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Question 1: We are living in the aftermath of the housing market collapse of 2008 that was caused by rising mortgage defaults. Especially the concept of re-sets of low interest ARM's. Your parent's generation used 30 year fixed mortgages to buy houses, but in recent years, financial engineers have created CDO's, CMO's, CLO's and SIV's. These methods of spreading risk have created great liquidity in the mortgage market and with low interest rates, many people who would otherwise not qualify for conventional mortgages have obtained ARM's, interest only, no-doc, you name it. Now, however, banks around the world, who hold many of these engineered debt instruments have been hit by write offs of these instruments and there has been a serious contraction of liquidity as the perception and reality of risk of non-payment is now evident in the massive rate of increase of foreclosures. I want you to do some brief research on this and set forth your view of where "information asymmetry" may have played a role in this "mess". This whole problem is very much like the Savings and Loan "melt down" in the 1980's but on a global scope.
Who benefitted from the run up in mortgages? Why did it go on so long? Where were the "rating" agencies on this? Why did the Federal Reserve cut interest rates to "zero" and start buying treasury bonds?
Question 2: With all the financial models and tools that are available, one might believe that finance and market behaviors are fully determined. This is the "random-walk" theory of market behavior. All events are instantly "priced-in" and the fluctuations are random. Yet, there are legions of individuals who follow trading systems to "beat the market". So what's your view is market trading a hopeless zero-sum game? Are the Random-walker's right? Or is there something more to market behavior.
The following retirement problem is often used to illustrate Significant aspects of savings and compound interest - see what you can learn by working the problem.
Briefly discuss the relationship between the formulas used to calculate (a) the after-tax yield, and (b) the taxable equivalent yield of a bond
thirsty cactus corp. just paid a dividend of 1.20 per share. the dividends are expected to grow at 15 percent for the
a. Calculate the monthly returns.
The issue makes semiannual payments and has an embedded cost of 9 percent annually. Note the embedded cost refers to the coupon rate.
discuss the situation in which corporationshave to choose trade-off theory of capital structure in order tooptimize
1 Assume Andursco's common stock is quoted on the OTCBB at 159/ 7/19. The VP of finance recommends a 4-for -1 split to increase trading activity. show the effects of this action on the BS, and on a shareholder of the company.'
javits amp sons common stock currently trades at 37.00 a share. it is expected to pay an annual dividend of 2.75 a
spacefood products will pay a dividend of 2.40 per share this year. it is expected that this dividend will grow by 3
Raise $600,000 for 1 year to supply working capital to a new store.
The equipment will produce the following cash flows: Year 1, $30,000; Year 2, $40,000; Year 3, $50,000. Ramos requires a minimum rate of return of 12%. What is the maximum price Ramos should pay for this equipment?
calculated pension expense for its underfunded pension plan as follows: Required: Which elements of DeAngelo's balance sheet are affected by the components of pension expense? What are the specific changes in these accounts?
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