Does a price ceiling attempt to make a price higher oorlower?
{j} State the main aims of regulation in financial seryices markets. [2] {ii} Discuss briefly the different ways a regulatory regime can be established. {i} State briefly how you would expect returns from shortterm and EongiElterm fixed-interest government bonds to compare with original expectations: {a} if inflation turns out to be lower than expected {b} if yields are falling more than expected {ii} In a particular country, over the last ten years goyernrnent bonds haye outperformed property. Suggest briefly possible reasons for this. | {j} lDuttine the features of: {a} unit trusts [3] {b} investment trusts [3] {ii} State two differences between unit trusts and openended investment companies Bank A and Bank B are two investment banks operating in the swaps market around highly developed and liquid bond markets in a country. A and B enter a swap agreement under which A "lends" cash to B in return for "borrowing securities. Describe briefly the credit and market risk exposures faced by Bank A under the swap agreement. [21 Describe briefly the steps that could be taken by A to mitigate the risks in (1) above. [4] [Total 6] Chart 1 below shows how the risk level of a portfolio of equities varies with the percentage of the portfolio invested outside of the countries of the European Monetary Union (Eurozone). (i) Discuss briefly the risk implications of Chart 1 for a Eurozone investor who wishes to invest in equities outside the Eurozone but who has decided not to hedge the foreign currency exposure. [2] Chart 1 - 100%% Hedged 20.09% 19.5% 19.0% 18.56 18.09% 17.59% 17.0%% Risk keel (volatility of annual turns) 16.5% 16.0% 15.5% 15.0% 14.5% 14.0% 13.5% 13.0% + 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage of equity portfolio invested outside of Eurozone (ii) Compare and contrast your answer to part (i) with the case where the Eurozone investor decides to fully hedge the foreign currency exposure in the portfolio. [4] [Total 6]You are the finance director of a meter car manufacturer who owns the freehold on the manufacturing facility. it property developer has offered to purchase the freehold. Outline the factors that you would need to take into account in deciding whether to recommend to your board the offer. [10] 10 1'I'ou are an independent adviser to a French based fashion clothing retailer, which is considering setting up a new internet subsidiary to sell its clothing range into the US market. Currently it has no distribution outside France. [3] Discuss the methods you would use to determine whether to pursue this venture. [7'] {ii} identify the major risks involved in launching the subsidiary together with ways that these risks might be mitigated. [6] {iii} Describe how you would choose the discount rate to be used in evaluating this project
