What are the basic differences between the revenue realization principle and revenue from the contract with customers (ASC 606)? Do you think ASC 606 is better than the realization principle? Why? Give your reasons.

Blockbuster FY2003 10K states, "Blockbuster Inc. is a leading global provider of in-home rental and retail movie and game entertainment, with approximately 8,900 stores in the United States, its territories and 27 other countries as of December 31, 2003." John F. Antioco serves as chairman, president and chief executive officer. Mr. Antioco signed the 10K reflecting his assessment of Blockbuster Inc at the time of its writing.   Also in 2003, Mr Antioco identified "Netflix, (as) our primary domestic competitor in online rental" and planned a competing online service. According to Blockbuster's 2003 10K and using Lovallo & Sibony cognitive bias types, what three statement:cognitive bias couples are true? Select the single best available answer from those presented below.

A) "We expect this (online) service to ultimately drive store revenues by not only attracting new customers who want the convenience that both the online and store channels provide, but also by bringing back customers who we have lost to competing online rental services": Competitor Neglect; "During 2003, we opened or purchased 341 company-operated stores (180 in the United States and 161 outside of the United States)": Confirmation bias; "During 2004, we plan to invest significantly in new systems and infrastructure to support our new initiatives, such as the expansion of our rental subscription programs, which includes our online rental subscription service; the continued development of our games store-in-store concepts; and the continued development and implementation of our movie and games trading model": Anchoring and insufficient adjustment.

B) "We expect this (online) service to ultimately drive store revenues by not only attracting new customers who want the convenience that both the online and store channels provide, but also by bringing back customers who we have lost to competing online rental services": Sunflower Management; "During 2003, we opened or purchased 341 company-operated stores (180 in the United States and 161 outside of the United States)": Confirmation bias; "During 2004, we plan to invest significantly in new systems and infrastructure to support our new initiatives, such as the expansion of our rental subscription programs, which includes our online rental subscription service; the continued development of our games store-in-store concepts; and the continued development and implementation of our movie and games trading model": Anchoring and insufficient adjustment.

C)"We expect this (online) service to ultimately drive store revenues by not only attracting new customers who want the convenience that both the online and store channels provide, but also by bringing back customers who we have lost to competing online rental services": Competitor Neglect; "During 2003, we opened or purchased 341 company-operated stores (180 in the United States and 161 outside of the United States)": Confirmation bias; "During 2004, we plan to invest significantly in new systems and infrastructure to support our new initiatives, such as the expansion of our rental subscription programs, which includes our online rental subscription service; the continued development of our games store-in-store concepts; and the continued development and implementation of our movie and games trading model": Sunflower Management

D) "We expect this (online) service to ultimately drive store revenues by not only attracting new customers who want the convenience that both the online and store channels provide, but also by bringing back customers who we have lost to competing online rental services": Competitor Neglect; "During 2003, we opened or purchased 341 company-operated stores (180 in the United States and 161 outside of the United States)": Status quo bias; "During 2004, we plan to invest significantly in new systems and infrastructure to support our new initiatives, such as the expansion of our rental subscription programs, which includes our online rental subscription service; the continued development of our games store-in-store concepts; and the continued development and implementation of our movie and games trading model": Anchoring and insufficient adjustment.

E) "We expect this (online) service to ultimately drive store revenues by not only attracting new customers who want the convenience that both the online and store channels provide, but also by bringing back customers who we have lost to competing online rental services": Sunflower Management; "During 2003, we opened or purchased 341 company-operated stores (180 in the United States and 161 outside of the United States)": Status quo bias; "During 2004, we plan to invest significantly in new systems and infrastructure to support our new initiatives, such as the expansion of our rental subscription programs, which includes our online rental subscription service; the continued development of our games store-in-store concepts; and the continued development and implementation of our movie and games trading model": Power of storytelling.

1. Consider the following data for the “home” country of Afar (whose currency is the Afarian pound, £); the “foreign” currency is the U.S. dollar ($):

2000    2006

E £20/$                 £22/$

Phome 100                    140

Pforeign         100                     110

1. Calculate the real exchange rate for 2000 and 2006.
2. Did the Afarian pound appreciate or depreciate in nominal terms? in real terms? Explain your answer intuitively.
3. What do you think has happened to Afar’s trade balance (E- Z) between 2000 and 2006?
4. Does (relative) purchasing power parity hold for Afar between 2000 and 2006? Why or why not?
5. What would the nominal exchange rate e have to be in 2006, in order for purchasing power parity to hold (i.e., to keep the real exchange rate constant at its 2000 level)?

Year

               Technology          Energy

2000:          -24.31            30.47

2001:          -38.55           -12.49

2002:          -36.89           -11.61

2003:           68.59            27.84

2004:         -9.98            35.94

2005:          17.81             70.70

2006:          3.79               -2.12

2007:          -3.13              29.30

2008:        -42.51           -48.25

2009:        79.03              40.13

2010:        45.03           34.25

2011:         -12.21          -8.76

what I have to find. There are 2 data FUNDS in the file: Technology and Energy.

1) For each fund, compute using Excel: the Average, Median, Mode, the first percentile, the third percentile.

2) Graph the Box-Plot for each fund (called Box and Whisker in Excel).

3) For each fund, compute using Excel: the Range, Mean Absolute Deviation, the variance, the standard deviation and the coefficient of variation.

4) Using Excel, compute the Sharpe-Ratio for each fund using the risk free return of 3%. 5) Using Excel, compute the correlation between both funds.

