Question 1: A bank A offers its depositors an interest rate of 16.6% compounded semi annually. Bank B also gives its depositors an interest rate of 16% compounded annually. Determine the effective interest rate for each bank and give your recommendation.

Question 2: Ama is considering these three investment projects with the following details: Investment A requires a cash of $70 million at 12.6% compounded semiannually for 5 years. Investment B requires a cash of $65 million at 10% compounded quarterly for 5 years. Investment C requires a cash of $ 45 million at 9.6% compounded monthly for 5 years. Determine the amount of each investment and the interest earned. Recommend one investment plan for Ama and give reason(s) for your choise.

Question 3: You have opened a savings account with bank WAT at the beginning of the year 2001 that pays 15% interest. You deposited $ 5million into the account the very day it was opened. You traveled to UK and came back in November, 2004. There was no withdrawal from your account. You were informed that, with effect from 1^st January 2005, your savings will earn an interest of 12% compounded quarterly. You deposited additional $7million at the beginning of 2005. You requested for your account statement at the end of 2008 financial year. What was your total amount, if there were no bank charges and withdrawals.

In his New York Times column of May 27, 2005, economist Paul Krugman stated: “After all, the Fed’s ability to manage the economy mainly comes from its ability to create booms and busts in the housing market.” What do you think he meant by that statement? Is it an accurate characterization of the Federal Reserve’s influence over the real economy?

During June, the following changes in inventory item 27 took place:

Perpetual inventories are maintained.

What is the cost of the ending inventory for item 27 under the FIFO method?

Cost of the ending Inventory?

Variance Company produces Chemical Y. It budgeted to produce 10,000 gallons of Chemical Y in fiscal year 2006. It actually produced 11,000 gallons. The production process for Chemical Y has two principal ingredients, Mystery Material M and labor. To produce 1 gallon of Chemical Y under budget requires 10 gallons of Mystery Material M @ $3/gallon and .5 labor hours @$20/labor hour. During 2006, it spent $346,500 to purchase 99,000 gallons of Mystery Material M that Variance Company used in production. Its actual total labor costs were $115,000 and it used 5,000 hours of labor

What is the labor volume variance?

A) $15,000 B) $10,000 C) $5,000 D) $500

5. What is the labor efficiency variance?

A) $15,000 B) $10,000 C) $5,000 D) $500

What is the flexible budget variance for mystery material M for the year 2006?

A) $16,500 B) $30,000 C) $10,000 D) $46,500

8. What is the price variance for mystery material M for the year 2006?

A) $33,000 B) $30,000 C) $49,500 D) $50,000

• n your view, what are the determinants of a company's beta?
• How would you estimate the cost of debt for a firm whose only debt issues are privately held by institutional investors? Does it make a difference if the company's debt is privately placed as opposed to being publicly traded?
• Why do we use an aftertax figure for cost of debt but not for cost of equity?
• What do we mean by market efficiency? In your opinion, are financial markets efficient?
• Does the success of Warren Buffet and Jim Simons invalidate the Efficient Market Hypothesis? Explain.
• Assume market efficiency. Suppose you just heard a press conference given by the FED chairperson indicating that the recession is over and the economy is again entering an expansion. After learning about this prediction, can you profit in the stock market?
• n your view, what are the determinants of a company's beta?
• How would you estimate the cost of debt for a firm whose only debt issues are privately held by institutional investors? Does it make a difference if the company's debt is privately placed as opposed to being publicly traded?
• Why do we use an aftertax figure for cost of debt but not for cost of equity?
• What do we mean by market efficiency? In your opinion, are financial markets efficient?
• Does the success of Warren Buffet and Jim Simons invalidate the Efficient Market Hypothesis? Explain.
• Assume market efficiency. Suppose you just heard a press conference given by the FED chairperson indicating that the recession is over and the economy is again entering an expansion. After learning about this prediction, can you profit in the stock market?
• n your view, what are the determinants of a company's beta?
• How would you estimate the cost of debt for a firm whose only debt issues are privately held by institutional investors? Does it make a difference if the company's debt is privately placed as opposed to being publicly traded?
• Why do we use an aftertax figure for cost of debt but not for cost of equity?
• What do we mean by market efficiency? In your opinion, are financial markets efficient?
• Does the success of Warren Buffet and Jim Simons invalidate the Efficient Market Hypothesis? Explain.
• Assume market efficiency. Suppose you just heard a press conference given by the FED chairperson indicating that the recession is over and the economy is again entering an expansion. After learning about this prediction, can you profit in the stock market?

