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Dick Holliday can build either a large video rental section or a small one in hisstore. He can also gather additional information (by conducting market study) orsimply do nothing. If he gathers additional information, the results could be eitherpositive or negative, but it would cost him $3,000 to gather the information.Holliday believes that there is a 50-50 chance that the information will bepositive. If the rental market is favorable, Holliday will earn $15,000 with a largesection or $5,000 with a small. With an unfavorable video-rental market,however, Holliday could lose $20,000 with a large section or $10,000 with a smallsection. Without gathering additional information, Holliday estimates that theprobability of a favorable rental market is 0.7. A positive report from the studywould increase the probability of a favorable rental market to 0.9. Furthermore, anegative report from the additional information would decrease the probability ofa favorable rental market to 0.4. Of course, Holliday could ignore these numbersand do nothing at any stage.By drawing and solving a decision tree, what is the maximum expected payoffthat Holliday can achieve? What should he do?
Discuss the implications, benefits and costs of organisations implementing a risk management and corporate governance strategy, drawing on cases used in the first assignment as examples.
Why and how are implied volatilities used to quote options prices? Can implied volatilities be expected to vary for options on the same stock with the same expiration but different exercise prices?
What levels of the hierarchy of controls are most applicable to system safety? Are any levels not useful when applying system safety? Provide one or more examples that support your response.
What is the difference between systematic and unsystematic risks? Is it true that regulators are more interested in systematic risks while individual banks give equal importance to both? Please share your views.
What impacts could these requested changes have on the budget - Could these requested changes also impact the schedule? If so, how?
Compare the short-term liquidity ratios of Coca-Cola with those of PepsiCo discussed in the chapter. Which firm appears to have more short-term liquidity risk? Explain.
Select a country (e.g., Brazil) of interest to you. Perform a search of popular and academic articles using as keywords. What types of country risks can you document for MNCs doing business in your chosen country?
Develop and assess a risk assessment tool that you will use to review and assess the case study project. Determine if your version of an effective risk assessment tool can adequately assess risk throughout this project.
Identify the portfolio risks inherent in this portfolio. Explain your views and possible solutions to solve or mitigate the portfolio issues identified.
What are the challenges of credit risk analysis? What do you mean by portfolio credit risk? How does it differ from firm (or obligor) credit risk?
What do you mean by credit risk culture? Discuss its importance. Explain the importance of credit risk appetite. What are the factors to be considered while deciding credit risk appetite?
What is the maximum amount of money the company should spend to get more information about the market share
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