Why, if you were a state government employee, would you prefer to participate in a defined benefit or a defined contribution pension plan? Explain the difference between the two types of plans in your answer

You have been pricing an MP3 player in several stores. Three stores have the identical price of $400. Each store charges 12 percent APR, has a 30-day grace period, and sends out bills on the first of the month. On further investigation, you find that store A calculates the finance charge by using the average daily balance method, store B uses the adjusted balance method, and store C uses the previous balance method. Assume you purchased the MP3 player on May 5 and made a $100 payment on June 15.

What will the finance charge for June be if you made your purchase from store A? From store B? From store C? (Do not round intermediate calculations. Round your answers to 2 decimal places

Finance charge

store A =

store B=

store C=

(Determining the outstanding balance of a​ loan) Ten years ago you took out a $ 250,000​, 20​-year mortgage with an annual interest rate of 12 percent and monthly payments of ​$2,752.72. What is the outstanding balance on your current loan if you just make the 120th ​payment?

​ (Present value of a perpetuity​)  What is the present value of a ​$4,500 perpetuity discounted back to the present at 14 ​percent?

The present value of the perpetuity is $(...)

Sam buys 100 shares of Acme stock at $100 per share on January 1, Year 1. At the end of the first year (December 31, Year 1), she buys 100 more shares at $120 per share. At the end of the second year (December 31, Year 2), she buys another 100 shares for $135 per share. The stock pays a dividend of $2.00 per share on December 29th of each year. Acme is trading at $169.80 as of December 31, Year 3. What is the time weighted return for Acme since January 1, Year 1 to today?

a. 21.00%.

b. 21.81%.

c. 23.21%.

d. 25.00%.

Problem 4-31
Non Annual Compounding

It is now January 1. You plan to make a total of 5 deposits of $500 each, one every 6 months, with the first payment being made today. The bank pays a nominal interest rate of 10% but uses semiannual compounding. You plan to leave the money in the bank for 10 years.

1. How much will be in your account after 10 years? Round your answer to the nearest cent.
   $  
   
2. You must make a payment of $1,658.29 in 10 years. To get the money for this payment, you will make 5 equal deposits, beginning today and for the following 4 quarters, in a bank that pays a nominal interest rate of 14% with quarterly compounding. How large must each of the 5 payments be? Round your answer to the nearest cent.
   $  

4.a. Explain the two causes of liquidity risk.

b. What are two ways a depository institution can offset the effects of asset - side liquidity risk such as the drawing down of a loan commitment?

c.What are the four measures of liquidity risk? Explain how each of them could be implemented and utilized and utilized by a depository institution.

Explain the two simple models to measure credit risk concentration in the loan portfolio : migration analysis and concentration limits.

Write a “bad news” memo to a group of employees in response to this scenario: You are the Human Resources Director at Natural Beauty Cosmetics, a manufacturer of multiple cosmetics lines sold across the globe. Your headquarters and manufacturing plant are in Syracuse, New York, and all told, the company employs 250 people. Many of your employees have degrees in chemistry and other product development fields. Over the past five years, your sales have declined by 6%, as your market has become more dominated by more inexpensive products from overseas. At best, your company projects sales to be flat over the next few years. Additionally, your company’s payments to provide health care for your employees have gone up by 18% since 2013. Until now, Natural Beauty Cosmetics has covered the entire cost of health care, but now your company has been forced to ask employees to pay 25% of their premiums. To explain these changes, your Assistant Director of HR, Marylou Masters will hold a meeting with affected employees at 4 p.m. on Wednesday, November 4 in Room 223 to discuss the new plan, answer any questions, and explain in detail which cost-cutting options, such as choosing a less expensive plan with higher deductibles, will be available. Asking employees to pay for their health care will have a number of benefits. It will help the company remain viable for the foreseeable future, and it will allow the company to keep everyone employed at the Syracuse headquarters. Everyone will still be able to keep his or her current level of medical coverage, and co-pays for any treatment will stay the same. Because this is a difficult decision, and you know that your most-talented employees may be tempted to look for work elsewhere, you are convinced that a face-to-face meeting will ensure that your employees choose the best option for themselves and their families. To make sure that everyone is aware of the meeting, your company will send this memo internally to all of the employees, informing them of the increase in premium payments as well as the meeting.

Question 2 A bank has $100 million of investment grade bonds with a duration of 8.0 years. This bank also has $500 million of commercial loans with a duration of 5.0 years. This bank has $300 million of consumer loans with a duration of 2.0 years. This bank has deposits of $600 million with a duration of 1.0 years and nondeposit borrowings of $100 million with an average duration of .25 years. What is this bank's duration gap? These are all of the assets and liabilities this bank has. A. This bank has a duration gap of 3.44 years B. This bank has a duration gap of 3.75 years C. This bank has a duration gap of 5.15 years D. This bank has a duration gap of 3.64 years E. This bank has a duration gap of 13.75 years

During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department. Mary Simpson who is an assistant to Leigh Jones, the financial vice president is asked to estimate Harry Davis’s cost of capital. Jones provides Simpson with the following data.

1. The firm’s tax rate is 40%.

2. The firm has 10% annual coupon bonds with 15 years remaining to maturity. The current price of the bond is $1, 096.26. The bond’s yield-to-maturity is 8.82%.

3. The firm’s balance sheet shows $100 million long-term debt and $300 million common equity.

Simpson estimates the market risk premium as the historical average return on stocks minus the current return on Treasury bonds and obtains a 15.4% of the cost of common stock based on the CAPM.

Simpson calculates the firm’s weighted average cost of capital (WACC) as follows:

Weight of long-term debt is .25 (=100/400)

Weight of common equity is .75 (=300/400)

WACC = .25 x 10% x (1 - .4) + .75 x 15.4% = 13.05%

1. Find problems inherent in Simpson’s WACC calculation.

2. What can you suggest to solve problems found in Question 1?

3. Simpson used the CAPM to estimate the cost of common stock. What can you propose to get the best estimate for the cost of common stock?

4. How confident can you be with the WACC based on solutions you suggested through the evaluative process in terms of the firm’s divisions and projects? What issues should be considered?

Corporate ownership varies around the world. Historically, individuals have owned the majority of shares in public corporations in the United States. In Canada this is also the case, but ownership is more often concentrated in the hands of a majority shareholder. In Germany and Japan, banks, other financial institutions, and large companies own most of the shares in public corporations. How do you think these ownership differences affect the severity of agency problems in different countries?

A _______ trading strategy involves taking a position in two or more options of the same type (i.e. two or more calls or two or more puts)