Questions and Answers of Financial Markets Institutions

Go to http://finance.yahoo.com/, enter the symbol MET (MetLife, Inc.), and click on “Get Quotes.” Click on “5y” just below the stock price trend to review the stock price movements over the
Go to http://finance.yahoo.com/, enter the symbol MET (MetLife, Inc.), and click on “Get Quotes.” Retrieve stock price data at the beginning of the last 20 quarters. Then go to
Interpret the following comments made by Wall Street analysts and portfolio managers:a. “Insurance company stocks may benefit from the recent decline in interest rates.”b. “Insurance company
Repeat the questions in exercise 1 for the Children’s Place Retail Stores (symbol is PLCE). Explain how the market capitalization and trading volume for PLCE differ from IBM.Exercise 1Review the
Go to http://research.stlouisfed.org/fred2. Under “Categories,” select “Interest rates” and then select the three-month Treasury bill series (secondary market). Describe how this rate has
a. Sing the most recent issue of The Wall Street Journal, review the yields for the following securities:If credit (default) risk is the only reason for the yield differentials, what is the default
Using the same website, retrieve data at the beginning of the last 20 quarters for interest rates (based on the three-month Treasury bill rate) and the producer price index for all commodities and
Assess the shape of the yield curve, using the website www.bloomberg.com. Click on “Market data” and then on “Rates & bonds.” Is the Treasury yield curve upward or downward sloping? What is
Based on the various theories attempting to explain the shape of the yield curve, what could explain the difference between the yields of the 90-day Treasury bill and the 30-year Treasury bond? Which
Assess the current structure of the Federal Reserve System, using the website www.federalreserve.gov/monetarypolicy/fomc.htm. Go to the minutes of the most recent meeting. Who is the current
Review recent issues of The Wall Street Journal and search for any comments that relate to the Fed. Does it appear that the Fed may attempt to revise the federal funds rate? If so, how and why?
Go to the website www.federalreserve.gov/ monetarypolicy/fomc.htm to review the activities of the FOMC. Succinctly summarize the minutes of the last FOMC meeting. What did the FOMC discuss at the
Review a recent issue of The Wall Street Journal. Summarize the market’s expectations about future interest rates. Are these expectations based primarily on the Fed’s monetary policy or on other
Is the Fed’s present policy focused more on stimulating the economy or on reducing inflation? Or is the present policy evenly balanced? Explain.
Using the website www.research.stlouisfed.org/fred2/, retrieve interest rate data at the beginning of the last 20 quarters for the federal funds rate and the threemonth Treasury bill (T-bill) rate,
Go to http://research.stlouisfed.org/fred2. Under “Categories,” select “Interest rates.” Compare the yield offered on a T-bill with the yield offered by another money market security with a
Use the “Money Rates” section of The Wall Street Journal to determine the 30-day yield (annualized) of commercial paper, certificates of deposit, banker’s acceptances, and T-bills. Which of
How has the risk premium on a specific risky money market security (versus the T-bill) changed since one year ago? Is the change due to a change in economic conditions? Explain.
Using the same website, retrieve interest rate data at the beginning of the last 20 quarters for the three-month T-bill and another money market security and place the data in two columns of an Excel
Go to http://finance.yahoo.com/bonds. Click on “Composite Bond Rates.” Compare the rate of a 10-year Treasury bond versus a 10-year municipal bond. Which type of bond would offer you a higher
The Treasury periodically issues new bonds to finance the deficit. Review recent issues of The Wall Street Journal or check related online news to find a recent article on such financing. Does the
Explain how the shape of the yield curve for municipal securities compares to the Treasury yield curve. Under what conditions do you think the two yield curves could be different?
Go to www.giddy.org/db/corpspreads.htm. The spreads are listed in the form of basis points (100 basis points = 1 percent) above the Treasury security with the same maturity.1. First determine the
Assess a mortgage payment schedule such as http://realestate.yahoo.com/calculators/amortization.html. Assume a loan amount of $120,000, an interest rate of 7.4 percent, and a 30-year maturity. Given
Review the “Corporate Borrowing Rates and Yields” table in a recent issue of The Wall Street Journal to determine the Treasury bond yield. How do these rates compare to the Fannie Mae yield
Describe the shared-appreciation mortgage.
Go to http://ipoportal.edgar-online.com/ipo/home.asp. Review an IPO that is scheduled for the near future. Review the deal information about this IPO.1. What is the offer amount? How much are total
Review a recent issue of The Wall Street Journal. Indicate whether the market prices increased or decreased, and explain what caused the market’s movement.
Go to http://finance.yahoo.com/7u. Compare the performance of the Dow, Nasdaq, and S&P 500 indexes. Click on each of these indexes and describe the trend for that index since January. Which index has
Review Section C of a recent issue of The Wall Street Journal. Notice that the stocks with the largest one-day gains and losses are shown. Do an Internet search for news about the stock with the
Go to http://finance.yahoo.com/, type in the symbol DELL (for Dell, Inc.) and click on “Get Quotes.” Then go to the bottom of the stock price chart and retrieve the end-of-month stock price of
Go to http://finance.yahoo.com/. Insert the ticker symbol of the firm of your choice in the “Get Quotes” section. Review the statistics provided. What is the average daily trading volume (Avg
For the same firm, click on “Key Statistics.” What is the firm’s beta? What are its return on assets (ROA) and return on equity (ROE)? What is its short ratio?
