5. Along with investment banks, hedge funds have figured prominently in the commentary that has been written on the GFC. With reference to the types of strategies that hedge funds may use, outline some of the reasons why hedge funds may have attracted criticism during and after the crisis. (LO 3.7)

4. A friend has suggested that you should consider investing in an equity hedge fund because the fund may achieve returns higher than the share market. (LO 3.6) (a) Describe how a hedge fund is structured, including the manager, investors and types of investment (b) Explain how a hedge fund may use leverage strategies to achieve higher returns. Give an example.

5. The Basel II capital accord comprises a framework of three pillars. Pillar 1 established the minimum capital required by a commercial bank and incorporates three risk components: credit risk, operational risk and market risk. (a) Define credit risk. (b) Using the standardized approach to credit risk, explain how a commercial bank will use this method to calculate its minimum capital requirement.

Suppose that you are planning for retirement. You want to have exactly $4 million dollars when you retire. You just turned 26 and plan to retire on your 65^th birthday. For the next 15 years, you can save $10,000 per year (with the first deposit being made one year from now), and at the end of that time (t=15) you plan to buy a car for your child as a gift that will cost $50,000.   How much will you have to save each year in years 16 until retirement so that you meet your retirement goal? Assume the discount rate is 10 percent per year.

The cost of debt   Gronseth Drywall​ Systems, Inc., is in discussions with its investment bankers regarding the issuance of new bonds. The investment banker has informed the firm that different maturities will carry different coupon rates and sell at different prices. The firm must choose among several alternatives. In each​ case, the bonds will have a ​$1 comma 000 par value and flotation costs will be ​$40 per bond. The company is taxed at 28 ​%. Use the approximation formula to calculate the ​after-tax cost of financing with the following alternative.  ​(Click on the icon located on the​ top-right corner of the data table below in order to copy its contents into a​ spreadsheet.) Coupon rate Time to maturity Premium or discount 8 ​% 10 years negative $ 250 The​ after-tax cost of financing using the approximation formula is nothing ​%. ​(Round to two decimal​ places.)

4. Bank regulators impose minimum capital adequacy standards on commercial banks. (a) Briefly explain the main functions of capital. (b) Identify and define the different types of acceptable capital under the Basel II.

please answer all questions and explain in detail and do not give the definition.

Explain the importance of "environmental scanning" when making marketing plans

Allison is the manager of the sales department of a medium sized household products company. She’s begun to notice that Dave, a member of the team, has been turning in his reports late and that the quality of the reports has declined. She decides to call him into her office to discuss the issue. How might she use the description, specific and problem-oriented elementals of supportive communication to guide this discussion?

PLEASE ANSWER F&G :) THANK YOU!!

4.    Suppose we have one risky asset Stock I and a risk-free asset. Stock I has an expected return of 25% and a beta of 2. The risk-free asset’s return is 6%.   

a. Calculate the expected returns and betas on portfolios with x% invested in Stock I and the rest invested in the risk-free asset, where x% = 0%, 25%, 75%, 100%, 125%, and 150%.

b. What reward-to-risk ratio does Stock I offer? How do you interpret this ratio?

c.   Suppose we have a second risky asset, Stock J. Stock J has an expected return of 20% and a beta of 1.7. Calculate the expected returns and betas on portfolios with x% invested in Stock J and the rest invested in the risk-free asset, where x% = 0%, 25%, 75%, 100%, 125%, and 150%.   

d. What reward-to-risk ratio does Stock J offer? How do you interpret this ratio?

e. Plot the portfolio betas against the portfolio expected returns for Stock I on a graph, and link all the points together with a line. Then plot the portfolio betas against the portfolio expected returns for Stock J on the same graph, and link all these points together with another line. (This can be done easily with the charting function in Microsoft Excel.)   

f.   Use the graph in part (e) above, together with your answers to parts (b) and (d) above to explain why Stock J is an inferior investment to Stock I.                

g. Can a situation in which one stock is inferior to another stock persist in a well-organized, active market? Why or why not?                                        

Broussard Skateboard's sales are expected to increase by 25% from $8.6 million in 2016 to $10.75 million in 2017. Its assets totaled $4 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 55%. What would be the additional funds needed? Do not round intermediate calculations. Round your answer to the nearest dollar.

Broussard Skateboard's sales are expected to increase by 20% from $8.4 million in 2016 to $10.08 million in 2017. Its assets totaled $5 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 3%. Assume that the company pays no dividends. Under these assumptions, what would be the additional funds needed for the coming year? Do not round intermediate calculations. Round your answer to the nearest dollar.