Data for Sale  

Want a list of 3,877 charity donors in Detroit? You can buy it from USAData for $465.24 through USAData’s Web site, which is linked to large databases maintained by Acxiom and Dun & Bradstreet, anyone with a credit card can buy marketing lists of consumers broken down by location, demographics, and interests. The College Board sells data on graduating high school seniors to 1,700 colleges and universities for 28 cents per student. These businesses are entirely legal. Also selling data are businesses that obtain credit card and cell phone records illegally and sell to private investigators and law enforcement. The buying and selling of personal data has become a multibillion dollar business that’s growing by leaps and bounds. Unlike banks or companies selling credit reports, these private data brokers are largely unregulated.

There has been little or no federal or state oversight of how they collect, maintain, and sell their data. But they have been allowed to flourish because there is such a huge market for personal information and they provide useful services for insurance companies, banks, employers, and federal, state, and local government agencies. For example, the Internal Revenue Service and departments of Homeland Security, Justice, and State paid data brokers $30 million in 2005 for data used in law enforcement and counterterrorism.

The Internal Revenue Service signed a five-year $200 milllion deal to access ChoicePoint’s databases to locate assets of delinquent taxpayers. After the September 11, 2001 terrorist attacks, ChoicePoint helped the U.S. government screen candidates for the new federally controlled airport security workforce.

ChoicePoint is one of the largest data brokers, with more than 5,000 employees serving businesses of all sizes as well as federal, state, and local governments. In 2004, ChoicePoint performed more than seven million background checks. It pocesses thousands of credit card transactions every second. ChoicePoint builds its vast repository of personal data through an extensive network of contractors who gather bits of information from public filings, financial-services firms, phone directories, and loan application forms. The contractors use police departments, school districts, the department of motor vehicles, and local courts to fill their caches. All of the information is public and legal.

ChoicePoint possesses 19 billion records containing personal information on the vast majority of American adult consumers. According to Daniel J. Solove, associate professor of law at George Washington University, the company has collected
information on nearly every adult American and “these are dossiers that J. Edgar Hoover would be envious of.”

The downside to the massive databases maintained by ChoicePoint and other data brokers is the threat they pose to personal privacy and social well being. The quality of the data they maintain can be unreliable, causing people to lose their jobs and
their savings. In one case, Boston Market fired an employee after receiving a background check from ChoicePoint that showed felony convictions. However, the report had been wrong. In another, a retired GE assembly-line worker was charged a higher insurance premium because another person’s driving record, with multiple accidents, had been added to his ChoicePoint file.

ChoicePoint came under fire in early 2005 for selling information on 145,000 customers to criminals posing as legitimate businesses. The criminals then used the identities of some of individuals on whom ChoicePoint maintained data to open fraudulent credit card accounts.

Since then ChoicePoint curtailed the sale of products that contain sensitive data, such as social security and driver’s license ID numbers, and limited access by small businesses, including private investigators, collection agencies, and non-bank financial institutions. ChoicePoint also implemented more stringent processes to verify customer authenticity.

Marc Rotenberg of the Electronic Privacy Information Center in Washington, D.C., believes that the ChoicePoint case is a clear demonstration that self-regulation does not work in the information business and that more comprehensive laws are needed. California, 22 other states, and New York City have passed laws requiring companies to inform customers when their personal data files have been compromised. More than a dozen data security bills were introduced in Congress in 2006 and some type of federal data security and privacy legislation will likely result. Privacy advocates are hoping for a broad federal law with a uniform set of standards for privacy protection practices.

1) Discuss the issues raised by data brokers in the context of management, organization, and technology factors.

2)    Use a professional code of ethics to recommend solutions to the issues in 2.

Data for Sale  

Want a list of 3,877 charity donors in Detroit? You can buy it from USAData for $465.24 through USAData’s Web site, which is linked to large databases maintained by Acxiom and Dun & Bradstreet, anyone with a credit card can buy marketing lists of consumers broken down by location, demographics, and interests. The College Board sells data on graduating high school seniors to 1,700 colleges and universities for 28 cents per student. These businesses are entirely legal. Also selling data are businesses that obtain credit card and cell phone records illegally and sell to private investigators and law enforcement. The buying and selling of personal data has become a multibillion dollar business that’s growing by leaps and bounds. Unlike banks or companies selling credit reports, these private data brokers are largely unregulated.

