Whether there is any chance of spending resources on creating real assets in an efficient way than just rearranging them and highlight some benefits earned by creating an array of derivative securities using primary securities. Introduction: Real assets: Assets which have a physical form can be justified as “real assets”. Money invested in purchase of real assets proves beneficial as it has inherent worth due to its properties. Few examples of real assets are building, land, machinery and plant etc.

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Answer 1

Question

Chapter 1, Problem 1PS

Summary Introduction

To evaluate: Whether there is any chance of spending resources on creating real assets in an efficient way than just rearranging them and highlight some benefits earned by creating an array of derivative securities using primary securities.

Introduction:

Real assets: Assets which have a physical form can be justified as “real assets”. Money invested in purchase of real assets proves beneficial as it has inherent worth due to its properties. Few examples of real assets are building, land, machinery and plant etc.

Expert Solution & Answer

Explanation of Solution

First of all, basis of financial engineering can be referred to as a program where finance and investment related aspects are dealt with using mathematical techniques. In other words, it is a platform which is a bunch of financial theory, engineering methods, various mathematical tools and programming techniques. Normally it contains a lot of paper shuffling.

Even though all financial assets are good, it cannot be assumed that all financial assets work the same way. If financial assets like bonds, stocks or mortgages are considered, it is found that these assets have their own payment format. The risks and the returns earned also differ accordingly For instance, consider government bonds and mortgage loans, both have particular payment format but with a difference − government bonds make coupon payments semi- annually while mortgage loans have a facility of being prepaid. When it comes to borrowing, sometimes the government borrows money with risks on reinvestment and people having an intention of buying a home may borrow money with zero prepayment and risks applicable by default.

Whatever the situation may be, the financial engineering products work better on financial underlying assets. But still investment in real assets is worthy as sometimes risk factor involved is less. The concept of more risk, more profit plays significant role in making a decision.

Conclusion

As concluded that the investment in real assets is worthy as sometimes risk factor involved in real assets is less.

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Students have asked these similar questions

Financial engineering has been disparaged as nothing more than paper shuffling. Critics argue that resources used for rearranging wealth (i.e., bundling and unbundling financial assets) might be better spent on creating wealth (i.e., creating real assets). Evaluate this criticism. Are any benefits realized by creating an array of derivative securities from various primary securities?

Why is it important that underwriting the investment banker does not overvalue (over price) or undervalued (under price) the securities? If the securities are overpriced or underpriced, who suffers the lost? Discuss with illustrations.

Why is it important that in an underwriting the investment banker does not overvalue (overprice) or undervalued (underprice) the securities? If the securities are overpriced or underpriced, who suffers the loss? Discuss with illustrations.

Answer 2

Question

Chapter 1, Problem 1PS

Summary Introduction

To evaluate: Whether there is any chance of spending resources on creating real assets in an efficient way than just rearranging them and highlight some benefits earned by creating an array of derivative securities using primary securities.

Introduction:

Real assets: Assets which have a physical form can be justified as “real assets”. Money invested in purchase of real assets proves beneficial as it has inherent worth due to its properties. Few examples of real assets are building, land, machinery and plant etc.

Expert Solution & Answer

Explanation of Solution

First of all, basis of financial engineering can be referred to as a program where finance and investment related aspects are dealt with using mathematical techniques. In other words, it is a platform which is a bunch of financial theory, engineering methods, various mathematical tools and programming techniques. Normally it contains a lot of paper shuffling.

Even though all financial assets are good, it cannot be assumed that all financial assets work the same way. If financial assets like bonds, stocks or mortgages are considered, it is found that these assets have their own payment format. The risks and the returns earned also differ accordingly For instance, consider government bonds and mortgage loans, both have particular payment format but with a difference − government bonds make coupon payments semi- annually while mortgage loans have a facility of being prepaid. When it comes to borrowing, sometimes the government borrows money with risks on reinvestment and people having an intention of buying a home may borrow money with zero prepayment and risks applicable by default.

Whatever the situation may be, the financial engineering products work better on financial underlying assets. But still investment in real assets is worthy as sometimes risk factor involved is less. The concept of more risk, more profit plays significant role in making a decision.

Conclusion

As concluded that the investment in real assets is worthy as sometimes risk factor involved in real assets is less.

