Asset 402- Asset 420
Asset 402
Why does a large interest rate differential exist even in pegged exchange board currency-even when the purpose of pegging was to minimize currency risk? Explain briefly.
Interest rates can be defined as the total of interest charged in a period to pay the amount deposited, borrowed or lent primarily known as the principle. Interest amount to the profit made once the full debt is paid.
If a particular currency has an interest rate at 4% while another currency has an interest rate of 2%, the difference in rates between the two currencies is known as interests rate differential. Currency pegging is made to reduce risks, but interest rate differential is very crucial in the foreign market since it helps in driving the currency pairs. Moreover, IRD is a vital entity for investors who want to do carry trade whereby you acquire a loan at low interest rate then invest in high return assets.
Asset 403
Does the Reserve Bank Staff College offer training courses for the officials of scheduled banks and financial institutions?
Reserve bank is the bank mandated with the responsibility to stabilize the overall financial system in a country. The reserve bank achieves this by monitoring the risk in the economy and providing the financial institution with liquidity
Reserve Bank Staff College provides training facilities for officials from other financial institution. RBSC offers training services not only to the recruits but also to the continuing financial officers both in Chennai and other parts of India. Due to the large number of potential trainees coaching is done in batches and through appointments. The objective of this college is to equip financial personnel with substantial information in running the economy of India. Additionally, there are more chances in working in your dream financial institution when you join RSBC training facilities.
Asset 404
is there a way that you think of that American Machine Tools might be able to make the machinery sale to Moldova?
American machine tool sells various products which include shears, CNC mills iron workers, 3D printers among others. The company offers excellent services with over 5000 customers with a 5 star rating in US and Canada.
Moldova is a developing country, and its economy depend on agriculture. American Machine Tools it gives solution to all metal fabrications, and it has the potential of providing metal solutions to Moldova. However, since it is a small economy country, I would suggest they agree with the government to use the instalment technique to purchase the equipment. American Machine Tool contribute up to 25% of the global value, and it would be unfair for them if they don’t consider other small economy countries. The other option is paying on credit instalments, and it will allow the government to pay the debt in small bits without stretching the expenditure.
Asset 405
Did Hank Paulson and Ben Bernanke’s moral hazard in bailing out Lehman destroyed the credibility of mortgage backed securities?
Moral hazard can be defined as the risk that a party exposes itself into after proving false information about its assets while getting into an agreement. Transparency is important since it unveils all the liabilities and assets of an organization before going into a contract.
It would be out of context to say Lehman was bailed out, but to the contrary, he was used to bail other entities such as TAPP out. Both Hank Paulson and Ben Bernanke’s predicted the haul that would hit the economy if Lehman and Bearn Stearns fell. Therefore, there was an immediate need to save American financial institutions. The credibility of mortgages was damaged by the performance of Lehman and other institutions. Additionally, the credibility of mortgaged-backed securities was destroyed by deficiencies and frauds, but it was not obliterated.
Asset 406
is learning about stochastic processes the best way to gain a mathematical edge in the financial markets?
Financial markets is the platform where the trading of securities occurs. These markets may include derivatives, forex and bond market among others. These markets enables the government acquire capital by trading their goods.
A stochastic process is a game of variables that is done mathematically. Learning this technique is beneficial, especially if you want to venture in financial markets where everything lies under prediction. Financial markets do not have future data to analyze the markets; instead, it used indicators such as stochastic to make precise predictions on how and when the markets will fluctuate or soar. Most hedge fund managers use this process to invest in stock markets. The study of these variables gives a mathematical edge advantage in financial markets.
Asset 407
if you were responsible for setting U.S energy policy, what polices would you promote? Give a brief rationale for your choices
Energy policy includes the regulation of energy extraction, taxes and incentives, legislation among other entities at the state level. The state plays a substantial role in the implementation of the efficient energy incentives in US
U.S. energy policy is steered by the federal state and the local governments towards the proper distribution of oil and gas and also the consumption. Given the opportunity to set the policies I would look into the oil and gas prices. Oil production contributes heavily on the economy of the U.S. and there is an urgent need to set a price policy that will not affect the progress of other factors of the economy. It is also crucial to consider the effect of pricing in the financial markets which affect government spending. The extraction of oil has harm to the environment, and therefore, we should focus on other sources of energy that lead to less pollution like renewable energy and geothermal energy.
Asset 409
- Why is it that leveraged buyouts and management buyouts are best suited for low risk businesses with stable cash flows? b. What is the significance of the delisting of 21st Century Fox from the ASX?
The low risks businesses can be defined as business whose operation is faced with smaller risks over the long run. These business include drop shipping, senior care direct sales among others. However, in most cases, lower risk business have a lower return rate.
- a) Leverage buyouts is the process of acquiring another firm through borrowing to meet the acquisition price. In the case of management buyouts, the manager of the organization acquires the entire company partly. The two approaches fit in low risk business since the assets of the company have increased stabilizing the cash flow essential for the firm’s operations.
- b) the delisting of Fox from ASX will be used as an incentive whereby Fox will use this opportunity to improve the rate of take-overbid.
Asset 410
a)Define the terms covariance and correlation coefficient. b) How are they related to one another, and how do they affect the required rate of return on a stock? c) Would correlation affect its required rate of return if a stock were held (say, by the company’s founder) in a one-asset portfolio?
