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Robert Chilufya's employer offers its workers a two-month paid sabbatical every seven years. Robert, who just started working for the firm, plans to spend his sabbatical touring Europe at an estimated cost of K25,000. To finance his trip, Robert plans to make six annual end-of-year deposits of K2,500 each, starting this year, into an investment account earning 4 percent interest semi-annually. (i) Will Robert's account balance at the end of seven years be enough to pay for his trip? (8 marks) (ii) Suppose Robert increases his annual contribution to K3,150. How large will his account balance be at the end of seven years? (7 marks) (b) Distinguish between systematic and unsystematic risk in relation to portfolio theory.

Quantum Corporation has two different bonds currently outstanding. Bond M has a face value of K20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $800 every six months over the subsequent eight years, and finally pays $1,000 every six months over the last six years. Bond N also has a face value of $20,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. If the required return on both these bonds is 8 percent compounded semiannually, what is the current price of Bond M and Bond N? (14 marks) (ii) Why is the goal of financial management to maximize the current share price of the company's stock? In other words, why isn't the goal to maximize the future share price? (4 marks) (iii)Who owns a corporation? Describe the process whereby the owners control the firm's management. What is the main reason that an agency relationship exists in the corporate form of organization? In this context, what kinds of problems can arise?

In a developed country, the capital share of GDP is about 33%; the average growth in output is about 2% per year; the depreciation rate is about 4% per year; and the capital-output ratio is about 2.5. Suppose that the production function is a Cobb-Douglas function, so that the capital share in output is constant, and that the US has been in a steady state.

1. Write out a Cobb-Douglas production function, both in per-worker and aggregate terms (1 point)

2. If in the steady state the growth rate of total output is 2%, then what is the growth rate of the population? Use the formula listed below to work on this. (0.5 point)

AY Y Ay = +n

(2)

3. What must the saving rate be in the initial steady state? [Hint: Use the following concepts 1) , 2) Ak = sy - (6+n)k]

For each ton of a certain type of rice commodity, the four-year forward price is 300. A four-year 400-strike European call option costs 110. The continuously compounded risk-free interest rate is 6.5%. Calculate the cost of a four-year 400-strike European put option for this rice commodity.

The ask price for a share of ABC company is 100.50 and the bid price is 100. Suppose an investor can borrow at an annual effective rate of 3.05% and lend (i.e., save) at an annual effective rate of 3%. Assume there are no transaction costs and no dividends. Determine which of the following strategies does not create an arbitrage opportunity. (A) Short sell one share, and enter into a long one-year forward contract on one share with a forward price of 102.50. (B) Short sell one share, and enter into a long one-year forward contract on one share with a forward price of 102.75. (C) Short sell one share, and enter into a long one-year forward contract on one share with a forward price of 103.00. (D) Purchase one share with borrowed money, and enter into a short one-year forward contract on one share with a forward price of 103.60. (E) Purchase one share with borrowed money, and enter into a short one-year forward contract on one share with a forward price of 103.75

address every question

3 Operations can be classified according to their volume and variety of production as well as the degree of variation and visibility. Which of the following operations would be classified as high volume, low variety? a. A family doctor b. A carpenter c. A front office bank d. A fast food restaurant 4 Which of the following activities is not a direct responsibility of operations management? a. Designing the operation's products, services and processes b. Planning and controlling the operation c. Developing an operations strategy for the operation.

Which of the following statements best describes a production function? a. the maximum profit generated from given levels of inputs b. the maximum level of output generated from given levels of inputs c. all levels of output that can be generated from given levels of inputs d. all levels of inputs that could produce a given level of output 5 With respect to production, the short run is best defined as a time period a. lasting about six months. b. lasting about two years. c. in which all inputs are fixed. d. in which at least one input is fixed. 6 In the long run, all factors of production are a. variable. b. fixed. c. materials. d. rented.

15 A concept that implies that the firm should consider issues such as protecting the consumer, paying fair wages, maintaining fair hiring practices, supporting education, and considering environmental issues. a. Financial management b. Profit maximization c. Agency theory d. Social responsibility 16 Which of the following is not normally a responsibility of the treasurer of the modern corporation but rather the controller? a. Budgets and forecasts b. Asset management c. Investment management d. Financing management.