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Answer 3

Question

Chapter 1, Problem 1PS

Summary Introduction

To evaluate: Whether there is any chance of spending resources on creating real assets in an efficient way than just rearranging them and highlight some benefits earned by creating an array of derivative securities using primary securities.

Introduction:

Real assets: Assets which have a physical form can be justified as “real assets”. Money invested in purchase of real assets proves beneficial as it has inherent worth due to its properties. Few examples of real assets are building, land, machinery and plant etc.

Expert Solution & Answer

Explanation of Solution

First of all, basis of financial engineering can be referred to as a program where finance and investment related aspects are dealt with using mathematical techniques. In other words, it is a platform which is a bunch of financial theory, engineering methods, various mathematical tools and programming techniques. Normally it contains a lot of paper shuffling.

Even though all financial assets are good, it cannot be assumed that all financial assets work the same way. If financial assets like bonds, stocks or mortgages are considered, it is found that these assets have their own payment format. The risks and the returns earned also differ accordingly For instance, consider government bonds and mortgage loans, both have particular payment format but with a difference − government bonds make coupon payments semi- annually while mortgage loans have a facility of being prepaid. When it comes to borrowing, sometimes the government borrows money with risks on reinvestment and people having an intention of buying a home may borrow money with zero prepayment and risks applicable by default.

Whatever the situation may be, the financial engineering products work better on financial underlying assets. But still investment in real assets is worthy as sometimes risk factor involved is less. The concept of more risk, more profit plays significant role in making a decision.

Conclusion

As concluded that the investment in real assets is worthy as sometimes risk factor involved in real assets is less.

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Answer 4

Question

Chapter 1, Problem 1PS

Summary Introduction

To evaluate: Whether there is any chance of spending resources on creating real assets in an efficient way than just rearranging them and highlight some benefits earned by creating an array of derivative securities using primary securities.

Introduction:

Real assets: Assets which have a physical form can be justified as “real assets”. Money invested in purchase of real assets proves beneficial as it has inherent worth due to its properties. Few examples of real assets are building, land, machinery and plant etc.

Expert Solution & Answer

Explanation of Solution

First of all, basis of financial engineering can be referred to as a program where finance and investment related aspects are dealt with using mathematical techniques. In other words, it is a platform which is a bunch of financial theory, engineering methods, various mathematical tools and programming techniques. Normally it contains a lot of paper shuffling.

Even though all financial assets are good, it cannot be assumed that all financial assets work the same way. If financial assets like bonds, stocks or mortgages are considered, it is found that these assets have their own payment format. The risks and the returns earned also differ accordingly For instance, consider government bonds and mortgage loans, both have particular payment format but with a difference − government bonds make coupon payments semi- annually while mortgage loans have a facility of being prepaid. When it comes to borrowing, sometimes the government borrows money with risks on reinvestment and people having an intention of buying a home may borrow money with zero prepayment and risks applicable by default.

Whatever the situation may be, the financial engineering products work better on financial underlying assets. But still investment in real assets is worthy as sometimes risk factor involved is less. The concept of more risk, more profit plays significant role in making a decision.

Conclusion

As concluded that the investment in real assets is worthy as sometimes risk factor involved in real assets is less.

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Answer 5

Chapter 1, Problem 1PS

Summary Introduction

To evaluate: Whether there is any chance of spending resources on creating real assets in an efficient way than just rearranging them and highlight some benefits earned by creating an array of derivative securities using primary securities.

Introduction:

Real assets: Assets which have a physical form can be justified as “real assets”. Money invested in purchase of real assets proves beneficial as it has inherent worth due to its properties. Few examples of real assets are building, land, machinery and plant etc.

Expert Solution & Answer

Explanation of Solution

First of all, basis of financial engineering can be referred to as a program where finance and investment related aspects are dealt with using mathematical techniques. In other words, it is a platform which is a bunch of financial theory, engineering methods, various mathematical tools and programming techniques. Normally it contains a lot of paper shuffling.