The rate of return of return is the net loss or gain on made by a company after their investment in specific period and its usually expressed as a percentage of the initial amount invested. Its measures the relevance of the business and determines whether to abort or reinvest in the next period
- a) covariance is used to determine the changes associated with one variable in relation to another while the correlation coefficient is the ratio of the strength and affiliation between two variables.
- b) covariance is the ration (measure) of the correlation coefficient, but correlation measures the shift in the movement of these variable. Covariance show the direction of the association while the correlation coefficient determines both association and strength. They two determine the most profitable entry points in stock.
- c) correlation does not affect the returns whether the stocks are held in a portfolio or not.
Asset 414
How can a U.S. business access resources, tools, and information help them appraise financial factors in foreign countries?
Financial factors are form of financial in a corporation which show when expenses are incurred and when the sales are made. Financial factors draws information from various models which include the cost of good, revenue among others.
PEST is a resourceful component in scanning financial factors in other countries. It breaks down all the factors affecting business such as politics, technology, environment and legal entities. Bureau of statistics offers diverse information on both the performance of business locally and internationally. For example, tax restrictions on imported goods in some countries would threaten a new business in that location. It also intensifies the most hit countries in terms of political influence and instability such as Iraq. FOMC is a good source of information since it releases up to date data on the progress of other countries economy wise.
Asset 415
Options can be used either to scale up or reduce overall portfolio risk. a) What are some examples of risk-increasing and risk-reducing options strategies? Explain each. b) Why do you think the most actively traded options tend to be the ones that are near the money?
Portfolio risks can be defined as the failure to meet the financial objectives through the combination of the units and assets in an investment. Portfolio investment carry their own risks and higher risk result to higher return rate.
Portfolio risk shows the risks involved in all the assets in an investment.
- Option strategies are made to mitigate risks; however, the risk-increasing option strategies increase risks, for example, when you invest in an asset portfolio with in-money-options. In this case, the price of the asset and put price are equal. The risk-reducing options reduce the risks, for example, when you buy stocks with the put price close or near the market price.
- The options near money, trade most due to the low risks especially for small investors.
Asset 416
When the government in India set aside a budget for creating jobs, how exactly have they used this budget?
Budget is the estimate of expenses and revenue for a future period of time. Budget can be made by the business, government or even people to cater for the future expenses and unseen emergencies within a period.
For a sustainable economy, the government responsible with leadership should be in the capacity to create jobs for her people. Indian administration has allocated 17,000 crore lakhs to steer the mission of establishing skills necessary for industrialization. The Skill India Mission is set to provide skills to the million youths in the country. Through this initiative, the unemployment rate will surge, giving the government the opportunity to focus on other projects of the country. This budget allocation is a significant leg up for president Modi towards achieving his goals.
Asset 417
Does the efficient market hypothesis apply to all financial markets? Explain. What factors can affect the efficiency of all or some of the markets?
Financial markets can be defined as the platform where the exchange of bonds, debentures and shares are done. Financial market aids in the limited resource allocation in a country by the government.
This hypothesis is informative and operational, which makes it applicable to all financial markets. The shift in stock prices is brought by different factors of the economy, and the efficient market hypothesis determines the change in prices. Almost every financial market is affected by prices; therefore, every investor, regardless of the market they are in, they will consider price prediction through market hypothesis. Financial disclosure, substantive information, the trading limit and market participation are main factors affecting the efficiency of the market.
Asset 418
If RCOM insolvency is approved, what happens to the shares?
Insolvency can be defined as a form of financial distress in the where an organization or someone is unable to pay their bills. Insolvency can be caused by poor cash flow of management in the business.
Insolvency occurs when the liabilities in a company exceeds the assets hence no money for shareholders. If RCOM file for insolvency your shares are as good as worthless, especially if the company oblige to sell off all the assets. Additionally, in the case where there is something left after liquidation, that’s the only time you can file for a complaint to be part of the little to be shared. In the condition that the assets cannot pay the creditors the company owner(shareholders) are supposed to pay off the creditors hence double loss.
Asset 419
How are the job placements for financial engineering phd graduates from Stevens Institute of Technology?
Financial engineering is the solving of the financial problems through mathematical techniques. To achieve this, financial engineering uses the knowledge from economics, statistics and computer science among others,
Stevens Institute of Technology offers quality education, and from the financial engineering rankings stevens institute was number 13. In terms of job placement, PhD graduates are absorbed in New York compared to other schools due to their competitive skills in financial fields. In 2018 the placement rate rose to 98% with placements getting above-average salaries. Academic value in Steven Institute is quite high, and even for undergraduate, the placement rate is 90% after six months upon graduation. Financial engineering placement rate remains at top-notch in this institute.
Asset 420
Would it make sense for a model of financial world to assume that there is no arbitrage? Would it make sense for a model of financial world to assume that there are no great bets?
Arbitrage is the trade of currency, securities or commodities done simultaneously in derivative forms to capitalize on the diverse price made to the same asset. Arbitrage is legal since the Arber explore different prices in diverse markets
Investors are all around looking for the most profitable investments and to achieve these goals, you required to meet a specific criterion. It is vital to understand what influences financial markets and to avoid risks you engage the arbitrage technique whereby you buy stock from one market the sell it in a different market with high returns. Arbitrage is practiced all over the world, and it cannot be ignored since it exists.
Just like another financial strategy to make money in the financial markets betting is a strategy used to buy or sell stocks; therefore, under no circumstance, it should be assumed it doesn’t exist.