Reference no: EM131145882
Managerial Finance
Details:
Congratulations. You have been promoted to vice president and director of your mid-size firm's pension fund management team located in Cincinnati, OH. Before you have even had the opportunity to settle into your new office, your senior vice president tapped you to take her place and present an investment seminar to "a group of investment decision-makers" comprised of government analysts from all over the tri-state area but that is the extent of the information you've been provided. After doing some quick research, you've identified that the specific target audience for this presentation is composed primarily of individuals with little or no professional investment experience who are attending this seminar to build their skills.
In order to address the range of information these individuals need to know and the likely range of questions that may crop up, you'll need to be able to:
Describe the essential characteristics of a bond and how these characteristics interact to determine bond value, inclusive of how both the interest rate and coupon rate influence bond value and pricing.
Summarize call provisions and sinking fund provisions. Explain how these types of provisions individually make bonds more or less risky for a) an investor, and b) the issuer.
The value of an asset whose value is based on expected future cash flows is determined by the present value of all future cash flows the assets will generate. Given the case scenario and target audience provided, select and discuss a simple asset situation that could apply to exemplify this concept.
Define what it means when a bond is callable. Provide two measures you can review to understand what type of returns to expect if the bond is called or if it is not called.
Describe the type of returns one could one expect with a callable bond trading at a premium price and provide your rationale. Explain the significance of the designation "premium price."
Discuss why or why not a callable bond trading at a premium price would be an appropriate investment for the target audience's organizations.
Select an example scenario appropriate to the seminar's target audience Write a general expression for the yield on a probable debt security (rd) and define these terms in regards to that hypothetical security: real risk-free rate of interest (r*), inflation premium (IP), default risk premium (DRP), liquidity premium (LP), and maturity risk premium (MRP).
Define the nominal risk-free rate (rRF) and provide an example relevant to your target audience of a specific security that can be used as an estimate of rRF.
Describe interest rate risk and reinvestment rate risk and how these relate to the maturity risk premium. Based on reinvestment rate risk, provide an example on how a 1-year bond or a 10-year bond would be a better investment for a typical community as represented by those attending your seminar.
Select an example appropriate to your seminar target audience to explain the concepts of a) term structure and interest rates and b) yield curve.
Review corporate bankruptcy law. If a firm were to default on its bonds, describe how the company assets could be/would be liquidated. What is a likely outcome for bondholders? Select and describe an example scenario that applies to your seminar attendees' organizations.
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What tax and nontax factors should be considered
: George, a wealthy investor, is uncertain whether he should invest in taxable or tax-exempt bonds. What tax and nontax factors should be considered?
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Explain major benefits of traditional activity-based costing
: Analyze the major benefits and major weaknesses of traditional Activity-Based Costing (ABC) in determining accurate overhead costs over a time-driven ABC system. Provide a rationale for your response.
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How much money you believe you may be making
: How much money you believe you may be making, the amount of taxes you will have to pay, governmental programs you expect to be around, and whether we will have cut the size of our government. Don't forget, this debt is just for the national governmen..
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Why or why not a callable bond trading at a premium price
: Discuss why or why not a callable bond trading at a premium price would be an appropriate investment for the target audience's organizations.
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Discuss the major contents of the fund financial statements
: Discuss the major contents of the fund financial statements and government wide financial statements. Address why those statements are necessary in the government annual report.
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Prepare the adjusting entry necessary to account
: Prepare the adjusting entry necessary to account for the note receivable from Ritter Industries at December 31, 2015. Determine the net realizable value of Ciavarella's accounts receivable at December 31, 2015.
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Briefly describe operating cycle of a merchandising company
: Briefly describe the operating cycle of a merchandising company. Identify the assets and liabilities directly affected by this cycle. Prepare journal entries to record these transactions, assuming Hearthstone uses a perpetual inventory system.
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Determine the amount of loss from inventory shrinkage stated
: Determine the amount of loss from inventory shrinkage stated (1) at cost and (2) at retail sales value. (Hint: Without any shrinkage losses, the cost of goods sold and the amount of gross profit would each amount to 50 percent of net sales.)
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