Challenge question I. Michael is shopping for a special automobile. He finds the exact car he​ wants, a 1966 dark blue Pontiac GTO. This car is currently the property of a​ neighbor, so to buy it for the​ agreed-upon price of ​$40,000​, Michael must secure his own financing. He visits four different financial institutions and gets the following available​ loans:

Bank​ 1:  60 monthly payments of ​$782.65

Bank​ 2:  72 monthly payments of ​$667.65

Bank​ 3:  208 weekly payments of ​$219.56  ​(Assume a​ 52-week year.)

Bank​ 4:  12 quarterly payments of $3,667.20

Which loan should Michael​ take?  ​Hint:  Which loan has the lowest​ EAR?

1. If Michael selects Bank 1 for the​ loan, what is the periodic interest rate on the​ loan?

______​% ​(Round to four decimal​ places.)

2. If Michael selects Bank 1 for the​ loan, what is the EAR on the​ loan?

____​% ​(Round to two decimal​ places.)

3. If Michael selects Bank 2 for the​ loan, what is the periodic interest rate on the​ loan?

___​% ​(Round to four decimal​ places.)

4. If Michael selects Bank 2 for the​ loan, what is the EAR on the​ loan?

____​% ​(Round to two decimal​ places.)

5. If Michael selects Bank 3 for the​ loan, what is the periodic interest rate on the​ loan?

___​% ​(Round to four decimal​ places.)

6. If Michael selects Bank 3 for the​ loan, what is the EAR on the​ loan?

___​% ​(Round to two decimal​ places.)

7. If Michael selects Bank 4 for the​ loan, what is the periodic interest rate on the​ loan?

___​% ​(Round to four decimal​ places.)

8. If Michael selects Bank 4 for the​ loan, what is the EAR on the​ loan?

___​% ​(Round to two decimal​ places.)

9. Which loan should Michael​ take?  ​(Choose the best​ response.)

Bank 3

Bank 4

Bank 2

Bank 1

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.6%. The probability distributions of the risky funds are:

The correlation between the fund returns is 0.0600. What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

D0= $2, rs =13%, the growth rate of dividend, gL= 5%

Estimate the intrinsic stock value, (P_0 ) ̂, and then the Dividend Yield (Yd) and Capital Gain Yield (CGY) from above data

Estimate the expected or intrinsic stock price today, (P_0 ) ̂, if non-constant growth of dividend is 30% for year 0 to year 1, 20% for year 1 to year 2, 10% for year 2 to year 3; the growth rate of dividend is constant, gL= 5% after year 3; D0 = $2; Rs =13%.

*please show work and formulas used

Describe how principles differ from characteristics/qualities of information, and how does this relate to sustainability?

How is actual cause different from proximate and probable cause?

The Course Project requires you to act as consultants for a fast food chain and develop a new food product. Your competitor has just launched a new campaign introducing Junior and Grand sizes to their already famous and successful hamburger and is drawing sales away from your client. Time is of the essence, yet you do not want to over-react and make a costly mistake. You will need to be innovative and capitalize not only on your client’s success, but also focus on how to bring back lost revenue and launch a strong marketing campaign. Your market research and product launch strategy will be described both in a written paper as well as presentation of your recommendations to the class.

1. Complete product/service description, including the type of innovation represented, and the source for the idea.

2. Product/service offering and a description of benefits that customers will both recognize and realize

3. Competitive analysis

"Points awarded for description of the innovation of the new competitive product and how it will compete in the marketplace. Product offering and a description of benefits customers will realize over that of your client’s competitor. In short, how will your new innovative food product increase sales for your client and as well as win back sales from your client’s competitor. Include in this section an identification of competitor products and specific customer benefits. The material in this assignment covers sections 4-6 listed in the outline above."

Explain how materiality and audit procedures to gather evidence are important in planning an audit.

1. If the proper goal of a finance manager is to maximise shareholder wealth how does managing the agency problem contribute to this goal? Discuss whether you believe purely financial incentives are enough to manage the agency problem?     

You would like to speculate on a rise in the price of a certain stock. The current stock price is $40 and a three-month call with a strike price of $42 costs $2.50. You have $5,000 to invest. Identify two alternative strategies. Outline the advantages and disadvantages of each.

Suppose it is September and a speculator consider that a stock is likely to decrease in value over the next three months. The stock price is currently $100, and a three-month put option with a strike price of $99 is currently selling for $5.00 per share. • create a table which compares selling short 2000 shares of stock and buying a put option written on 2000 shares of stock. Use December stock prices of $85 and $115.

Create a statement of operation for Chester Springs Hospital

Note: Not all of the givens may be used.

Givens (in '000s) For the Year Ended September 30, 20x1

Bad debt expense                                                                                                     $10,200

Cash                                                                                                                          $14,300

Net patient revenues                                                                                              $198,700

Net accounts receivable                                                                                           $26,400

Wages payable                                                                                                         $10,500

Inventory                                                                                                                     $3,800

Long-term debt                                                                                                         $27,000

Supply expense                                                                                                         $25,000

Gross plant, property, and equipment                                                                   $130,000

Parking revenue                                                                                                         $1,200

Depreciation expense                                                                                               $11,300

General expense                                                                                                       $48,000

Taxes                                                                                                                        ($1,400)

Accounts payable                                                                                                        $4,800

Interest expense                                                                                                         $1,400

Labor expense                                                                                                          $93,000

Accumulated depreciation                                                                                       $40,000

Long-term investments                                                                                          $104,800

If the focus of senior executives in corporations is to maximise shareholder wealth, discuss the following two “unresolved issues” in finance today and how they may contribute to reducing shareholder wealth:
a) What risks should firms take?   
b) Pay-out policies – the trade-off between dividends and growth.

You are trying to allocate your assets into a risky portfolio and the purchase of a risk free asset with a return of 2%. You use the following data to estimate information about the risky portfolio:

If you have a risk-aversion factor of 2.5, what percentage of your total portfolio should be in the risky portfolio?

1. What is meant by an agency cost or agency problem as it relates to corporate finance? Name and discuss any two mechanisms Boards of Directors use to control or minimise agency costs or the agency problem?