There has been little or no federal or state oversight of how they collect, maintain, and sell their data. But they have been allowed to flourish because there is such a huge market for personal information and they provide useful services for insurance companies, banks, employers, and federal, state, and local government agencies. For example, the Internal Revenue Service and departments of Homeland Security, Justice, and State paid data brokers $30 million in 2005 for data used in law enforcement and counterterrorism.

The Internal Revenue Service signed a five-year $200 milllion deal to access ChoicePoint’s databases to locate assets of delinquent taxpayers. After the September 11, 2001 terrorist attacks, ChoicePoint helped the U.S. government screen candidates for the new federally controlled airport security workforce.

ChoicePoint is one of the largest data brokers, with more than 5,000 employees serving businesses of all sizes as well as federal, state, and local governments. In 2004, ChoicePoint performed more than seven million background checks. It pocesses thousands of credit card transactions every second. ChoicePoint builds its vast repository of personal data through an extensive network of contractors who gather bits of information from public filings, financial-services firms, phone directories, and loan application forms. The contractors use police departments, school districts, the department of motor vehicles, and local courts to fill their caches. All of the information is public and legal.

ChoicePoint possesses 19 billion records containing personal information on the vast majority of American adult consumers. According to Daniel J. Solove, associate professor of law at George Washington University, the company has collected
information on nearly every adult American and “these are dossiers that J. Edgar Hoover would be envious of.”

The downside to the massive databases maintained by ChoicePoint and other data brokers is the threat they pose to personal privacy and social well being. The quality of the data they maintain can be unreliable, causing people to lose their jobs and
their savings. In one case, Boston Market fired an employee after receiving a background check from ChoicePoint that showed felony convictions. However, the report had been wrong. In another, a retired GE assembly-line worker was charged a higher insurance premium because another person’s driving record, with multiple accidents, had been added to his ChoicePoint file.

ChoicePoint came under fire in early 2005 for selling information on 145,000 customers to criminals posing as legitimate businesses. The criminals then used the identities of some of individuals on whom ChoicePoint maintained data to open fraudulent credit card accounts.

Since then ChoicePoint curtailed the sale of products that contain sensitive data, such as social security and driver’s license ID numbers, and limited access by small businesses, including private investigators, collection agencies, and non-bank financial institutions. ChoicePoint also implemented more stringent processes to verify customer authenticity.

Marc Rotenberg of the Electronic Privacy Information Center in Washington, D.C., believes that the ChoicePoint case is a clear demonstration that self-regulation does not work in the information business and that more comprehensive laws are needed. California, 22 other states, and New York City have passed laws requiring companies to inform customers when their personal data files have been compromised. More than a dozen data security bills were introduced in Congress in 2006 and some type of federal data security and privacy legislation will likely result. Privacy advocates are hoping for a broad federal law with a uniform set of standards for privacy protection practices.

Argue the ethical dilemma raised by data brokers, based on an ethical theory of your choice.

Many investors and financial analysts believe the Dow Jones Industrial Average (DJIA) gives a good barometer of the overall stock market. On January 31, 2006, 9 of the 30 stocks making up the DJIA increased in price (The Wall Street Journal, February 1, 2006). On the basis of this fact, a financial analyst claims we can assume that 30% of the stocks traded on the New York Stock Exchange (NYSE) went up the same day.

A sample of 53 stocks traded on the NYSE that day showed that 21 went up.

You are conducting a study to see if the proportion of stocks that went up is is significantly more than 0.3. You use a significance level of α=0.005α=0.005.

What is the test statistic for this sample? (Report answer accurate to three decimal places.)
test statistic = ______

What is the p-value for this sample? (Report answer accurate to four decimal places.)
p-value = _______

The p-value is...

A) less than (or equal to) αα

B) greater than αα

This test statistic leads to a decision to...

A) reject the null

B)accept the null

C)fail to reject the null

As such, the final conclusion is that...

A) There is sufficient evidence to warrant rejection of the claim that the proportion of stocks that went up is is more than 0.3.

B) There is not sufficient evidence to warrant rejection of the claim that the proportion of stocks that went up is is more than 0.3.

C) The sample data support the claim that the proportion of stocks that went up is is more than 0.3.

D) There is not sufficient sample evidence to support the claim that the proportion of stocks that went up is is more than 0.3.