1. Why is understanding stock valuation so important for businesses? Explain at least one method used and the pro’s as well as the con’s of the valuation. What role would the valuation play in an acquisition analysis?
2. What is the tax rate that would make an investor indifferent between a corporate (taxable) bond of 10% and a municipal bond of 8%? Use the formula we discussed in lecture.
3. Before 1972, futures trading was dominated by agricultural commodities. The spectacular growth of financial futures now accounts for approximately 50% of all futures trading. Why are they so popular? Is there any risk?Which industry dominates the market?