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  1. What is the primary distinction between exchange-listed and over-the-counter options? Which option strategy uses both markets?

 
 
 
 
 
 

  1. Explain why there is or isn’t cash payment upfront in (a) an option and (b) a futures contract.

 
 
 
 
 
 

  1. Would an American call be worth more than its European counterpart if the stock (a) does pay dividend and (b) does not pay dividend? Explain.

 
 
 
 
 
 

  1. Would an American put be worth more than its European counterpart if the stock (a) does pay dividend and (b) does not pay dividend? Explain.

 
 
 
 
 
 
 

  1. What is (are) the purpose(s) of instituting limits on option trading? What are these called? What risk does an exchange face with these limits?

 
 
 
 
 
 
 
 

  1. How does change in interest rates leads affect call and put prices? What would be the direction of price changes for call and put? Explain in words without using any equation(s).

 
 
 
 
 
 
 
 

  1. Is there an arbitrage opportunity if the futures price exceeds the spot price plus carrying cost? If so, design a trading strategy. Do not give an example.

 
 
 
 
 
 
 

  1. What risk is there for holding onto a futures position in the delivery month? How does a trader avoid this risk?

 
 
 
 
 
 
 
 
 
 

  1. An investor currently owns a portfolio of stocks and expects that the stock market to fall next quarter. How does the investor hedge risk without selling the portfolio?

 
 
 
 
 
 
 
 

  1. How does a borrower reduce interest rate risk?

 
 
 
 
 
 
 
 
 

  1. Explain the difference between a recombining and non-recombining tree. Which one is more desirable? Explain why?

 
 
 
 
 
 
Numerical questions:

  1. You calculated the following values for a two-year in-the-money American put with $8 intrinsic value on a non-dividend paying stock currently trading at $102:

Su = $127.50 Sd = $81.60
Assume n = 2, the risk-free rate is 8% per annum, and the stock is expected to grow at the same rate for the next two years.                                                             (12 points)
 

  • Calculate the stock prices after two years.

 
 
 
 
 
 

  • Calculate p and (1 – p) rounding them to two-digit after decimal.

 
 
 
 
 

  • Calculate Pu2, Pud, Pd2, Pu, and Pd.

 
 
 
 
 
 
 
 

  • Calculate current price of the put.

 
 
 
 

  • Calculate the time value of the put, the initial and subsequent hedge ratios, and the rate of return for a hedged portfolio if the stock goes down after one period.

 
 
 
 
 
 
 
 
 

  1. A farmer currently holds 5,000 bushels of corn. The local mill is offering a price of $3.41 per bushel. Currently, a four-month futures contract is trading at $3.49. The farmer is considering selling now or holding the corn in inventory and selling a futures contract now. The farmer can store and insure the corn at a cost of 15 cents per bushel per annum to be paid monthly in advance at the beginning of each month. Interest rates are 7%, continuously compounded.

(10 points)
(a)       Calculate total carrying cost per bushel of corn.
 
 
 
 
 
 

  • What is the theoretical price for a four-month futures contract?

 
 
 
 

  • What is the best strategy for the farmer? Explain why.

 
 
 
 
 

  • What is the basis today?

 
 
 
 

  1. A stock currently trading at $112 pays a $5 dividend in five months and eight months. A call option on the stock with an intrinsic value of $7 expires in nine months. Annualized yield for T-bill for this option is 8% and annualized standard deviation (volatility) of the continuously compounded return on the stock is 13%.

(8 points)
 
(a) Compute S0′
 
 
 
(b) Compute d1 and N(d1)
 
 
 
(c) Compute N(d2) assuming d2 is -.2953. Use this N(d2) in part (d).
 
 
(d) Compute the price of the European call.
 
 
 

  1. Under the terms of an interest rate swap, PDX Corp has agreed to receive 12% per annum and to pay six-month LIBOR in return on a notional principal of $190 million with payments being exchanged every six months. The swap has a remaining life of 14 months. The six-month LIBOR yield curve is downward sloping and rates for next payment dates are 14%, 16%, and 12% per annum with continuous compounding. The six-month LIBOR at the last payment date was 11.5% per annum.

(9 points)     
 
(a) What is the value of the fixed-rate bond?
 
 
 
 
 
 
 

  • What is the value of the floating-rate bond?

 
 
 
 
 
 

  • What is the value of the swap to PDX’s counterparty?

 
 
 
 

  1. Companies P and Q have been offered the following rates per annum on a $100 million six-year loan:

_________________________________________
Fixed Rate           Variable Rate
_________________________________________
Company P                 11%                   LIBOR + 1.5%
Company Q                14%                   LIBOR + 2.5%
_________________________________________
 
Company P requires a floating-rate loan; Company Q requires a fixed-rate loan. A broker will charge 1.5% per annum in a swap between P & Q.
 
