a. A 10-year 5% coupon bond has a yield of 8% and a duration of 7.85 years. If the bond yield increases by 60 basis points, what is the percentage change in the bond price?

b. Alpha Insurance Company is obligated to make payments of $2 million, $3 million, and $4 million at the end of the next three years, respectively. The market interest rate is 8% per annum.

i. Determine the duration of the company’s payment obligations.

ii. Suppose the company’s payment obligations are fully funded and immunized using both 6-month zero coupon bonds and perpetuities. Determine how much of each of these bonds the company will hold in the portfolio.

Explain the difference between public placement and private placement in investment banking. What are the advantages and disadvantages of each?

Regulators treat Tier I capital differently from Tier II capital? What is the difference and why are they treated differently?

Why is marking-to-market difficult for open-end mutual funds investing in international equities? What solution would you suggest?

Are financial institutions more risk averse since the crisis ? How do they manage risks ? Are they profitable from risk management ?

Edmond and Tina are a young couple. They are planning to invest in MTR. Currently, MTR has shares and bonds outstanding in the market. Advise them the difference between MTR shares and bonds.

Edward Lai and Teresa Tai have been married for 20 years and have a 16-year old son, Brian and a 10-year old daughter, Carmen. Teresa is a housewife since their marriage. The Lai family lives in a 576-square foot flat owned by Edward as sole owner. The flat is now worth $9 million. The outstanding mortgage on the flat is $3 million with a remaining term of 9 years.

Currently, Edward is confirmed to have a lung cancer. He wants to make a will to protect his family. Explain him what a valid will is and how it is important to him.

A gold-mining firm is concerned about short-term volatility in its revenues. Gold currently sells for $2,050 an ounce, but the price is extremely volatile and could fall as low as $1,950 or rise as high as $2,150 in the next month. The company will bring 1,350 ounces of gold to the market next month.

a. What will be the total revenues if the firm remains unhedged for gold prices of (i) $1,950, (ii) $2,050, and (iii) $2,150 an ounce?

b. The futures price of gold for delivery 1 month ahead is $2,070. What will be the firm’s total revenues if the firm enters into a 1-month futures contract to deliver 1,350 ounces of gold?

c. What will be the total revenues if the firm buys a 1-month put option to sell gold for $1,350 an ounce? The put option costs $47 per ounce.

Calculating Cycles
Consider the following financial statement information for the Hop Corporation:

Beginning Inventory $16,284
Beginning Accounts receivable 11,219
Beginning Accounts payable 13,960
Ending Inventory $19,108
Ending Accounts receivable 13,973
Ending Accounts payable 16,676
Net sales $219,320
Cost of goods sold 168,420

Calculate the operating and cash cycles. How do you interpret your answer?

Show all steps and formula. Don't round off calculations.

5.Jack needs $6100 in 6 years from today to buy a holiday. He invests $2500 today. Find the effective annual rate of interest that Jack needs to earn on this amount (as a %, 2 decimal places) in order to reach his goal.
(Solve using excel =RATE function; Answer in percentage to two decimals without the % sign e.g. 1.88

10.You have the alternative of paying for university fees today for a payment of $15,000 or, you can select a payment plan where you pay $8,000 in 6 months from today and another $12,000 in exactly 18 months from today. If the interest rate is 9.9%p.a. compounding monthly, what is the advantage that the payment plan has over the upfront payment?

Lockboxes and Collection Time
Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. Therefore, it is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by two days. Based on the following information, should the lockbox system be adopted?

Average number of payments per day 750
Average value of payment $570
Variable lockbox fee (per transaction) $0.18
Annual interest rate on money market securities 7%

How would your answer change if there were a fixed charge of $5,000 per year in addition to the variable charge?

Shows all the step and formula. Don't round off until you get the answer.

Please define basic tax terminologies and discuss the principlesof taxation. 500 Words
(Minimum)

Nielsen’s Fine Clothing Store

Please do this problem in excel.

You are the owner of a general retail-clothing store. Below is the income statement for last year which is not expected to change at all during the upcoming fiscal year. You have one full time manager, two three quarter time assistant managers and 3 part time clerks. You have had the manager and assistant managers for the past five years. Five years ago sales were only 350,000 dollars. As sales have increased you have added the part time clerks. You anticipate adding more clerks as sales increase in the future. You pay you credit card vendor 1 percent of sales. Bad debt expense and shrinkage are also estimated as a percentage of sales. The Mall common area payment must be paid regardless of how many sales you make

1. Please calculate the pretax breakeven point in sales dollars from the formula in the online lecture on breakeven analysis. Use the formula for breakeven sales dollars. Do not use the formula for breakeven in units. As part of this analysis list each expense item and identify whether it is a fixed or a variable expense. (20 points)

2. What happens to your breakeven point if your primary supplier of clothing raises prices 5%? You buy 45% of your clothing from this company. (10 points)

3. Your manager has received an offer of employment from a competitor. She would make 25% more than you are paying her now. If you match this offer, what is the impact upon your breakeven point (what will the new breakeven point be)? (10 points)

Please show the calculations with your answers.

