we should focus specifically on the other strategies.”

 

  1. Describe the three alternative strategies that Parkinson is considering, and evaluate each with respect to their level of market risk and credit risk. Interpret their correlations with the S&P 500 and the Lehman Government/Corporate Bond indices as presented in the table above.
  2. Critique the analyst’s statement.

Q.3. Discuss the construction and interpretation of benchmarks, including biases, in alternative investment groups.

 

Q.4. Roger Guidry, CIO of a university endowment fund, is reviewing investment data related to the endowment’s investment in energy commodities.

  1. Calculate the roll yield for Year 1.
  2. Calculate the collateral yield for Year 2.

Guidry notes that the collateral yield is positive in both scenarios, although the GSCI total annual return for Year 2 is -30.5 percent. He asks for an explanation with regard to the positive collateral yield.

  1. Justify the positive collateral yield by discussing the concepts of margin and implied yield.

A consultant tells Guidry: “Commodities exhibit positive event risk.”

  1. Justify the consultant’s statement by discussing the relationship between commodity prices and event risk.

 

Provide students with an understanding of how financial and non-financial corporations can identify, quantify and manage risks. Provide an understanding of how corporate management may contribute to increasing shareholder wealth.

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Financial Risk Management

INTENDED LEARNING OUTCOMES
1. Critically evaluate the advanced concepts and procedures of financial risk management;
2. Critically evaluate and quantify financial risk;
3. Identify and apply practical and theoretical concepts to the management of financial risk in a business environment.

AIMS OF THE MODULE
The module aims to:
1. Provide students with an understanding of how financial and non-financial corporations can identify, quantify and manage risks.
2. Provide an understanding of how corporate management may contribute to increasing shareholder wealth.
3. Examine the characteristics of the four major derivative instruments: forwards, futures, options and swaps and consider how their value is determined and how they may be used to manage financial risk.

ASSIGNMENT DECRIPTION
Have a look at the charts below:
1) Discuss how the ECB and the FED are coping with the surge of inflation.

2) Suppose you were a fixed income trader. Choose 3 Italian Government bonds with maturities equal to 5, 10 and 20 years respectively and compute their Duration and Convexity. Please quantify the impact of the foregoing monetary policy choices on your portfolio (for simplicity, assume a parallel shift in the yield curve). Do not forget to provide with a detailed overview of the relationship between bond prices and interest rate levels.

3) Discuss the impact of the monetary tightening on the EUR/USD exchange rate.

4) Suppose you were a trader, how would hedge your portfolio against FX risk using options? Do not forget to provide with both a theoretical discussion and a quantitative realistic example of the resulting payoff profile.