(a)    Calculate net gain from swap for each company.
 
 
 
(b)    What rates of interest will P and Q end up paying after the swap and how?
 
 
 
 
 
(c)     Diagrammatically present the swap in a figure.                                (8 points)
 
 
 
 
 
 

  1. Suppose that 12-month and 15-month LIBOR are 8% and 11% with continuous compounding. ABC Inc. enters into a FRA with XYZ Inc. to receive the forward market rate and pay 13% measured with quarterly compounding, on a notional principal of $13 million for 3 months beginning 12 months from now. (5 points)
    • Which party is the FRA seller and the FRA buyer?

 
 
 

  • What is value of this FRA to the FRA buyer?

 
 
 
 
 
 
 

  1. Today is February 25th, 2020, and a 1-yr T-bill is selling at 89.58% of par. A put option on XYZ stock expires on March 14th, 2020. Calculate the appropriate annual risk-free rate for this option. (4 points)                                                                              

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  • Paperenglishessay
    6000 words
    all the instruction in the attachment.

    Faculty of Business
    Assignment
    Course Code: BUFN4702
    Course Title: Financial Institutions and Markets
    Maximum Marks: 15
     
    Name: [IN CAPITAL LETTERS] ……………………………………………
    Student ID: ………………………………………………………….…….….
     
    Total Marks:      15
    Last Date of Assignment Submission: 20/12/2020
    Online Presentation date: 23/12/2020       8:30 AM- 10:00 AM
    Note: The assignment file is available below titled: ” BUAFN4702-Assignment”
     
     
    Instructions:
    1.      The students are required to write report not more than 6000 words.
    2.      The assignment should be submitted individually. Only submission through Turnitin will be accepted. No email submission will be accepted.
    3.      Students are required to write reports in their own words and online presentation of reports is compulsory. MS Teams will be used for individual presentations.
    4.      The students are required to prepare presentation slides (maximum 10 slides are allowed).
    5.      The similarity index should not be more than 20 percent.  Plagiarism more than 20 percent will be dealt according to the university policy.
    Good luck!
     
     
     
     
     
     
     
    A. Institution/Financial Scandal
     
    Instructions Section A
    There are three Financial institutions given below. Student must incorporate these point in the assignment.
     
    1. Enron
    · What is the origin of Enron financial scandal?
    · What type of business the Enron was engaged in?
    · Why the scandal happened? What went wrong?
    · How the regulator and analyst were not aware? How Enron had hidden such scandal? What was the role of regulators/regulations?
    · Why was there sudden decline in share price of Enron?
    · Why high share prices were normal after dot.com bubble?
    · Why mark to market method is blame for this scandal?
     
    2. Worldcom
     
    · What is the origin of Worldcom financial scandal?
    · What type of business the Worldcom was engaged in?
    · Why the scandal happened? What went wrong?
    · World.com has cook the books? If yes, how?
    · How the regulator and analyst were not aware? How Enron had hidden such scandal? What was the role of regulators/regulations?
     
    3. Lehman Brothers
    · What is the origin of Lehman Brothers financial scandal?
    · What type of business the Lehman Brothers was engaged in?
    · Why the scandal happened? What went wrong?
    · What was the role of accounting standards in Lehman Brothers scandle?
     
     
     
     
     
     
     
    B. Financial Institutions and Market in Oman
     
    1. Classify Depository and Non-depository financial institution in Oman?
    2. What are regulatory requirement for listing companies stock market in Oman?
    3. How companies issue stocks on Muscat Securities exchange?
    4. Do Oman have investment banks? How investment banking play role in financial markets in Oman?
    5. What are different indexes used in Muscat securities Market and how these indexes are constructed?
    6. What are different capital market and money market instruments are available for investment in Oman?
     
     
     
     
     
    C. Monetary Policy and Interest rates in Oman
    1. How central bank manage monetary policy in Oman?
    2. What different monetary policy tools available used by central bank of Oman to control money supply in economy?

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Week 15 – Reading/Reflection – Due by 12/10 @ 9:30am

Waiting by Ha Jin is a story about the Cultural Revolution in China, changing social mores, changing gender and sexual relationships and conflicts of the human heart.  Please wait until you are done reading the assigned pages (pp 3-96) before completing this Forum posting.  Each person should start a new posting.
For this assignment, of the 3 characters, Lin Kong, Shuya, and Manna Wu, given the historical and social circumstances, please explain which character you sympathize with most and why.  Please support your position and analysis with specifics from the reading.
In order to maintain the uniqueness of each person’s individual thoughts on these people, please do not look at anyone else’s Forum posting before you think about and elaborate on your own position.  After you are done posting then you may look at what your peers have written and see how other people have thought about these issues and why and see how it compares to your own thinking.  We will compare and contrast these findings in class.   There is no right or wrong answer—it will be interesting to see what we as a class think.
ALSO REMINDER:
For the Weekly Reading /Reflections Assignments you are only required to do 7 of these.  Or I will only count the 7 highest scores.  So if you have already done 7 and are happy with your grades on this aspect of the assignments, you do not need to do any more.  However, if you would like to improve your grade, then you can do additional ones in the hopes of improving your grade and replacing any that received a low score.