Even though all financial assets are good, it cannot be assumed that all financial assets work the same way. If financial assets like bonds, stocks or mortgages are considered, it is found that these assets have their own payment format. The risks and the returns earned also differ accordingly For instance, consider government bonds and mortgage loans, both have particular payment format but with a difference − government bonds make coupon payments semi- annually while mortgage loans have a facility of being prepaid. When it comes to borrowing, sometimes the government borrows money with risks on reinvestment and people having an intention of buying a home may borrow money with zero prepayment and risks applicable by default.

Whatever the situation may be, the financial engineering products work better on financial underlying assets. But still investment in real assets is worthy as sometimes risk factor involved is less. The concept of more risk, more profit plays significant role in making a decision.

Conclusion

As concluded that the investment in real assets is worthy as sometimes risk factor involved in real assets is less.

Answer 6

Chapter 1, Problem 1PS

Summary Introduction

To evaluate: Whether there is any chance of spending resources on creating real assets in an efficient way than just rearranging them and highlight some benefits earned by creating an array of derivative securities using primary securities.

Introduction:

Real assets: Assets which have a physical form can be justified as “real assets”. Money invested in purchase of real assets proves beneficial as it has inherent worth due to its properties. Few examples of real assets are building, land, machinery and plant etc.

Expert Solution & Answer

Explanation of Solution

First of all, basis of financial engineering can be referred to as a program where finance and investment related aspects are dealt with using mathematical techniques. In other words, it is a platform which is a bunch of financial theory, engineering methods, various mathematical tools and programming techniques. Normally it contains a lot of paper shuffling.

Even though all financial assets are good, it cannot be assumed that all financial assets work the same way. If financial assets like bonds, stocks or mortgages are considered, it is found that these assets have their own payment format. The risks and the returns earned also differ accordingly For instance, consider government bonds and mortgage loans, both have particular payment format but with a difference − government bonds make coupon payments semi- annually while mortgage loans have a facility of being prepaid. When it comes to borrowing, sometimes the government borrows money with risks on reinvestment and people having an intention of buying a home may borrow money with zero prepayment and risks applicable by default.

Whatever the situation may be, the financial engineering products work better on financial underlying assets. But still investment in real assets is worthy as sometimes risk factor involved is less. The concept of more risk, more profit plays significant role in making a decision.

Conclusion

As concluded that the investment in real assets is worthy as sometimes risk factor involved in real assets is less.

Answer 7

Chapter 1, Problem 1PS

Summary Introduction

To evaluate: Whether there is any chance of spending resources on creating real assets in an efficient way than just rearranging them and highlight some benefits earned by creating an array of derivative securities using primary securities.

Introduction:

Real assets: Assets which have a physical form can be justified as “real assets”. Money invested in purchase of real assets proves beneficial as it has inherent worth due to its properties. Few examples of real assets are building, land, machinery and plant etc.

Answer 8

Expert Solution & Answer

Explanation of Solution

First of all, basis of financial engineering can be referred to as a program where finance and investment related aspects are dealt with using mathematical techniques. In other words, it is a platform which is a bunch of financial theory, engineering methods, various mathematical tools and programming techniques. Normally it contains a lot of paper shuffling.

Even though all financial assets are good, it cannot be assumed that all financial assets work the same way. If financial assets like bonds, stocks or mortgages are considered, it is found that these assets have their own payment format. The risks and the returns earned also differ accordingly For instance, consider government bonds and mortgage loans, both have particular payment format but with a difference − government bonds make coupon payments semi- annually while mortgage loans have a facility of being prepaid. When it comes to borrowing, sometimes the government borrows money with risks on reinvestment and people having an intention of buying a home may borrow money with zero prepayment and risks applicable by default.

Whatever the situation may be, the financial engineering products work better on financial underlying assets. But still investment in real assets is worthy as sometimes risk factor involved is less. The concept of more risk, more profit plays significant role in making a decision.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Conclusion

As concluded that the investment in real assets is worthy as sometimes risk factor involved in real assets is less.

Answer 12

Ch. 1 - Prob. 1PS Ch. 1 - Prob. 2PS Ch. 1 - Prob. 3PS Ch. 1 - Prob. 4PS Ch. 1 - Prob. 5PS Ch. 1 - Prob. 6PS Ch. 1 - Prob. 7PS Ch. 1 - Prob. 8PS Ch. 1 - Prob. 9PS Ch. 1 - Prob. 10PS

Explanation of Solution

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Chapter 1 Solutions