Data for analysis.

First step: Determine which expense items are fixed and which are variable. I do not expect you to make the same assumptions I would make. You are graded on the application of the breakeven formula to the data as you have analyzed it.

Second Step: Calculate the breakeven sales using the formula in the online lecture.

Third Step: Do a “what if” analysis by changing the inputs (in problem 2 and 3) and recalculating the breakeven sales.

Revenues                                         $650,000

Expenses:                           

Managers’s Salaries & Benefits          25,000

Asst. Managers’ Wages                       35,000

Clerical Wages                                     29,000

Owner’s Salary                                    55,000

Rent (4% of gross revenue)                 13,000

Mall Common Area Payment             25,000

Phone Bill                                              5,000

Property Insurance                                7,000

Property Taxes                                      5,000

Office Supplies                                     2,000

Postage                                                     500

Equipment Expenses                             5,000

Shrinkage                                               4,000

Bad Debt Expense                               15,000

Credit Card Expense                              6.500

Wholesale Clothing Purchases           380,000

                                                         ---------------

Total Expenses                                    612,000

Net Operating Income                           38,000               

6. A nominal annual rate which indicates a compounding frequency:

Select one:

A. Allows us to determine the effective rate for any smaller period less than a year, by simply dividing the annual rate by the number of those smaller periods that occur in a year.

B. Allows us to determine the effective rate for the period that matches the compounding frequency, by dividing the annual rate by the number of times interest compounds in a year.

C. Makes it impossible to determine the effective rate for periods smaller than a year.

D. Only allows us to determine the effective annual rate but not effective rates for smaller periods.

7. Which of the following is CORRECT? When discounting an amount to be received in one years' time at a rate that is quoted as 12% compounding quarterly, we can:

Select one:

A. Discount the amount using an effective monthly rate of 1% where the number of periods is 12.

B. Discount the amount using an effective annual rate (EAR) of (1+0.01)^12-1 =12.6825% where number of periods is 1.

C. Discount the amount using the annual rate of 12% where number of periods is 1.

D. Discount the amount using the effective quarterly rate of 3% where the number of discount periods is 4.

8.You invest in your savings account $2365 today, $2000 at the end of year one and $3900 at the end of year three. If the interest rate is 6.1% per annum, compounded annually, then the amount you will have in exactly three years is closest to:

Select one:

a. $8976.17

b. $8754.34

c. $9214.07

d. $8846.73

9.Jack deposits the following amounts in a savings plan which pays 9.6% per annum, compounded monthly:

• $2853 today,
• $1400 at the end of year two and
• $2000 at the end of year three.

The amount he will have in exactly 3 years is closest to:

Select one:

a. $7495.90

b. $7290.47

c. $7341.33

d. $6994.73

11.Jack sells his lawn-mowing business for $50,000 but the buyer wants to pay for it in two cash payments: $25,000 in two months from today and the balance in 1 year from today. How much will Jack need to receive as the final payment (in 12 months) if the interest rate he charges is 6% per annum compounding monthly?

Select one:

A. $25,584.91

B. $25,248.14

C. $27,446.42

D. $26,805.39

13.You owe your parents $40,000 (in present day dollars) and want to repay them in equal amounts the first to occur in 4 years from today and the other in 6 years from today. If the interest rate is 4.8% per annum compounding monthly, what will be the amount of each repayment?

Select one:

A. $25,383.68

B. $21,000.00

C. $25,255.69

D. $24,956.22

15. An advertised investment product promises to pay $597 per month for 51 months commencing in 1 month from today. If the investment earns 8.0% p.a compounding monthly, how much will the investment product cost today? (round to nearest cent; don’t use $ sign or commas)

Select one:

a. $2248.42

b. $25739.01

c. $2081.87

d. $25910.60

17. A bank offers personal loans at 12.7%p.a compounding monthly. The effective annual rate of interest (EAR) is ( to the nearest two decimal places):

Select one:

a. 1.06%

b. 13.32%

c. 13.10%

d. 13.47%

does Jordan have rules for making sure that analysts are separated from investment banking activities and that any conflicts of interests that analysts may have are fully disclosed??