9 In industries in which there are scale economies, the variety of goods that a country can produce is constrained by a. the fixed cost b. the size of the labor force c. the marginal cost d. the size of the market 10 A monopoly firm engaged in international trade but enjoying a protected home market will a. equate marginal costs with foreign marginal revenues. b. equate marginal costs with marginal revenues in both domestic and foreign markets c. equate average costs in local and foreign markets d. none of the above.

3 In the long run, a perfectly competitive firm will achieve all but which of the following: a. Economic profit b. Allocative Efficiency c. Productive Efficiency d. Normal profit 4 If the price a firm receives for its product is equal to the marginal cost of producing that product, the firm is: a. Always earning an economic profit b. Always productively efficient. c. Always allocatively efficient. d. Always experiencing an economic loss.

9 In perfect competition, the product of a single firm a. is sold to different customers at different prices. b. has many perfect complements produced by other firms. c. has many perfect substitutes produced by other firms. d. is sold under many differing brand names. 10 In perfect competition, restrictions on entry into an industry a. do not exist. b. apply to labor but not to capital. c. apply to both capital and labor. d. apply to capital but not to labor. 11 Price for a firm under monopolistic competition is_. a. equal to marginal revenue b. greater than marginal revenue c. less than marginal revenue d. greater than total revenue

3 Oligopoly is the only market structure characterized by: a. Interdependence in pricing and output decisions. b. Differentiated products. c. Barriers to entry. d. Profit-maximizing behavior. 4 Oligopoly is characterized by all of the following except: a. A few large firms. b. Differentiated product. c. Difficult entry into the industry. d. Price competition 5 A major threat to longer term profits exists when barriers to entry into an industry are high. (a)True (b) False 6 Under kinked demand theory the prices of oligopolists are predicted to be rather rigid or 'sticky'. (a)True (b) False 7 In contestable markets, large oligopolistic firms end up behaving like: a. a monopoly. b. monopolistically competitive firms. c. a cartel. d. perfectly competitive firms

XYZ Company's share paid RM2.00 dividend last year. According to the financial manager of this firm, the XYZ's dividend will grow at 20% for first two years, 10% for next two years, and then level out at 5%. Assume that the required rate of return is 15%. Required: Determine the maximum price an investor willing to pay today for (7 marks) XYZ's share. Determine the maximum price an investor willing to pay for XYZ's share if he believes that the 10% growth rate can be maintained indefinitely. (4 marks) If the 10% rate of growth is achieved, determine the share price be at the end of Year 3, assuming the condition in Part (b) is hold. (4 marks) Supposed you are currently having two investments on hand: Investment A Five years ago, you invested RM10,000 in this investment. For the past five years, you received nothing. At the end of this year, you will receive accummilated interest compounded annually at 7% based on the principal that you have invested. For next five years, you will receive incomes of RM7,000 per annum Investment B Five years ago, you invested RM10,000 in this investment. For the past five years, you have received incomes of RM2,500 per anmum. At the beginning of this year, you decided to invest another RM10,000 into this investment. By the end of this year, you will start receiving RM5,000 per annum for the following ten years. Examine which investment will have a higher expected return [Hint: Using formula or financial calculator method]. (15 marks) (c) Today is Raymond's birthday, he decides to start saving for his college education. He begins his study on his 18th birthday and will need RM4,000 per year at the end of each year for the following 4 years. He makes a deposit one year from today in an account paying 12 percent annually and continue to make an identical deposit each year up to and including the year he begins his study in college. If a deposit amount of RM2,542.05 will allow him to reach this goal, assess what birthday that he is celebrating today. (10 marks) (d) Describe the benefits of investing in dividend yields. Justify with reasons whether dividend stocks able to achieve sustainable capital appreciation over the long term.

What are the three types of financial management decisions? For each type of decision, give an example of a business transaction that would be relevant. (6 Marks) 2. Who owns a corporation? Describe the process whereby the owners control the firm's management. What is the main reason that an agency relationship exists in the corporate form of organization? In this context, what kind of problems can arise? (4 Marks)

2. What are the implications of a majority federal government to the Canadian political scene? How does this differ from a minority government? (A minority government exists when no one party has a majority of seats in a legislative assembly. To pass legislation and other measures, that government would need the support of at least some members of other parties in the assembly.47) Explain.

