Question: Answer all the questions in the attachments below.

17 Much of the recent discussion of the role of the firm deals with a range of stakeholder interests, rather than the previous emphasis on the shareholder only. Identify two stakeholders other than the shareholders and briefly explain why their interests might conflict with those of the shareholders. [5] 18 Many large companies issue debentures as a means of raising long term finance. These are often quoted on the stock exchange. Describe the risks associated with investing in such debentures. [5] 19 A major quoted company has announced that it has amassed a cash "mountain". It proposes to return this cash to the shareholders 18 months after the date of the announcement. Rather than do so by means of a dividend, the company will buy a proportion of each shareholders' shares back at a small premium to the prevailing market price. (i) Explain why management might want to return cash to the shareholders instead of retaining it in the company. [4] (ii) Explain how the company's share price might react to this purchase: (a) on the announcement of the buy-back (b) at the time of the buy-back [8] (iii) Explain why the company might have chosen to purchase shares rather than make a dividend payment of the same amount. [4] (iv) Explain why the company has announced this transaction 18 months in advance. [4] [Total 20]Consider the following time-inhomogeneous Markov jump process with transition rates as shown below: 2 0. 1/ 0.2 0.11 0.2f 0.05r 0.51. (i) Write down the generator matrix at time t. [2] (ii) Write down the Kolmogorov backward differential equations for Py3(s,() and Pi3(s,t). [3] (iii) Using the technique of separation of variables, or otherwise, show that the solution of the differential equation for Pyy(s,f) is: P3(s,1) = -0.25(13-42) [4] (iv) Show that the probability that the process visits neither state 2 nor state 4 by time /, given that it starts in state 1 at time 0, is: 8 -0.07512 _1 -0.251 [6] (v) State the limiting value as f -> co of the probability in (iv). Explain why this must be the case for this particular model. [2] [Total 17]