Matilda has recently been appointed as an analyst within the Waltzing Investment Co. Part of her role is to advise fund managers on the fixed income portion of their portfolio. a. One of Matilda’s colleagues suggests that analyzing the bonds issued by foreign governments is more complex than for the bonds issued by domestic corporate bonds. The colleague states that this difficulty is a result of the intangible and non-quantitative elements involved in analyzing the foreign bonds. Discuss whether you agree with this argument.
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- Matilda has recently been appointed as an analyst within the Waltzing Investment Co. Part of her role is to advise fund managers on the fixed income portion of their portfolio.
a. One of Matilda’s colleagues suggests that analyzing the bonds issued by foreign governments is more complex than for the bonds issued by domestic corporate bonds. The colleague states that this difficulty is a result of the intangible and non-quantitative elements involved in analyzing the foreign bonds. Discuss whether you agree with this argument.
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- Robert Black and Carol Alvarez are vice presidents of Western Money Management andcodirectors of the company’s pension fund management division. A major new client, the California League ofCities, has requested that Western present an investment seminar to the mayors of the represented cities. Blackand Alvarez, who will make the presentation, have asked you to help them by answering the following questions:a. What are a bond’s key features?b. What are call provisions and sinking fund provisions? Do these provisions make bonds more or less risky?c. How is the value of any asset whose value is based on expected future cash flows determined?d. How is a bond’s value determined? What is the value of a 10-year, $1,000 par value bond with a 10%annual coupon if its required return is 10%?e. 1. What is the value of a 13% coupon bond that is otherwise identical to the bond described in part d?Would we now have a discount or a premium bond?2. What is the value of a 7% coupon bond with these…Which of the following statements is CORRECT? a. Hedge funds are legal in Europe and Asia, but they are not permitted to operate in the United States. b. Hedge funds have more in common with commercial banks than with any other type of financial institution. c. Hedge funds have more in common with investment banks than with any other type of financial institution. d. Hedge funds are legal in the United States, but they are not permitted to operate in Europe or Asia. e. The justification for the "light" regulation of hedge funds is that only "sophisticated" investors with high net worths and high incomes are permitted to invest in these funds, and such investors supposedly can do the necessary "due diligence" on their own rather than have it done by the SEC or some other regulator.Which statement is NOT true of Asset-backed securities and Mortgage-backed securities in the Philippines? * Asset-backed securities (ABS) are certificates issued by a Special Purpose Trust (SPT) representing undivided ownership interest in the asset pool. ABS are eligible as collaterals for loans extended by a bank which originated/sold the underlying assets of such ABS. ABS and MBS benefit sellers because they can be removed from the balance sheet, allowing sellers to acquire additional funding. Investors in the Philippines are wary on the reliability of MBS specifically those backed by assets of low income households and those originated by publicly controlled finance institutions. Mortgage-backed securities (MBS) are formed by pooling together mortgages.
- Which of the following statements is CORRECT? A. Capital market instruments include both mortgages and U.S. Treasury bonds. B. An example of a primary market transaction would be your uncle transferring 100 shares of Wal-Mart stock to you as a birthday gift. C. The NYSE does not exist as a physical location. Rather it represents a loose collection of dealers who trade stock electronically. D. While the two frequently perform similar functions, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise large blocks of capital from investors.When a small firm works with an investment banker to raise funds through the sale of bonds on a best-efforts basis, which of the following functions does not come into play? Underwriting Indenture Origination DistributionSergei Leenid, CFA, is a long-only fi xed income portfolio manager for the Parliament Funds.He has developed a quantitative model, based on fi nancial statement data, to predict changesin the credit ratings assigned to corporate bond issues. Before applying the model, Leenid fi rstperforms a screening process to exclude bonds that fail to meet certain criteria relative to theircredit rating. Existing holdings that fail to pass the initial screen are individually reviewed forpotential disposition. Bonds that pass the screening process are evaluated using the quantitative model to identify potential rating changes.Leenid is concerned that a pending change in accounting rules could aff ect the results ofthe initial screening process. One current screen excludes bonds when the fi nancial leverage ratio (equity multiplier) exceeds a given level and/or the interest coverage ratio falls below a givenlevel for a given bond rating. For example, any “A” rated bond of a company with a fi nancial…
- Which of the following statements correctly describes the nature of direct financing as discussed in lectures? Group of answer choices A. More than one of the other answers is correct B. It is the source of financing whenever an investor purchases shares that are listed on the Australian Securities Exchange. C. None of the other answers is correct D. May involve an individual investor buying shares in a company when a company goes public via an initial public offering. E. It relies upon an intermediary to facilitate the flow of funds from surplus to deficit units, unlike indirect financing I answered D, is it correct?As an executive of a securities market regulatory body such as the Securities Exchange Commission of Bangladesh you are conducting a workshop on stock trading using leverage (borrowing of funds/securities) for a group of new investors. What major points should you try to convey to the audience in a compact presentation? Please Do correct answer.Investment banks' activities in recent years have gone well beyond their "traditional" role of underwriting stocks and bonds. Investment banks (remember, most of them are now bank holding companies and thus are able to borrow funds from the Federal Reserve and get taxpayer-funded bailouts) are involved in a wide variety of "complimentary financial activities." What are the possible implications for financial markets as investment bans continue to expand their activities? Is this an efficient way for investment banks to diversify their activities? Or is it an attempt by investment banks to corner markets that could result in the next global financial crisis?
- The HFS Trustees have solicited input from three consultants concerning the risks and rewards of an allocation to international equities. Two of them strongly favor such action, while the third consultant commented as follows: “The risk reduction benefits of international investing have been significantly overstated. Recent studies relating to the cross-country correlation structure of equity returns during different market phases cast serious doubt on the ability of international investing to reduce risk, especially in situations when risk reduction is needed the most.”a. Describe the behavior of cross-country equity return correlations to which the consultant is referring. Explain how that behavior may diminish the ability of international investing to reduce risk in the short run. Assume that the consultant’s assertion is correct. b. Explain why it might still be more efficient on a risk/reward basis to invest internationally rather than only domestically in the long run.Which of the following statements correctly describes the nature of indirect financing as discussed in lectures? Group of answer choices A) It is the source of financing whenever an investor purchases shares that are listed on the Australian Securities Exchange. B) May involve an individual investor buying shares in a company when a company goes public via an initial public offering. C) More than one of the other answers is correct D) None of the other answers is correct E) It relies upon an intermediary to facilitate the flow of funds from surplus to deficit units, unlike direct financingWhich of the following is an example of a systematic risk? Bond investor invests in a Japanese investment grade bond and receives coupon payments in Japanese yens A firm hires a former politician with ties to the Republican party when a political climate in the state changes U.S. government announces an increase in corporate tax rate Bond investor receives news about a bond issuer issuing another corporate bond