interest rate (annual): 10% Japanese interest rate (annual): 10% ______________________________________________________________________________ a. In which country would you invest your $1 million if you decided to use the forward market? What total amount (in dollars) would you obtain at the end of the 180 days? Show the necessary calculations. Note: Assume that there are no transaction costs. The current spot exchange is $1 = Y200, in 180 days 200/210 =.95 which
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Financial Management Definitions FIN/370 MARCH 31ST 2014 1. Finance – is considered the part of economics that involves the distribution of property and debts. Finance relates to Financial Management because it is the science of how to manage money. 2. Efficient Market – A type of Market where all important information is shared by all participants simultaneously. Efficient Markets (Stock markets) relates to Financial Management in that Stock Markets play a part of
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systematic risk and unsystematic risk In finance, systematic risk, sometimes called market risk, aggregate risk, or undiversifiable risk, is the risk associated with aggregate market returns. By contrast, unsystematic risk, sometimes called specific risk, idiosyncratic risk, residual risk, or diversifiable risk, is the company-specific or industry-specific risk in a portfolio, which is uncorrelated with aggregate market returns. Unsystematic risk can be mitigated through diversification, and systematic
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securing a government construction project through private financial initiative (PFI - company will build with own source of funding and government will pay later). Being a conservative businessman, his late father kept almost all the company reserves in cash (RM30 million), owned a few parcel of agricultural land in Malaysia (book value at RM40 million) and 5 shop-lots (commercial properties) in several parts of Kuala Lumpur. The total estimate market price of the whole commercial property is about RM20
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valuation introduction Financial assets Three main types: 1.fixed interest or Debt 2.Shares or Equity 3. Derivative Securities (Futures, Options) Fixed interest: 1.Payments fixed or determined by a formula 2. Money market debt: short, term, highly marketable(市场的), usually low credit risk 3. Capital market debt: long term bonds, can be safe or risky 4.Subject to Interest Rate movements (Yield Curve) and Credit Risk Equity Securities: 1.ownership of a corporate entity 2.secondary markets liquid and low
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1. Duration for the coupon bond: D= 2501.2510001+2501.25210002+12501.25310003=2.44 The percentage change from 25% to 26% for the zero-coupon bond is shown as ΔPP=-2.51.250.01=-2% The percentage change from 25% to 26% for the coupon bond is shown as ΔPP=-2.441.250.01=-1.95% The zero-coupon bond is more sensitive to interest-rate change due to its longer duration. 2. (a) An investor wants upside potential if IBM increases but wants (net) losses no greater than $15 if prices
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Market Beta (β) and Stock Returns - An Analysis of Select Companies I INTRODUCTION During the past three decades, CAPM (Capital Asset Pricing Model) has been studied in great depth and is used as the standard risk-return model by various researchers and academicians. The basic premise of CAPM is that the stocks with a higher beta yield higher returns for the investors. One of the conditions stipulated in the model is that the said return should be higher than the return of the risk-free
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Financial management * Finance:- Finance may be defined as that administrative area which is concerned with arrangement of cash and credit effectively. * Business finance:- Business finance is the process of determining the required amount of fund, finding available sources of fund, calculating the nominal and effective cost of each sources of fund, conservating the collected funds properly and allocate the optimally in order to achieve the goal of an organization or a business firm.
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Financial Terms and Roles Shannan Cousin FIN 370: Finance for Business April 13, 2013 Amy Grover, MBA In this paper I will outline the fourteen financial terms and roles for the following words finance, efficient market, primary market, secondary market, risk, security, stock, bond, capital, debt, yield, rate of return, return on investment and cash flow and identify their roles in finance in today’s business world. These fourteen terms and roles are very essentials in today’s business
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model as a financial model which uses multiple factors during computation to explain a given market phenomena or at a given equilibrium market prices. The model is also useful in explaining both the individual and portfolio market securities. This is capable through comparison of two or more factors which are being analyzed to determine the relationship between the securities performance and the variables. Formula can be used to express the relationship Return on equity (Ri), Market return (Rm)
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