Finance Assignment
Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Responses should be at least 75 words for each question.
1) Briefly explain the securitization process and include at least one reason why a bank would consider using this.
2) Briefly compare and contrast a collateralized mortgage obligation with a collateralized debt obligation.
3) Provide at least two reasons why blame for the credit crisis is a challenge to assign to one particular group alone.
4) Provide at least one reason why the government felt compelled to pass the Troubled Asset Relief Program (TARP). What is your conclusion regarding the effectiveness of this?
5) Briefly identify one key component of the Financial Reform Act and why you think it may or may not be effective.
6) Identify two reasons why an investor would prefer common stock over preferred stock.
7) What is bookbuilding and does it benefit investors or the issuing corporation, in your opinion?
8) What benefit do investors realize as a result of an extended trading session? What might be a downside to using this session?
9) You are a fund manager and are dissatisfied with one of the companies in your portfolio. You have decided shareholder activism is an appropriate strategy. Select one approach from the material to use and briefly note why you selected it.
10) Chatter Corporation issued the following quarterly dividends last year: $0.15, $0.17, $0.20, and $0.25. The current stock price is $24.59. What is the dividend yield for this stock using this information?
11) Identify two reasons for the existence of different valuations produced by the Price-Earnings Method. Which would you use and why?
12) Briefly distinguish each of the three forms of market efficiency from each other. Which do you think best represents US markets?
13) Stock ABC has a beta of 1.3, a risk-free rate of 2.25%, and a market return of 9%. What is the expected return for this stock?
14) Company QRS just paid a dividend of $1.35. It is expected this dividend will grow at a constant rate of 3% indefinitely. What is the price of this stock if the required return is 7%?
15) You make the following investments in stocks: $4,000 in IBM, $6,000 in F, and $9,000 in MSFT. The betas for the stocks are IBM: 0.97; F: 1.05, and MSFT: 1.3. What is the portfolio beta?
16) Why would a bank be interested in a long hedge?
17) Briefly describe the characteristics of a single stock future. What type of investor might be interested in these?
18) You decided to buy Treasury bill futures contracts with a quoted price was 95-60. When you close this position, the quoted price was 94-50. Determine the profit or loss per contract, ignoring transaction costs.
19) You decided to sell Treasury bill futures contracts with a quoted price was 93-40. When you close this position, the quoted price was 92-65. Determine the profit or loss per contract, ignoring transaction costs.
20) You sell S&P 500 stock index futures that specified an index of 1,750. When you close this position, the index specified by the futures contract was 1,830. Determine the profit or loss, ignoring transaction costs.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also include a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also Include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.