Stocks A and B have the following historical returns:

(a) Calculate the average rate of return and standard deviation of returns (as percents) for each stock during the 5-year period. (Round your standard deviations to two decimal places.)

stock A average rate of return %

standard deviation %

stock B average rate of return %

standard deviation %

(b) Assume that someone held a portfolio consisting of 50% of stock A and 50% of stock B and that the average annual realized returns and past volatility of each stock are unbiased estimators of their expected returns and future volatility. What is the portfolio's expected return and the volatility of next year's returns (as percents)? The correlation between the returns of the two stock is 90.83%. (Round your answers to two decimal places.)

expected return %

volatility %

Fraud investigators found that 70 percent of the nearly $160 million in sales booked by an Asian subsidiary of a European company between September 2006 and June 2007 were fictitious. In an effort to earn rich bonuses tied to sales targets, the Asian subsidiary’s managers used highly sophisticated schemes to fool auditors. One especially egregious method involved funneling bank loans through third parties to make it look as though customers had paid, when in fact they hadn’t.

In a lawsuit filed by the company’s auditors, it was alleged that former executives “deliberately” provided “false or incomplete information” to the auditors and conspired to obstruct the firm’s audits. To fool the auditors, the subsidiary used two types of schemes. The first involved factoring unpaid receivables to banks to obtain cash up front. Side letters that were concealed from the auditors gave the banks the right to take the money back if they couldn’t collect from the company’s customers. Hence, the factoring agreements amounted to little more than loans.

The second, more creative, scheme was used after the auditors questioned why the company wasn’t collecting more of its overdue bills from customers. It turns out that the subsidiary told many customers to transfer their contracts to third parties. The third parties then took out bank loans, for which the company provided collateral, and then “paid” the overdue bills to the company using the borrowed money. The result was that the company was paying itself. When the contracts were later canceled, the company paid “penalties” to the customers and the third parties to compensate them “for the inconvenience of dealing with the auditors.”

The investigators also found that the bulk of the company’s sales came from contracts signed at the end of quarters, so managers could meet ambitious quarterly sales targets and receive multimillion-dollar bonuses. For example, 90 percent of the revenue recorded by the subsidiary in the second quarter of 2007 was booked in several deals signed in the final nine days of the quarter. But the company was forced to subsequently cancel 70 percent of those contracts because the customers—most of them tiny startups—didn’t have the means to pay.

List revenue-related fraud symptoms and schemes used in this case. Briefly discuss how actively searching and understanding revenue-related fraud symptoms could have led to discovering the fraud by the company’s auditors.

In this exercise involving paired differences, consider that it is reasonable to assume the populations being compared have approximately the same shape and that the distribution of paired differences is approximately symmetric.

Percents of on-time arrivals for flights in 2006 and 2007 were collected for 11 randomly selected airports. Suppose data for these airports follow.

Use α = 0.05 to test the hypothesis that there is no difference between the median percent of on-time arrivals for the two years.

State the null and alternative hypotheses.

H₀: Median percent on-time in 2006 − Median percent on-time in 2007 > 0
H_a: Median percent on-time in 2006 − Median percent on-time in 2007 = 0

H₀: Median percent on-time in 2006 − Median percent on-time in 2007 ≤ 0
H_a: Median percent on-time in 2006 − Median percent on-time in 2007 > 0   

H₀: Median percent on-time in 2006 − Median percent on-time in 2007 ≠ 0
H_a: Median percent on-time in 2006 − Median percent on-time in 2007 = 0

H₀: Median percent on-time in 2006 − Median percent on-time in 2007 = 0
H_a: Median percent on-time in 2006 − Median percent on-time in 2007 ≠ 0

H₀: Median percent on-time in 2006 − Median percent on-time in 2007 ≥ 0
H_a: Median percent on-time in 2006 − Median percent on-time in 2007 < 0

Find the value of the test statistic.

T⁺ =

Find the p-value. (Round your answer to four decimal places.)

p-value =

What is your conclusion?

Do not reject H₀. There is sufficient evidence to conclude that there is a significant difference between the median percent of on-time arrivals for the two years.

Do not reject H₀. There is not sufficient evidence to conclude that there is a significant difference between the median percent of on-time arrivals for the two years.    

Reject H₀. There is not sufficient evidence to conclude that there is a significant difference between the median percent of on-time arrivals for the two years.

Reject H₀. There is sufficient evidence to conclude that there is a significant difference between the median percent of on-time arrivals for the two years.

Shares for Deloitte plc and PWC ltd have the following historical dividends and price data

Required:

(a) Calculate the realized rate of return (or holding period return) for each share in each year. Assume an equally weighted portfolio. What would the realized rate of return on the portfolio be in each year from 2001 through to 2006? What are the average returns for each share and for the portfolio?

(b) Calculate the standard deviation of returns for each share and for the portfolio.

(c) Based on the extent to which the portfolio has a lower risk than the shares held individually, would you assess that the correlation co-efficient between returns on the two shares is closer to 0.9, 0.0 or -0.9?

(d) If you added more shares at random to the portfolio, what is the most accurate statement of what would happen to σp?

σp would remain constant

σp would decline to somewhere in the vicinity of 15%, or

σp would decline to zero if enough shares were included

74% of all Americans live in cities with population greater than 100,000 people. If 37 Americans are randomly selected, find the probability that

a. Exactly 25 of them live in cities with population greater than 100,000 people.______

b. At most 26 of them live in cities with population greater than 100,000 people. _____

c. At least 27 of them live in cities with population greater than 100,000 people. _____

d. Between 23 and 29 (including 23 and 29) of them live in cities with population greater than 100,000 people._____

Apple is interested in learning how potential customers view its newest product rollout. To do this, it collected surveys gauging respondents' perceived likelihood of purchase (out of 100), along with their age and income levels. Using these data, describe using regression how the likelihopod of purchase relates to age and income.