1-1 A Modern Financial System—An Overview 1-2 Learning Objectives • Explain the functions of a financial system • The main types of financial institutions • Describe the main classes of financial instruments issued in a financial system • The flow of funds between savers / borrowers • Distinguish between various types of financial markets according to function • Appreciate the importance of globalisation • Understand the effects and consequences of a financial crisis on a financial system
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Proxima Centauri, Inc. On January 1, 2012, Proxima Centauri Inc., a publicly-traded U.S. corporation, granted 1,000 “at-the-money” employee stock options to the founding employees of the high-tech company. To align the compensation of the employees with the financial performance of Proxima, the award was designed to vest only if cumulative revenue over the following three-year reporting period was greater than $10 million and the employees were still employed by the organization at the end of the
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Concepts for Analysis 1. Debt securities. 1, 2, 3, 13 1 4, 7 (a) Held-to-maturity. 4, 5, 7, 8, 10, 13, 21 1, 3 1, 2, 3, 5 1, 7 4 (b) Trading. 4, 6, 7, 8, 10, 21 4 1, 4 (c) Available-for-sale. 4, 7, 8, 9, 10, 11, 21 2, 10 4 1, 2, 3, 4, 7 1, 4 2. Bond amortization. 8, 9 1, 2, 3 3, 4, 5 1, 2, 3 3. Equity securities. 1, 12, 13, 16 4, 7 (a) Available-for-sale. 7, 10, 11, 15, 21 5, 8 6, 8, 9, 11, 12, 16 5, 6, 8, 9, 10, 11, 12 1, 2, 3 (b) Trading. 6, 7, 8, 14, 15, 21 6 6, 7, 14, 15 6, 8
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various types of bond issues. . There are several different types of bond issues: Secured and Unsecured Bonds – Secured bond is backed by collateral, such as a mortgage or lien. The most common secured bonds are mortgage bonds which are backed by real estate or physical equipment that can be liquidated. Unsecured bond issue is backed only by the creditworthiness and reputation of the issuer, and not by any pledged asset. Term, Serial and Callable Bonds – Term bond issues are bonds which mature
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Task 4 Year Cash Flow 15% Rate of Return Present Value 0 $(3,000,000.00) 1 $1,100,000.00 $956,521.74 2 $1,450,000.00 $1,260,869.57 3 $1,300,000.00 $1,130,434.78 4 $950,000.00 $826,086.96 Less Investment $(3,000,000.00) $3,450,866.74 1. IRR % IRR= 22.38% 2. NPV NPV= $3,450,866.74 3. Should the company accept this project and why? I believe the company should look into this. The IRR is greater than the Required Rate
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Hollaar Project-Coordinator: J.H.J.Lukkezen Course-Coordinator: dr. C. Remery Course: Applied Economics Research Course Date: 13th of November, 2011 Table of Contents Abstract 2 Introduction 3 Section I: Theory 5 1.1 Sovereign bonds and credit rating agencies 5 1.2 Measures for investors behavior 6 1.3 Expected behavior of investors 11 1.4 Related literature 15 1.5 Models 16 Section II: Data & Stylized facts 17 2.1 Data 17 2.2 Stylized facts 20 Section III:
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Brigham Concise 4th Edition Chapter 4: The Financial Environment: Markets, Institutions, and Interest Rates 1. The New York Stock Exchange (NYSE) is: a. a secondary market. b. a physical asset market. c. a primary market d. Statements a and b are correct. e. Statements b and c are correct. a. Correct. 2. An example of a primary market transaction is: a. buying 100 shares of Wal-Mart stock from your uncle. b. buying 100 shares of IBM stock through the New York Stock Exchange via
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and sold. One great example would be Companies, governments or public sector institutions that funding through the direct purchase of a new stock or bond. Secondary market: This is a financial market where previously issued securities such as stocks and bonds are bought and sold. A great example of this would be after the bank is issued stocks and bonds, they are then sold to consumers and customers at the bank. Risk: Risk is a possibility for investments. Shareholders, investors, business owners
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The Great Illusion According to the Thomas Jeffery Hogan and R. David Mautz, Jr., “Earnings per share (EPS) is considered by some to be the single most important item in the financial statements” (Hogan and Mautz, Jr., 1991, p. 50). Reasons for this are that they are known to be disclosed in statements of public companies as well as a figure auditors refer to. However, earnings per share may not really be the number investors should look at. Concepts Statement
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50 MC questions Chapter 7, 8, and 9 Test review * Risk * It’s the possibility of a loss, the uncertainty of a return that will never be achieved * What are the two components of risk? * Unsystematic risk (diversifiable risk) * Business risk * Financial risk * Can be eliminated through diversification * Systematic risk (non diversifiable risk) * Market risk * Interest rate risk * Reinvestment risk
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