Learnine Outcomes: CLO1- Recognise the characteristics and risks of slocks, bonds, moncy market, and property investments. CLO2- Describe hedging activities, stock options, and currency derivatives. CLO3- Recognixe the purpost and function of stock markets, istcrest rates, and international regulation. CLO5- Evaluate porffolio performance and risk. (Case Study \& Problen solving) Question(s): Q.1. Abdallah followx the automotive industry, including XYZ Motor Company, Based on XYZ's 2021 annual report. Abdullah writes the following summary: XYZ Motor Company has businesses in several countries around the woeld. XYZ frequently has expenditures and receipts denominated in non-U.S. currencies, includiag purchases and sales of finisbed velieles and production parts, subsidiary dividends, investments in non-US. operations. etc. XYZ uses a varisty of commodities in the ptoduction of motor vehicles, such as iconferrous metals, precious metals, ferrous alloys, energy, and plasticsiresins. XYZ typically purchases these coenmedities from outside suppliers. To finasce its operations. XYZ uses a variety of funding sources, such as commereial poper, term debt, and lines of credit from major commersial banks. The company invests any surplus cash in securities of various types and maturities, the value of which are sabject to floctaations in ielerest fates. XYZ has a erodit division, which provides financing to castoeners wanting to parchase XYZ's vehicles on credit. Overall, XYZ faces several risks. To manage some of its risks, XYZ invests in fixed-income instruments and derivative contracts, Some of these investments do not rely on a clearing house and instead effect sentement throaph the execution of bilateral agrecments. Based on the above summary, recommend and justify the risk expasures that should be reported as part of an Enterprise Risk Managemean System for XVZ Motor Company. is Marisi) Q2 An investment manager placed a limit onder to buy 900,000 shares of Ahmad Corporation at SAR 21.35 limin at the opening of trading on February 8 . The closing market price of Ahmad Corporation on February 7 was also SAR 21.35. The limit order filled 40,000 shares, and the remaining 460,000 shares were never filled. Some good news came ofl about Ahmad Corporation on February 8, and its price increased wo SAR 23.60 by the end of that day. However, by the close of trading on February I4, the price had declined to SAR 21.74. The investment manager is analyzing the missed trade opportunity cost asing the elosing prise on Februry 8 as the benchmark price. A. What is the estimate of the missed trade opportunity cost if it is measured at a one day interval after the decision to trade? 2:5 Mariver B. What is the estimate of the missed trade opportunity cost if it is measured at a coe-week interval after the decision to trade? (2.5 Marbir) Q3.Consider soene stocks that trade in two markets, with a truder being able to trade in these shocks in either market. Suppose that the two markets are identical in all respects except that bid-ask spreads are lower and depths (the mumber of shares being offered at the bid and ask prices) are greater in one of the two markets. State in which market liquidity-motivated and information-motivated traders would pecfer to transach. Justify your answer. 225 Marks) Q4. Zaid retired from his firm. He has coetinued to bold his privase retirement imvetments in a portfolio of common stocks and bonds. At the beginning of 2019 , when be retired, his account was valued at SAR 453,000. By the end of 2019, the value of his account was SAR 523,500 . Zaid made no contributions to of withdrawals from the portfolie during 2019 . What rate of retum did Zaid eam on his portfolio during 2019:(2.5 Mariv)