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ECONOMICS

 
Case Study Maximum Word Count 500 words
 

 
Grootbos Nature Reserve lies 160 km east of Cape Town, where the Southern Right Whale breeds each year. The views of the sea are breath-taking. Luxurious cottages provide tranquillity in a unique and beautiful setting.
 
The diagram above represents the monthly demand for (D) and short-run (S) and long- run (LRS) supplies of cottages in Grootbos. The market is in both short-run and long- run equilibrium with 0Q1 lodges being rented out monthly at a price of 0P1.
 
If a sudden wildfire destroyed exactly 50% of the cottages, what would happen to P and Q in the
 
i) short run?
ii) long run?
 
 
 
1
 
Essay 1 Maximum Word Count 2000 words
 
The new President was giving his first speech. He said
 
“Our society should be ashamed because while a few lucky ones earn more money than they could ever spend, many individuals do not have enough to live on. It is the inefficiency of the market economy which causes the enormous differences in incomes between the ‘haves’ and the ‘have nots’.”
 
A leading economist contradicted the President, stating that he knew nothing about the efficiency of the market.
 
i) The President and the economist have differing views on the efficiency of the market. Who is correct?
 
ii) In what areas is the market economy inefficient?
 
 
 
Essay 2 Maximum Word Count 2000 words
 

Year Q Y C I G X Z Transfers U% INF% Budget
1 100 100 60 20 20 30 30 40 5.0 2 0
2 103 106 62 22 22 31 31 40 4.0 4 -10
3 106 109 65 18 32 28 34 40 4.0 8 -18
4 109 104 62 16 34 28 34 40 6.0 11 -26

 
 
The economy was in ‘perfect shape’ in Year 1 as far as the government was concerned. There was low unemployment, low inflation, a good mix of consumption, investment and government expenditure, balanced trade and a balanced budget. However, the following three years were not so good.
 
Using the above data, hypothesis what fiscal and monetary policies were enacted each year.
 
If you were to assume control of the economy in Year 4, what policies would you advocate if your goals were to have low inflation, low unemployment and a balanced budget?
 
 
1

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6000 words
all the instruction in the attachment.
BUFN4702Assignment

Business & Finance homework help

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1. The Theta company manufactures silicon boards that are used in preparing small, medium and large size electronic circuits. The company is considering to reduce its cost by automating some of its manufacturing tasks. This automation requires the installation of a new equipment. The relevant information for net present value (NPV) analysis of investment in new equipment is given below:
i. Cost of equipment: $72,000
ii. Expected annual cost savings to be provided by new equipment: $40,000
iii. Useful life of the equipment: 6 years
iv. Salvage value at the end of 6 years: $0
v. Discount rate: 12%
Should the new equipment be purchased?
Essay Questions 
Each answer should be no more than 500 words. You will be graded on correctness as well as the clarity of your answer.
1. In the context of negotiations, what is leverage? What role does it play in achieving negotiated agreements? Does leverage exist objectively or is it merely a perception or “mindset?”
2. Choose three financial ratios. For each, give its definition, explain what it reveals, why it might be useful and at least one business situation in which it might be used.
3. Explain the difference between risk and exposure, in a business context. Then, discuss the ways in which one’s relationship to risk influences decisions. In managing risk, are there any common mistakes one should try to avoid? Are there common mistakes one can guard against in decision making?

Business & Finance homework help

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1. The Theta company manufactures silicon boards that are used in preparing small, medium and large size electronic circuits. The company is considering to reduce its cost by automating some of its manufacturing tasks. This automation requires the installation of a new equipment. The relevant information for net present value (NPV) analysis of investment in new equipment is given below:
i. Cost of equipment: $72,000
ii. Expected annual cost savings to be provided by new equipment: $40,000
iii. Useful life of the equipment: 6 years
iv. Salvage value at the end of 6 years: $0
v. Discount rate: 12%
Should the new equipment be purchased?
Essay Questions 
Each answer should be no more than 500 words. You will be graded on correctness as well as the clarity of your answer.
1. In the context of negotiations, what is leverage? What role does it play in achieving negotiated agreements? Does leverage exist objectively or is it merely a perception or “mindset?”
2. Choose three financial ratios. For each, give its definition, explain what it reveals, why it might be useful and at least one business situation in which it might be used.
3. Explain the difference between risk and exposure, in a business context. Then, discuss the ways in which one’s relationship to risk influences decisions. In managing risk, are there any common mistakes one should try to avoid? Are there common mistakes one can guard against in decision making?

