Solve the following attachments. Answer all questions.

(3) You and a classmate are assigned a project on which you will receive one combined grade. You each want to receive a good grade, but you also want to avoid hard work. In particular, here is the situation: If you both work hard, you get an A, which gives you each 40 units of happiness .If only one of you works hard, you both get a B, which gives you each 30 units of happiness. .If neither of you works hard, you both get a D, which gives each of you 10 units of happiness. . Working hard costs 25 units of happiness. (a) Fill in the following payoff matrix: Your decision Work Shirk Classmate's Work decision Shirk (b) What is the likely outcome? Explain your answer. T (c) If you get this classmate as your partner on a series of projects throughout the year, rather than only once, how might that change the outcome you predicted in part (b)?MARKETS ") Distinguish between the terms "cum div" and "ex - div" as used in financial markets QUESTION 10 JUNE 2009 QUESTION ONE. ) Explain the main factors behind the rapid development of capital markets in your country QUESTION 11 a) DECEMBER 2006 QUESTIONS Discuss the role of a capital markets authority in the development of a country's financial my QUESTION 12 SIX a) Describe the benefits to a country of integrating its financial markets with those of other country QUESTION 13 a) Distinguish between primary and secondary securities market. b) "Despite the large investment in the stock exchange and the various government incentives, only few companies are listed at the stock exchange of the three East Africa Countries" . This was the opening remark by the guest speaker in a seminar whose theme was "Developing our capital market." Required: i) The advantage of being listed at the stock exchange. ii) Highlight four factors that may hinder companies from being listed at the stock exchange. QUESTION 14 a) Briefly explain how the "Dow theory " views the movement of the market prices of shares traded on a stock exchange b) Identify and briefly explain the factors that must be taken into account in the design and construction of a market index for shares c) Joseph Kimeu is trying to determine the value of Bidii Ltd's ordinary shares. The earnings growth rate over his planned six-year holding period is estimated to be 10% and the dividend payout ration in 60%. The ending price earnings (P/E) ration is expected to be 20 and the current earning per share are Sh. 4. The required rate of return for this share is 15%. Required Compute the market price of Bidii Ltd's ordinary share QUESTION 15 a) Briefly describe the three forms of capital markets efficiency, b) Highlight four factors that may underlie the low rate of listing of companies in a stock exchange you are familiar with. QUESTION 16 (a) Highlight four advantages and disadvantages to a company of being listed on a stock exchange (b) In relation to the stock exchange" Section 3 F.M4- Suppose that two motorcycle manufacturers, Honda and Suzuki, are considering offering 10-year full coverage warranties for their new motorcycles. Although the warranties are expensive to offer, it could be disastrous for one firm if it does not offer a warranty while its competitor does. Let's assume the payoffs for the firms are as follows: Honda \\ Suzuki Offer Don't Offer Warranty Warranty Offer Warranty 20, 20 120, 10 Don't Offer Warranty 10, 120 50,50 (a) If the game is played once, what is the outcome? (b) Suppose the game is repeated three times. Will the outcome change from your answer in (a)? Explain. (c) Now, suppose the game is infinitely repeated and Suzuki and Honda formed an agreement to not offer warranties to their customers. Each firm plans the use of a grim trigger strategy to encourage compliance with the agreement. At what level of 6 (discount factor) would Honda be indifferent about keeping the agreement vs. cheating on it? Explain.1. (15 points) For the exercises below, transform the regression equation Yi = 60 +81Xli +$2X2i +pi so that you can use a t-statistic to test for the following restrictions. Show all your steps for full credit. a. (5 points) B1 = 1262 b. (5 points) B1 - 82 = 2 a) If we assume normality of u, then we know the exact distribution of B1, a t student b) If we do not assume normality of u but n is large, then we approximate the sampling distribution 3 2. (15 points) Consider the following model to explain CEO salaries in terms of various factors: salary = 30 + Blsales + $2mktval + 83ceoten + u, where: salary = 1990 compensation, $1000s; sales = 1990 firm sales, millions; mktval = market value, end 1990, mills; ceoten = years as ceo with company Next you perform the following regression: * R2 = 0.2013, SER = 529.67 a) (5 pts) What does each estimated coefficient on the individual variables (and constant term) mean quantitatively (do not worry about standard errors, as they are not given, or the measures of fit)? b) (5 pts) What is the forecasted salary of a CEO working in a firm with sales equal to 5,000 millions, market value equal to 10,000 millions, and 10 years of tenure? c) (5 pts) Eliminating the variable sales from your regression, the estimation regression becomes:" salary = 613.436 + .019sales + .023mktval + 12.703ceoten + u salary = 641.059 + .0369mktval + 11.525ceoten + u R2 = 0.184, SER = 533.58 Why do you think that the effect of mktval has changed now over part b. (very briefly describe)