Compare the different types of financial markets securities

Assignment Help Financial Management

Reference no: EM132759619

LO 1: Evaluate the advantages and disadvantages of long-term capital market for rising corporate finance.
LO 2: Compare the different types of financial markets securities.
LO 3: Select appropriate hedging strategies using future markets for reducing financial risk and evaluate the performance of different types of derivatives.
LO 4: Evaluate the performance of financial institutions currently working in the market.

Question 1: Answer the following questions:
Suppose you believe that Johnson Company's stock price is going to increase from its current level of $22.50 sometime during the next 5 months. For $310.25 you can buy a 5-month call option giving you the right to buy 100 shares at a price of $25 per share. If you buy this option for $310.25 and Johnson's stock price actually rises to $45, what would your pre-tax net profit be

Suppose you believe that Delva Corporation's stock price is going to decline from its current level of $82.50 sometime during the next 5 months. For $510.25 you could buy a 5-month put option giving you the right to sell 100 shares at a price of $85 per share. If you bought this option for $510.25 and Delva's stock price actually dropped to $60, what would your pre-tax net profit be?

Question 2: Answer the following question:
Construct an amortization schedule for the first three months and the final three months of payments for a 30-year, 7 percent mortgage in the amount of $90,000. What percentage of the third payment is principal? What percentage of the final payment is principal? What do these differences imply? (Hint: The balance after the 357th payment is $1,775.56, and the monthly payments is: $598.77)

Question 3: Answer the following questions:
Why are loans such a high percentage of total assets at the typical bank? What four broad classes of loans do banks engage in?

Most nonfinancial firms would never hold as much of their assets in safe liquid securities as banks do. Why do banks maintain such a high percentage of investment in securities?

Calculate the bank's asset utilization ratio (AU).

Question 4: Answer the following questions:
How do Sales finance companies differ from Personal credit and Business credit institutions? List an example of each.

An FI's position in FX markets generally reflects four trading activities. What are they, and which one(s) cause the FI to bear FX risk?

Today, Stock A is worth $20 and has 1,000 shares outstanding. Stock B costs $30 and has 500 shares outstanding. Stock C is priced at $50 per share and has 1,200 shares outstanding. If, tomorrow, Stock A is priced at $22, Stock B at $35, and Stock C is worth $48, what would the value-weighted index amount equal? (The index has a base period value of 100.)

Attachment:- Financial Institutions Markets.rar

Reference no: EM132759619

Questions Cloud

How much is the gain reported in the income statement : At year-end, the fair value of the land held for investment is P4,700,000. Under the fair value model, how much is the gain reported in the income statement?

Identify five business risks that the company is facing : Identify FIVE business risks that the company is facing and explain why they constitute a significant risk. You also need to identify the account

What should mike as a christian do : In 400-500 words, respond to the following: How ought the Christian think about sickness and health? How should a Christian think about medical intervention?

Provide a brief explanation of the effect of each weakness : Provide a brief explanation of the effect of each weakness identified in (a) on the risk of material misstatement in the financial statements.

Compare the different types of financial markets securities : What percentage of the third payment is principal? What percentage of the final payment is principal? What do these differences imply?

Legal and regulatory compliance play in procurement : What role does legal and regulatory compliance play in procurement? What criteria are used to evaluate bids? How are these criteria defined?

Identify key aspects of the selected healthcare setting : In a two to three paragraph discussion post, identify key aspects of the selected healthcare setting, how their mission and values compare with the services.

Determine the amount of factory overhead applied to jobs : Determine the amount of factory overhead applied to Jobs 200 and 305 in May using the data on direct labor hours from BE 16-2

Makes for successful event and what leads to failure : One of the main goals of this course this semester is to be able to discern what makes for a successful event and what leads to failure.

User Account

All Pages