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Question 1:
What is the secondary mortgage market?  List three reasons why it is important. Please elaborate by expressing your thoughts about your findings in at least 3 – 4 sentences.
Student 1:
According to Investopedia, “The secondary mortgage market is a marketplace where home loans and servicing rights are bought and sold between lenders and investors. A large percentage of newly originated mortgages are sold by the lenders who issue them into this secondary market, where they are packaged into mortgage-backed securities and sold to investors such as pension funds, insurance companies, and hedge funds (Investopedia).” According to the author from Investopedia, the secondary market is the market behind the primary market where your loan liability (notes receivable from lender’s perspective) is traded as sellable assets to other lenders or investors.
An example would be that home buyer David acquired a property using mortgage with Bank of America with a 20 year fixed rate mortgage. Bank of America sold this “notes receivable” to a third party “Citizens Bank”. Now, Citizens Bank has your notes receivable despite that you did not engage with them initially for the mortgage. It is similar to sell receivables to other companies for a lower percentage of cash in return.
The reasons they are important are:

  • It can give the banks options in times where interest rates are raising and they want to sell the mortgage off for a better interest rate mortgage.
  • It creates additional trading and transactions that increases the competitiveness of the loan market.
  • In times of lowering interest rates, the bank can also sell the mortgage for a gain and have additional capital.

Sources:
JULIA KAGAN AND TROY SEGAL (March 16th, 2020). Secondary Mortgage Market t. Investopedia. Retrieved from Investopedia: https://www.investopedia.com/terms/s/secondary_mortgage_market.asp
Question 2:
EXPLORING THE WEB
Please visit National Mortgage News at  http://www.nationalmortgagenews.com/technology (Links to an external site.). Explore the site.  Bring back an article or something that interest you and share it with the class.
Student 2:
The National Mortgage News is a site for the mortgage industry to share ideas and news. It has the Leaders forum, for leaders in the mortgage industry to bring innovative and senior voices to share leadership experiences on most pressing topics. It has the Origination section that shares up to date news in the industry, including articles, projects and other related information. It has the Servicing section, with opinions and articles in the mortgage service section. It also offers information on compliances and regulations, the secondary mortgage market, technology and events.
One of the articles I find interesting is entitled “High Demand, Limited Supply Continue to Push Home Prices Upward” by Brad Finkelstein in the Origination section of the website. The article talks about the home prices because the supply and demand. It states that the appreciation rate of American homes was at 7.3% in October of 2020. The main reasons for this increase of home prices is that the suppliers are shorter than demand, especially during the pandemic, most home owners will hold the home for sale which causes a shortage of supply. The project for the home price is that it is on the rise, with only a few, 5 to 6, places where there is a projected decline of home price.
References:
The National Mortgage News. Retrieved from http://www.nationalmortgagenews.com/technology (Links to an external site.)
High Demand, Limited Supply Continue to Push Home Prices Upward. Retrieved from https://www.nationalmortgagenews.com/news/home-prices-rose-7-3-in-october-corelogic-reports#:~:text=High%20demand%2C%20limited%20supply%20continue%20to%20push%20home%20prices%20upward&text=Home%20price%20growth%20has%20continued,April%202014%2C%20according%20to%20CoreLogic.&text=Still%2C%20CoreLogic%20predicted%20that%20over,prices%20will%20grow%20by%201.9%25 (Links to an external site.).

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Finance
The Saudi Vision 2030 is a plan to diversify the economy and develop sectors such as education, infrastructure, and tourism. The government encourages private investment in transportation and renewable energy. It emphasizes economic and investment activities and increasing non-oil industry trade between countries.
1/ What would be the role of FDI (Foreign Direct Investment) to achieve the aims of the Saudi Vision 2030?2/ what might be some challenges with Vision 2030 that Saudi Arabia faces?
Directions:
1- Search the SEU library or the Internet for an academic or industry-related article. Select an article that – relates to these concepts and explain how it relates to doing business in Saudi Arabia.
2-  For your discussion post, your first step is to summarize the article in two paragraphs, describing what you think are the most important points made by the authors (remember to use citations where appropriate).
3- For the second step, include the reference listing with a hyperlink to the article. Do not copy the article into your post and limit your summary to two paragraphs. Let your instructor know if you have any questions and enjoy your search.