Reference no: EM131146877

Part 1

•Discuss government rescue of failed banks concept
•Review any complicated or confusing concepts. Strive to provide fresh insight to each other.
•Summarize the discussion in 350 to 525 words.

Part 2

1-The Fed Briefly describe the origin of the Federal Reserve System. Describe the functions of the Fed district banks.

2-Open Market Operations Explain how the Fed increases the money supply through open market operations.

3-Policy Directive What is the policy directive, and who carries it out?

4-Reserve Requirements How is money supply growth affected by an increase in the reserve requirement ratio?

5-The Fed's Impact on Unemployment Explain how the Fed's monetary policy affects the unemployment level.

6-The Fed's Impact on Home Purchases Explain how the Fed influences the monthly mortgage payments on homes. How might the Fed indirectly influence the total demand for homes by consumers?

7-The Fed's Impact on Security Prices Explain how the Fed's monetary policy may indirectly affect the price of equity securities.

8-Choice of Monetary Policy When does the Fed use a stimulative monetary policy, and when does it use a restrictive monetary policy? What is a criticism of a stimulative monetary policy? What is the risk of using a monetary policy that is too restrictive?

9-Impact of Money Supply Growth Explain why an increase in the money supply can affect interest rates in different ways. Include the potential impact of the money supply on the supply of and the demand for loanable funds when answering this question.

10-Interpreting the Fed's Monetary Policy When the Fed increases the money supply to lower the federal funds rate, will the cost of capital to U.S. companies be reduced? Explain how the segmented markets theory regarding the term structure of interest rates (as explained in Chapter 3) could influence the degree to which the Fed's monetary policy affects long-term interest rates.

11-Effect of Bank Strategies on Bank Ratings A bank has asked you to assess various strategies it is considering and explain how they could affect its regulatory review. Regulatory reviews include an assessment of capital, asset quality, management, earnings, liquidity, and sensitivity to financial market conditions. Many types of strategies can result in more favorable regulatory reviews based on some criteria but less favorable reviews based on other criteria. The bank is planning to issue more stock, retain more of its earnings, increase its holdings of Treasury securities, and reduce its business loans. The bank has historically been rated favorably by regulators yet believes that these strategies will result in an even more favorable regulatory assessment.

a. Which regulatory criteria will be affected by the bank's strategies? How?
b. Do you believe that the strategies planned by the bank will satisfy its shareholders? Is it possible for the bank to use strategies that would satisfy both regulators and shareholders? Explain.
c. Do you believe that the strategies planned by the bank will satisfy the bank's managers? Explain.

Part 3

1-High Corporation incorporates on May 1 and begins business on May 10 of the current year. What alternative tax years can High elect to report its initial year's income?

2-Port Corporation wants to change its tax year from a calendar year to a fiscal year ending June 30. Port is a C corporation owned by 100 shareholders, none of whom own more than 5% of the stock. Can Port change its tax year? If so, how can it accomplish the change?

3-Stan and Susan, two calendar year taxpayers, are starting a new business to manufacture and sell digital circuits. They intend to incorporate the business with $600,000 of their own capital and $2 million of equity capital obtained from other investors. The company expects to incur organizational and start-up expenditures of $100,000 in the first year. Inventories are a material income-producing factor. The company also expects to incur losses of $500,000 in the first two years of operations and substantial research and development expenses during the first three years. The company expects to break even in the third year and be profitable at the end of the fourth year, even though the nature of the digital circuit business will require continual research and development activities. What accounting methods and tax elections must Stan and Susan consider in their first year of operation? For each method and election, explain the possible alternatives and the advantages and disadvantages of each alternative.

4-Compare the tax treatment of capital gains and losses by a corporation and by an individual.

5-What are organizational expenditures? How are they treated for tax purposes?

6-What are start-up expenditures? How are they treated for tax purposes?