Identify one bond that is issued by any company you might have heard of. Write down the type of bond, coupon, par value of that bond. see if you can also find the rating of that bond

An analysis of company performance using DuPont analysis

Walking down the hall of your office building with a sheaf of papers in his hand, your friend and colleague, Akira, stepped into your office and asked the following.

AKIRA: Do you have 10 or 15 minutes that you can spare?

YOU: Sure, I’ve got a meeting in an hour, but I don’t want to start something new and then be interrupted by the meeting, so how can I help?

AKIRA: I’ve been reviewing the company’s financial statements and looking for general ways to improve our performance, in general, and the company’s return on equity, or ROE, in particular. Emma, my new team leader, suggested that I start by using a DuPont analysis, and I’d like to run my numbers and conclusions by you, to see if I’ve missed anything.

Here are the balance sheet and income statement data that Emma gave me, and here are my notes with my calculations. Could you start by making sure that my numbers are correct?

YOU: Give me a minute to look at these financial statements and to remember what I know about the DuPont analysis.

If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the ???????????? , the total asset turnover ratio, and the ????????????????? .

And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratios provide insights into the company’s ?????????????? , effectiveness in using the company’s assets, and ???????????????? .

Now, let’s see your notes with your ratios, and then we can talk about possible strategies that will improve the ratios. In the dropdown lists next to your values I’m going to select correct if your calculation is correct and incorrect if your calculation is incorrect.

AKIRA: OK, it looks like I’ve got a couple of incorrect values, so show me your calculations, and then we can talk strategies for improvement.

YOU: I’ve just made rough calculations, so let me complete this table by inputting the components of each ratio and its value:

Note: Do not round intermediate calculations. Round final answers to the nearest whole number.

AKIRA: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Emma would have been very disappointed in me if I had showed her my original work.

So, now let’s switch topics and identify general strategies that could be used to positively affect Canis Major’s ROE.

YOU: OK, so given your knowledge of the component ratios used in the DuPont equation, which of the following strategies should improve the company’s ROE?

Check all that apply.

A) Increase the interest rate on its notes payable or long-term debt obligations because it will reduce the company’s net profit margin.

B) Increase the efficiency of its assets so that it generates more sales with each dollar of asset investment and increases the company’s total asset turnover.

C) Increase the firm’s bottom-line profitability for the same volume of sales, which will increase the company’s net profit margin.

D) Use more debt financing in its capital structure and increase the equity multiplier.

AKIRA: I think I understand now. Thanks for taking the time to go over this with me, and let me know when I can return the favor.

Citibank gives you the following information:

Spot exchange rate (AUD/EUR) = 1.42

One-month forward exchange rate (AUD/EUR) = 1.45

One-month domestic interest rate (in Australia) = 6.5% p.a.

One-month foreign interest rate (in Germany) = 4.5% p.a.

(a) Is there any violation of the CIP? Why or why not?

(b) Is the AUD selling at a premium or discount against the EUR? By how much?

(c) Suggest a value for the forward rate which is consistent with CIP.

(d) Based on the given information, due to expect the EUR to appreciate or depreciate against the AUD over the next month? Why?

2. ANZ bank is quoting the following exchange rates against the New Zealand dollar (NZD) for the Danish Krone (DKK) and the South African Rand (ZAR):

DKK/NZD = 4.23 - 42

ZAR/NZD = 9.60 - 95

A South African firm asks the ANZ bank for a ZAR/DKK quote. What rates (bid and ask) would the bank quote? Explain how you arrive at your answer.

3. Suppose that the Reserve Bank of India suddenly increases the domestic money supply. This policy change is expected to be permanent by the market. Assume the Indian rupee (INR) to be the home currency and the USD to be the foreign currency.

(a) Explain with the help of the money market and FOREX market diagrams, what happens to the interest rate and exchange rate in the short-run? In your graphs, clearly label the axes, curves and equilibrium points.

(b) Explain what happens to the interest rate and exchange rate in the long-run. In your graphs, clearly label the axes, curves and equilibrium points.

(c) Explain how the economy transitions from the short-run equilibrium to the long-run equilibrium.

4. As of November 1, 2017, the nominal exchange rate between the Brazilian real and the U.S. dollar is BRL1.95/USD. The consensus forecast for the U.S. and Brazil inflation rates for the next 1-year period is 2.6% and 20.0%, respectively. Assume UIP and relative PPP holds.

(a) What would you forecast the nominal exchange rate to be at around November 1, 2018?

(b) If the U.S. interest rate on bonds with one-year to maturity is 4%, what would you expect the interest rate for a Brazilian bond with one-year to maturity to be?

rev: 09_18_2012, 04_09_2016_QC_CS-48481