1. Financial institutions in the U.S. economySuppose Gilberto would like to use $5,000 of his savings to make a financial investment.One way of making a financial investment is to purchase stock or bonds from a private company.Suppose NanoSpeck, a biotechnology firm, is selling bonds to raise money for a new lab-a practice known asissued by NanoSpeck would give Gilbertowill be paid first.Suppose instead Gilberto decides to buy 100 shares of NanoSpeck stock.Which of the following statements are correct? Check all that apply.finance. Buying a bondthe firm. In the event that NanoSpeck runs into financial difficulty,An increase in the perceived profitability of NanoSpeck will likely cause the value of Gilberto's shares to rise.The price of his shares will rise if NanoSpeck issues additional shares of stock.The Dow Jones Industrial Average is an example of a stock exchange here he can purchase NanoSpeck stock.Alternatively, Gilberto could make a financial investment by purchasing bonds issued by the U.S. government.Assuming that everything else is equal, a municipal bond issued by a state most likely pays aby an electronics manufacturer.interest rate than a corporate bond issued

Bond holders have a priority claim on the assets of the company in case of bankruptcy. Bond holders…

finance. Buying a bond Suppose NanoSpeck, a biotechnology firm, is selling bonds to raise money for a new lab-a practice known as issued by NanoSpeck would give Gilberto the firm. In the event that NanoSpeck runs into financial difficulty, will be paid first. Suppose instead Gilberto decides to buy 100 shares of NanoSpeck stock. Which of the following statements are correct? Check all that apply. An increase in the perceived profitability of NanoSpeck will likely cause the value of Gilberto's shares to rise. The price of his shares will rise if NanoSpeck issues additional shares of stock. The Dow Jones Industrial Average is an example of a stock exchange where he can purchase NanoSpeck stock. Alternatively, Gilberto could make a financial investment by purchasing bonds issued by the U.S. government. Assuming that everything else is equal, a municipal bond issued by a state most likely pays a by an electronics manufacturer. interest rate than a corporate bond issued

finance. Buying a bond Suppose NanoSpeck, a biotechnology firm, is selling bonds to raise money for a new lab-a practice known as issued by NanoSpeck would give Gilberto the firm. In the event that NanoSpeck runs into financial difficulty, will be paid first. Suppose instead Gilberto decides to buy 100 shares of NanoSpeck stock. Which of the following statements are correct? Check all that apply. An increase in the perceived profitability of NanoSpeck will likely cause the value of Gilberto's shares to rise. The price of his shares will rise if NanoSpeck issues additional shares of stock. The Dow Jones Industrial Average is an example of a stock exchange where he can purchase NanoSpeck stock. Alternatively, Gilberto could make a financial investment by purchasing bonds issued by the U.S. government. Assuming that everything else is equal, a municipal bond issued by a state most likely pays a by an electronics manufacturer. interest rate than a corporate bond issued

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter21: International Cash Management

