Structured Product Explanation

Find a derivative or structured product from any issuer and explain it in plain English. Having done so, state the problems you may have encountered in conveying the features to a client.

The successful submission will clearly and concisely explain the product in a manner appropriate for a retail client who is intelligent but not experienced with investments.

FINANCIAL ANALYSIS
The extracts of the financial statements of Micanfin Auto Spares (Pvt) Limited for 2017 are provided
below:
Extract of the Statement of Comprehensive Income for the year ended 31 December 2017.
Sales (credit) 1 288 000
Less cost of sales 650 000
Gross profit 638 000
Less Operating expenses 360 000
Operating profit 278 000
Less interest expense 70 000
Profit before tax 208 000
Profit after tax 180 000
Extract of Statement of Financial Position as at 31 December 2017.
Non-current assets 1 140 000
Inventories 266 000
Debtors 300 000
Bank 220 000
Total assets 1 926 000
Ordinary share capital 1 000 000
Retained earnings 482 000
Non-current liabilities 240 000
Creditors 215 000
Total liabilities 1 926 000
Required:
Calculate the following ratios for 2017. Where applicable, answers must be rounded off to two decimal places.
Profit margin
Interest cover
Debtors collection period
Current ratio
Acid test ratio
Return on own capital

16-11

Mercury Air’s debt consists of $50,000 in accounts payable, $100,000 in 10 percent notes payable. And $240,000 in 8 percent bonds. Mercury has no preferred stock. If its marginal tax rate is 35 percent, what is Mercury’s financial breakeven point?

16-14

Stumpy’s Gator Farm forecasts that its net income will be $46,800 this year. The firm’s marginal tax rate is 35 percent, and it must pay $36,000 interest on outstanding debt. Stumpy’s has no preferred stock. What is the firm’s degree of financial leverage (DFL)?

There are a senior manager at Zambia Airways and have been authorized to spend up to K400,000 FOR THE PROJECTS. The three projects you are considering have the fillowing characterics;

Assume the corporate discount rate is 10%, please offer your recommedations by ranking the projects, backed by your analysis using:

a) Net Present Value

b) Profitabilty Index

c) payback period

d) Chritique the flaws of each technique

What is an annual report? What are some of the things it contains beyond the financial statements? What can it be used for? Why is the "notes" section of the annual report so critically important?

Three government bons are in issue, bonds A, B and C each bond has a par value of K100 and is redeemable at the par value. The following additional information ia available in respect of each bond.

Bond Maturity term Annual coupon rate Price

Bond A 1 year 3.5% K99.90

Bond B 2 years 3.75% K98.75

Bond C 3 Years 3.80 % K97.80

a) by bootstrapping the above coupon paying bonds, estimate the one year , two year and three year spot rates and state the shape of the resulting spot yield curve.

b) Calculate the yield to maturity of each of the bond B and C and discuss the relationships between the spot rates and yields to maturity for both bonds.

Caffieneland is a small country in Central America. The main product of the country is coffee, which is currently priced at $1.20 per cup. Inflation is expected to be 3% per year, and the nominal interest rate is 10% per year.

a. Calculate the real interest rate.

b. Suppose you wanted to borrow 1000 cups of coffee now, and pay back the loan next year. How many cups of coffee would you owe? What is the interest rate for this coffee loan? Hint: Borrow money now and use it to buy coffee at the current price. Then calculate how much you owe in dollars next year. Use next year’s coffee price to determine how much you owed in terms of “cups of coffee.”

c. Juan Valdez, a brilliant local scientist, has invented a coffee replicator. The replicator works as follows: At time 0, you insert 1,000 cups of coffee. These cups are consumed by the machine, that is you have to ‘invest 1,000 cups now to make the replicator operate. Then, for each of the next five years, the replicator produces 300 cups of coffee. You get 300 cups at time 1, another 300 cups at time 2, and so on. After five years the replicator is used up. Calculate the PV of the replicator in terms of dollars.

d. Now calculate the PV of the replicator in terms of coffee. Hint: Use cups of coffee as your currency. Make a Coffee-Flow diagram and then calculate the PV. Be sure to use the coffee interest rate in your PV calculations. e. Convert the PV in terms of coffee from part d into dollars. Multiply the answer from d by the current price of coffee.

show work please!

3-1 Looking back on 4 March 2008 when the interest rate was set at 7.25% by RBA (Reserve Bank Australia), however since then RBA gradually reduced the interest rate to its lowest 1% on 3 July 2019. Present an overview on the expectations or motivations behind such interest rate cut by RBA? (summary)

[Note: In the early 1990s the interest rate was 17.5%, you don’t need to go back such distant past, your analysis should focus between 2008 to 2019]

3-2 Identify the possible impact of interest rate cut on investments in the capital market in Australia.

[Note: Here you can investigate the differences in impact between debt instruments and equity instruments in the capital market, you can use table, chart, graph wherever you would find it appropriate]

3-3 Identify the possible impact of interest rate cut on the Real Estate market in Australia.