Describe the roles played by floor brokers and specialists. Explain how specialists or market-makers may attempt to capitalize on stock price discrepancies.
Describe “front-running.” Explain how front-running may prevent limit orders from investors from being executed.
The former chairman of the NYSE, Richard Grasso, resigned in 2003 as a result of institutional outrage over his excessive compensation package. Besides setting a bad example for the firms listed on
Obtain recent stock options data for a particular stock or stock index in which you are interested. Go to http://online.wsj.com/mdc/public/page/marketsdata.html and click on “Stocks” and then
Go to http://futuresource.quote.com/. Review the charts for an equity index product such as the S&P 500. Explain how the price pattern moved recently.
Now compare that pattern to the actual trend of the S&P 500, which is provided at http://finance.yahoo.com/7u (just click on “S&P 500” there to access the charts). Describe the relationship
Explain how index arbitrage may be used.
Go to www.cboe.com. Under “Quotes,” select “Delayed Quotes Classic.” Insert the ticker symbol for a stock option in which you are interested. Assess the results. Did the premium (“Net”)
Based on the changes in the premium, do you think the underlying stock price increased or decreased? Explain.
Review the recent annualized rate for a short-term security such as the 1-year Treasury rate versus a long-term security such as the 10-year Treasury rate. Based on this information, do you think
Use a recent issue of The Wall Street Journal to determine how short-term interest rates have changed over the last year (assess the Treasury yield for a three-month maturity based on the yield curve
Assume that you need long-term funds and can borrow at the short-term Treasury rate. Based on the existing interest rates, would you consider engaging in a swap of a floating rate in exchange for a
What is the most recent value of the Australian dollar in U.S. dollars? For large transactions, how many British pounds does a U.S. dollar buy?
Use a recent issue of The Wall Street Journal to determine how a particular currency’s value has changed against the dollar since the beginning of the year. The table called “Currencies” lists
Review the pound’s value over the past year. Offer a possible explanation for the recent movements in the pound’s value.
What is the most recent value of the Hong Kong dollar in U.S. dollars? Do you notice anything unusual about this value over time? What could explain an exchange rate trend such as this?
Summarize an article in The Wall Street Journal that discussed a recent change in managerial strategy by a particular commercial bank. (You may wish to do an Internet search in the online version of
Seattle Bank was long in Australian dollars and short in Canadian dollars. Explain a possible future scenario that could adversely affect the bank’s performance.
Go to the website www.chase.com. List the various services offered by Chase that were listed in this chapter. For each, state whether the service provided by the bank reflects an asset (use of funds)
Browse the most recent Quarterly Banking Profile at www.fdic.gov/bank/analytical/index.html. Click on “Industry Analysis” and then on “Failed Banks.” Describe how regulators responded to one
Using a recent issue of The Wall Street Journal, summarize an article that discussed a particular commercial bank regulation that has recently been passed or is currently being considered by
Assess the services offered by an Internet bank. Describe the types of online services offered by the bank. Do you think an Internet bank such as this offers higher or lower interest rates than a
Go to http://finance.yahoo.com/, enter the symbol BK (Bank of New York Mellon Corporation), and click on “Get Quotes.” Click on “5y” just below the stock price trend to review the stock price
Go to http://finance.yahoo.com/, enter the symbol WFC (Wells Fargo Bank), and click on “Get Quotes.” Retrieve stock price data at the beginning of the last 20 quarters. Then go to
Go to www.suntrust.com. Click on “Investor Relations” and then on “Annual Reports.” Use the income statement to determine SunTrust’s performance. Describe SunTrust’s performance in recent
Using a recent issue of The Wall Street Journal, summarize an article that discussed the recent performance of a particular commercial bank. Does the article suggest that the bank’s performance was
Has SunTrust’s ROA increased since the year before? Explain what caused its ROA to change over the last year. Has its net interest margin changed since last year? How has its noninterest income (as
Assess the recent performance of savings institutions using the website www2.fdic.gov/qbp/index.asp. Click on “Quarterly Banking Profile,” then on “Savings Institution” section, and summarize
Retrieve the annual report of Heritage Financial Corporation (ticker symbol is HFWA) or another savings institution of your choice. To access income statement information, go to
Go to http://finance.yahoo.com/, enter the symbol HFWA (Heritage Financial Corporation), and click on “Get Quotes.” Then, retrieve stock price data at the beginning of the last 20 quarters. Then
Go to www.gmaccf.com. Describe the services offered by GMAC Commercial Finance.
