Assess the regulatory environment faced by brokerages and investment banking firms. Do you consider this environment to be highly regulated, moderately regulated or unregulated. Justify your response.Compare and contrast credit risk with liquidity risk.Describe the size, structure and composition of the mutual fund industry. Do you consider these characteristics as having a positive or negative impact on investors ? Why ?An investment bank pays $ 23.00 for 4 million shares of JC Co., and then resells them for $ 25 per share. How much money does JC receive? What is the profit to the investment bank ?An investment bank pays $ 20.50 per share for 3 million shares of X. It then sells these shares to the public for $ 22.50 per share. How much money does X receive ? What is the profit to the investment bank ? What is the stock price of X ?A mutual fund owns 500 shares of X currently trading at $ 12, and 300 shares of Y, currently trading at $ 24. The fund has 900 shares outstanding.What is the Net Asset Value of the fund ?If investors expect the price of X shares to increase to $ 14, and Y shares to decrease to $ 23, at the end of the year, what is the new NAV ?Assume that the expected price of X shares is realized at $ 14. What is the maximum price decrease that can occur to Y to realize an end of year NAV equal to the NAV estimated in (a).Assume that a bank has assets located in the EU worth 101 million euros, on which it earns an average of 9% per year. The bank has 76 m

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
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Assess the regulatory environment faced by brokerages and investment banking firms. Do you consider this environment to be highly regulated, moderately regulated or unregulated. Justify your response.Compare and contrast credit risk with liquidity risk.Describe the size, structure and composition of the mutual fund industry. Do you consider these characteristics as having a positive or negative impact on investors ? Why ?An investment bank pays $ 23.00 for 4 million shares of JC Co., and then resells them for $ 25 per share. How much money does JC receive? What is the profit to the investment bank ?An investment bank pays $ 20.50 per share for 3 million shares of X. It then sells these shares to the public for $ 22.50 per share. How much money does X receive ? What is the profit to the investment bank ? What is the stock price of X ?A mutual fund owns 500 shares of X currently trading at $ 12, and 300 shares of Y, currently trading at $ 24. The fund has 900 shares outstanding.What is the Net Asset Value of the fund ?If investors expect the price of X shares to increase to $ 14, and Y shares to decrease to $ 23, at the end of the year, what is the new NAV ?Assume that the expected price of X shares is realized at $ 14. What is the maximum price decrease that can occur to Y to realize an end of year NAV equal to the NAV estimated in (a).Assume that a bank has assets located in the EU worth 101 million euros, on which it earns an average of 9% per year. The bank has 76 million Euros in liabilities on which earns an average of 5% per year. The spot exchange rate is 0.76 euros/$.If the exchange rate at the end of the year is 0.79euros/$, will the dollar have appreciated or depreciated against the euro ?Given the change in the exchange rate, what is the effect in dollars on the net interest income from foreign assets and liabilities ?Consider the following balance sheet for X Savings (in milllions).AssetsFloating rate mortgages $ 40(Currently 9% annuall7)30-year fixed rate loans(Currently 6% annuall7) 40Total Assets 80Liabilities and Equity1-year time deposits(currently 5% annually) $ 503-year time deposits(Currently 7% annually) 20Equity 10Total liabilities and equity 80What Is X’s expected net interest income at year end ?What will net interest income be if interest rates rise by 1 percent ?Using the cumulative repricing gap model, what is the expected net interest income for a 1 percent increase in interest rates ?What will net interest income be at year end if interest rates on rate sensitive assets increase by 1% but interest rates on rate sensitive liabilities increase by 0.5% ?

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