[Note: You can analyse the differences in impact between foreign sourced investment and local sourced investment in the Real Estate Market, you can use table, chart, graph wherever you would find it appropriate]

3-4 There are four countries (Japan, Sweden, Denmark and Switzerland) have negative interest rates. What could be the expectations/ motivations to drop interest rate below zero?

Could you please give me a quick summary of the solution to each question so that I may expand on this. It is for my current job.

Medical Research Corporation (Comprehensive time value of money) Dr. Harold Wolf of Medical Research Corporation (MRC) was thrilled with the response he had received from drug companies for his latest discovery, a unique electronic stimulator that reduces the pain from arthritis. The process had yet to pass rigorous Federal Drug Administration (FDA) testing and was still in the early stages of development, but the interest was intense. He received the three offers described following this paragraph. (A 10 percent interest rate should be used throughout this analysis unless otherwise specified.)

Offer I - $1,000,000 now plus $200,000 from year 6 through 15. Also, if the product did over $100 million in cumulative sales by the end of year 15, he would receive an additional $3,000,000. Dr. Wolf thought there was a 70 percent probability this would happen.

Offer II - Thirty percent of the buyer’s gross profit on the product for the next four years. The buyer in this case was Zbay Pharmaceutical. Zbay’s gross profit margin was 60 percent. Sales in year one were projected to be $2 million and then expected to grow by 40 percent per year.

Offer III - A trust fund would be set up for the next eight years. At the end of that period, Dr. Wolf would receive the proceeds (and discount them back to the present at 10 percent). The trust fund called for semiannual payments for the next eight years of $200,000 (a total of $400,000 per year).

The payments would start immediately. Since the payments are coming at the beginning of each period instead of the end, this is an annuity due. To look up the future value of an annuity due in the tables, add 1 to n (16 + 1) and subtract 1 from the value in the table. Assume the annual interest rate on this annuity is 10 percent annually (5 percent semiannually). Determine the present value of the trust fund’s final value.

Required: Find the present value of each of the three offers and indicate which one has the highest present value.

Consider John Smith, a new freshman who has just received a study loan and started college. He plans to obtain the maximum loan at the beginning of each year. Although John Smith does not have to make any payments while he is still in school, the 6.5 percent interest per year compounded monthly owed accrued and is added to the balance of the loan.

After graduation, John Smith gets a six-month grace period. This means that monthly payments are still not required, but interest is still accruing. After the grace period, the standard repayment plan is to amortize the debt using monthly payments for 10 years.

Required:

Using the standard repayment plan and a 6.8 percent APR interest rate, compute the monthly payments John Smith owes after the grace period.

Describe the role of finance in the healthcare field?

Suppose that an investor opens an account by investing $1,000. At the beginning of each of the next four years, he deposits an additional $1,000 each year, and he then liquidates the account at the end of the total five-year period. Suppose that the yearly returns in this account, beginning in year 1, are as follows: −9 percent, 17 percent, 9 percent, 14 percent, and −4 percent.

a. Calculate the arithmetic and geometric average returns for this investment. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Arithmetic Return _______%

Geometric Return_______%

b. Determine what the investor’s actual dollar-weighted average return was for this five-year period. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Dollar-weighted average return

Holt Enterprises recently paid a dividend, D₀, of $1.00. It expects to have nonconstant growth of 13% for 2 years followed by a constant rate of 4% thereafter. The firm's required return is 8%.

1. How far away is the horizon date?
   1. The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero.
   2. The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero.
   3. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2.
   4. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2.
   5. The terminal, or horizon, date is infinity since common stocks do not have a maturity date.
   
   -Select-
   
2. What is the firm's horizon, or continuing, value? Round your answer to two decimal places. Do not round your intermediate calculations.
   
   $
   
3. What is the firm's intrinsic value today, P̂₀? Round your answer to two decimal places. Do not round your intermediate calculations.
   
   $

The director of capital budgeting for Giant Inc. has identified two mutually exclusive projects, L and S, with the following expected net cash flows: Expected Net Cash Flows Year Project L Project S 0 ($100) ($100) 1 10 70 2 60 50 3 80 20 Both projects have a cost of capital of 12 percent. What is Project S's MIRR? What is Project L's MIRR?

Zane Corporation has an inventory conversion period of 63 days, an average collection period of 33 days, and a payables deferral period of 37 days. Assume 365 days in year for your calculations.

What is the length of the cash conversion cycle? Round your answer to two decimal places.

__days

If Zane's annual sales are $2,679,070 and all sales are on credit, what is the investment in accounts receivable? Round your answer to the nearest cent. Do not round intermediate calculations. $

How many times per year does Zane turn over its inventory? Assume that the cost of goods sold is 75% of sales. Use sales in the numerator to calculate the turnover ratio. Round your answer to two decimal places. Do not round intermediate calculations.