3. If you represented the federal government, how would you respond to industries that have been seeking government action (e.g., subsidies or changes to policies) but to no avail? For example, take the position of the Canadian forestry industry, which in ten years lost about 114 000 jobs.48 Keep in mind that other industries (e.g., aircraft manufacturing and automotive) have received such support (i.e., subsidies and bailout money).

4. The overnight bank rate, set by the Bank of Canada, is currently very low. What circumstance( s) would cause the Governor of the Bank of Canada to raise this rate? What impact would this increase have on individuals and businesses with debt?

1) The issue of how much government should be involved in the economy has been the subject of much debate in Canada. In the United States, ideology has played a major role in influencing Americans to believe that, in principle, government should "butt out." This thinking ignores the significant role that the U.S. government has played and continues to play in the country's economy. In comparison, the governments in France and Sweden are more socialistic in nature and government involvement is more common. In Canada, we are less negative and perhaps more pragmatic: If it works, let's do it. But where do we go from here? Do we need less or more government involvement? Is it a question of the quality of that involvement? Could it be smarter rather than just less? How can the cost of government involvement decrease?

2. What are the implications of a majority federal government to the Canadian political scene? How does this differ from a minority government? (A minority government exists when no one party has a majority of seats in a legislative assembly. To pass legislation and other measures, that government would need the support of at least some members of other parties in the assembly.47) Explain.

3. If you represented the federal government, how would you respond to industries that have been seeking government action (e.g., subsidies or changes to policies) but to no avail? For example, take the position of the Canadian forestry industry, which in ten years lost about 114 000 jobs.48 Keep in mind that other industries (e.g., aircraft manufacturing and automotive) have received such support (i.e., subsidies and bailout money).

3. Assume the total cost of a university education will be $280,000 when your child enters university in 18 years. You presently have $50,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child's university education? (4 Marks) 4. You expect to receive $10,000 at graduation in two years. You plan on investing it at 11% per year until you have $100,000. How long will you wait from now? (4 Marks) Chapter 6 5. An investment offers $4,600 per year for 15 years, with the first payment occurring one year from now. If the required return is 8% per year, a) what is the value of the investment today? (3 marks) b) What would the value be if the payments occurred forever? (2 marks) 6. You want to have $80,000 in your savings account 10 years from now, and you're prepared to make equal annual deposits into the account at the end of each year. If the account pays 6.5% interest per year, what amount must you deposit each year? (4 Marks) 7. A six-year lease requires payment of $1059.00 at the beginning of every three months. If money is worth 5 percent compounded monthly, what is the cash value of the lease? 8. You are planning to make monthly deposits of $250 into a retirement account that pays 10% interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 30 years? (6 Marks) 9. A 15-year annuity pays $1,500 per month, and payments are made at the end of each month. If the interest rate is 13% compounded monthly for the first seven years, and 10% compounded monthly thereafter, what is the present value of the annuity?

Robert Chilufya's employer offers its workers a two-month paid sabbatical every seven years. Robert, who just started working for the firm, plans to spend his sabbatical touring Europe at an estimated cost of K25,000. To finance his trip, Robert plans to make six annual end-of-year deposits of K2,500 each, starting this year, into an investment account earning 4 percent interest semi-annually. (i) Will Robert's account balance at the end of seven years be enough to pay for his trip? (8 marks) (ii) Suppose Robert increases his annual contribution to K3,150. How large will his account balance be at the end of seven years? (7 marks) (b) Distinguish between systematic and unsystematic risk in relation to portfolio theory.

Quantum Corporation has two different bonds currently outstanding. Bond M has a face value of K20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $800 every six months over the subsequent eight years, and finally pays $1,000 every six months over the last six years. Bond N also has a face value of $20,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. If the required return on both these bonds is 8 percent compounded semiannually, what is the current price of Bond M and Bond N? (14 marks) (ii) Why is the goal of financial management to maximize the current share price of the company's stock? In other words, why isn't the goal to maximize the future share price? (4 marks) (iii)Who owns a corporation? Describe the process whereby the owners control the firm's management. What is the main reason that an agency relationship exists in the corporate form of organization? In this context, what kinds of problems can arise?