Section: Chapter Questions

Problem 2SBD

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One example of financial intermediation is the selling of mortgages by banks to a third party. If you borrow money from the Bank of America to buy a house, the bank immediately sells your mortgage to a third party like Fannie Mae. This transaction gives Bank of America the cash to make another mortgage. Fannie then holds your loan along with millions of others they have bought, and they use the loans as assets to serve as collateral, so they can borrow money in the financial markets to buy more loans from Bank of America and other lenders. What is the impact of all this activity on the cost and availability of mortgages? What if any pitfalls do you see in the process? On balance, is it good or bad for society? Why?
Wall Street performs a sort of “financial alchemy” enabling the individual to benefit from institutions lending money to them, according to Adam Davidson, cofounder of NPR’s “Planet Money.” Individuals can invest small amounts of their money in a 401(k), pooling their capital and spreading the risk. Assume you invested in Fidelity New Millennium, FMILX, one of the “10 Best Rated Funds for 2012” by The Street. How much would you pay for 100 shares if the 52-week high is $34.46, the 52-week low is $28.78, and the NAV is 42.08? (Round your answer to the nearest cent.)
Imagine that you work for OstBank, a fictional European bank, as part of the team that manages repurchase agreements with the European Central Bank (ECB). If the ECB lowers the refinancing rate from 2% to 1%, OstBank will borrow from the ECB. To execute this change, OstBank could v the ECB. The result would be in OstBank's reserves, prompting OstBank to make loans. Because banks making loans lead to deposits, and deposits in the banking system are part of the money supply, a decrease in the ECB's refinancing rate will tend to the money supply in Europe.
The examples below are all examples of a U.S. capital outflow except a . General Motors invests in an automobile plant in France. b . Charles Schwab, Inc., invests mutual fund money in the Japanese stock market. c . All answers are capital outflows. d . Microsoft opens a new office in Detroit
The Case:Hassan Mustafa has recently started his new job as a financial manager in a firm called ScanSoft. ScanSoft is developing a new process to manufacture optical disks. The development costs were higher than expected, so ScanSoft requires an immediate cash inflow of $5,200,000. To raise the required capital, the company decided to issue bonds. Since ScanSoft had no expertise in issuing and selling bonds, Hassan suggested that the company work with an investment dealer. The investment dealer bought the company's entire bond issue at a discount, and then planned to sell the bonds to the public at face value or the current market value. To ensure it would raise the $5,200,000 it required, ScanSoft plans to issue 5200 bonds with a face value of $1000 each, on January 20, 2021. Interest is paid semi-annually on July 20 and January 20, beginning July 20, 2021. The bonds pay interest at 5.5% compounded semi- annually.Hassan Mustafa realized that when the bonds mature on January 20, 2041,…
Why do community banks not want Wal-Mart to be in the banking business? What are the possible benefits to Wal-Mart of such move? What drawback to community bankers anticipates if Wal-Mart can operate full-scale bank in the United States?
17. Suppose Intel is considering building a new chip-making factory. Would Intel compare the expected rate of return on the factory to the bond market interest rate when deciding whether to build the factory? If Intel needs to borrow money in the bond market, how might the bond interest rate affect Intel's decision whether to build the factory? If Intel has enough of its own funds to finance the new factory without borrowing, would the bond interest rate affect their decision whether to build the factory?
c) In what three ways do commercial banks make a profit from the monetary system? (d) In Canada, what is the equivalent of the U.S. Federal Reserve? e) Suppose that the United States were to adopt a system of full-reserve banking; thatis, demand deposits would be illegal to lend out, and banks would only charge a nominalfee for safekeeping. Would this help to fix the problems that Mike Maloney layed out? Explain your answer.
The ABC Bank takes funds from depositors and gives out commercial, housing and car loans. Now, instead of keeping the housing and car loans on its books, it sells them to a hedge fund. However, the borrowers still make payments to ABC Bank which then remits the payments to the hedge fund. The bank receives a fee from the hedge fund for servicing the loans. Discuss two (2) advantages to ABC Bank from switching its housing and car loans business to the fee-based income model of banking instead of earning an interest spread (difference in interest between what the bank charges its customers and pays its depositors).
5.3)Suppose that you hold a piece of land in the City of London that you may want to sell in one year. As a U.S. resident, you are concerned with the dollar value of the land. Assume that, if the British economy booms in the future, the land will be worth £19 and one British pound will be worth $1.29. If the British economy slows down, on the other hand, the land will be worth less, i.e., £23 million, but the pound will be stronger, i.e., $1.41/£. You feel that the British economy will experience a boom with a 70% probability and a slow- down with the remaining probability. Estimate the exposure b to the exchange risk. (USD, no cents)
Considering the following quotes from three banks: London Bank: €1.0837/£ Hong Kong Bank: U$1.1944/£ Tokyo Bank: €0.9582/U$ Ignoring transaction costs, is there an arbitrage opportunity based on these quotes? Justify your answer through calculations. If yes, what steps would you take to make an arbitrage profit and how much profit in US dollars would you make if you are authorized to use 10 million US dollars for this purpose?