Using a recent issue of The Wall Street Journal, summarize an article that discussed the recent performance of a particular finance company. Does the article suggest that the finance company’s
Retrieve the annual report of American International Group (its ticker symbol is AIG), which owns a large consumer finance company, or select your own consumer finance company. To access income
Assess today’s mutual fund performance, using the website www.bloomberg.com/markets/. Under “Market Data,” click on “Mutual Funds.” What is the bestperforming mutual fund today in terms of
Using an issue of The Wall Street Journal, summarize an article that discussed the recent performance of a specific mutual fund. Has this mutual fund’s performance been better or worse than the
When would a commercial bank take a short position in a foreign currency? A long position?
The mutual fund industry publishes a fact book containing exhaustive data on the historic and current state of mutual funds. Go to www.ici.org, click on Research and Statistics, then on Fact Books.a.
William realizes that there is no point in paying fees to mutual fund managers for them to choose which stock or securities to buy for him. However, after carefully reviewing his decision, he decides
It is relatively easy to find up-to-date information on banks because of their extensive reporting requirements. Go to http://www2.fdic.gov/qbp/. This site is sponsored by the Federal Deposit
Liverpool Bank has an income gap of -$10 million, Alur Finance Co has an income gap of $25 million and TLBR Bank has an income gap of -$15 million. Propose an interest rate swap that will benefit all
A mutual fund charges a 6% front-end load and reports an expense ratio of 1.75%. If an investor plans on holding a fund for 35 years, what is the average annual fee, as a percent, paid by the
Morningstar is the best-known company that specializes in analysis and review of mutual funds. There are a number of Web sites that report Morningstar's results. Go to www.quicken.com/investments/
Suppose that you can deposit at most $300 per month for your savings and that you want to buy securities that are available only in large denominations. What benefit of mutual funds would be
A mutual fund reported year-end total assets of $2,347,000,000. Determine the expense ratio if total fees amounted to $18,580,000.
Calculate the NAV of the following fund, assuming 3,500 shares are outstanding. Calculate the percentage change in the NAV of the fund if stock C climbs to $33.41. Stock A B с Cash Shares
A mutual fund offers "A" shares which have a 6% frontend load and an expense ratio of 0.86%. The fund also offers "B" shares, which have a 4% back-end load and an expense ratio of 0.97%. Which shares
Calculate the NAV of the following fund if 5,000,000 shares are outstanding. Assuming you bought shares in this fund a year ago at $5.06, determine the yield on your investment. Stock (at current
What was the role of hedge funds in the global financial crisis of 2007–2009?
On December 31 a mutual fund has the following assets and prices at 4:00 p.m.Calculate the net asset value (NAV) for the fund. Assume that 8,000 shares are outstanding for the fund.
Suppose a mutual fund advertises a yearly return of 12%, for which it charges an upfront fee (a percentage of your initial investment). Another fund advertises the same return, but it charges a 3%
Considering the evolution of mutual funds fees over the past 20 years, would you say that competition among mutual funds has been a good thing or not?
What distinguishes the investing strategies of hedge funds from those of mutual funds?
On January 3 the prices at 4:00 p.m. are as follows:Calculate the new NAV. Stock 1 2 3 4 5 Cash Shares owned 1,000 5,000 2,800 9,900 3,000 n.a. Price $1.92 $51.18 $29.08 $67.19 $4.51 $5,353.40
Recall that under the provisions of the Dodd-Frank Act of 2010, systemically important financial institutions (SIFIs) are required to maintain capital reserves (potentially up to 8% of the fund’s
Distinguish between mutual fund investments and investments in shares on the stock market.
Compare the performance of mutual funds to a savings account.
Camille is offered two options: (1) Receive $100 or (2) Flip a coin and get $0 if she loses or $200 if she wins. Assuming Camille prefers the first option; would you say Camille is more or less
Research indicates that the 1,500,000 cars in your city experience unrecoverable losses of $300,000,000 per year from theft, collisions, and so on. If 40% of premiums are used to cover expenses, what
There are many sites on the Web to help you compute whether you are properly preparing for your retirement. One of the better is offered by Quicken.You will find it at
What are the possible options when buying insurance for the elderly? Compare the options of whole life insurance policy and term life insurance policy.
Assume that life expectancy in the United Kingdom is normally distributed with a mean of 80 years and a standard deviation of 11 years. What is the probability that you will live to be over 120 years
The Internet offers many calculators to help consumers estimate their needs for various financial services. When using these tools, you must remember that they are usually sponsored by financial
Suppose an insurance company decides to insure the earnings obtained by a professional tennis player (in the event of an injury), provided she does not engage in activities like skydiving or skiing.
Kio Outfitters estimated the following losses and probabilities from past experience:What is the probability Kio will experience a loss of $5,000 or greater? If an insurance company offers a What is
Assume that your rich relative passes away, leaving you a life insurance policy worth $200,000. The insurance company also offers you an option to receive $9,000/year for 25 years, with the first
A home products manufacturer estimates that the probability of being sued for product defects is 2% per year per product manufactured. If the firm currently manufacturers 25 products, what is the
How do insurance companies price their products to solve the problem of asymmetric information?

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