...the market because short-term securities have less interest rate risk than longer-term securities and, thus, a smaller Maturity Risk Premium (MRP). Therefore, short-term rates are typically lower than long-term rates. There are two primary theories that explain the factors which determine the shape of the yield curve: (1) the pure expectations theory and (2) the liquidity preference theory. The pure expectations theory states that the shape of the yield curve depends on investors’ expectations about future interest rates. According to the pure expectations theory, long-term interest rates are a weighted average of current and expected future short-term interest rates. In addition, investors are indifferent with respect to maturity in the sense that they do not view long-term bonds as being riskier than short-term bonds. Therefore, the Maturity Risk Premium (MRP) is equal to zero under the pure expectations theory. The pure expectations theory would suggest that this particular U.S. Treasury yield curve is upward-sloping because interest rates are expected to increase in the future. This increase could be due to an increase in expected inflation or to an increase in the expected real risk-free rate. The liquidity preference theory states that lenders, other things held constant, would prefer to make short-term loans rather than long-term loans because such securities are more liquid in the sense that they can be converted to cash with little danger of loss of principal...
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...maturity, bonds issued by different parties (i.e. government vs. corporate), etc. As a result, there is a different interest rate for each type of bond. We will look at the behavior of interest rates of two groups of bonds: (1) Bonds with the same features but are issued by different agency. In other words, we want to look at the risk structure of interest rates. (2) Bonds issued by the same agency but have different term to maturity (i.e. life of the bond). In other words, we want to look at the term structure of interest rates. 1. Risk structure of interest rate As we have discussed in the previous section, the (relative) risk level of an asset affects its demands according to the theory of asset demand. The higher the relative risk level, the lower the demand of that asset. According to the theory of asset demand, this leads to an increase in interest rate. In other words, investors need to be compensated with a higher return (in the form of higher interest rate) in order to induce them to hold the assets. There are a number of factors that affect the risk level of a bond. In this section, we will focus on only 3 of them: default risk, liquidity, and tax consideration. (i) Default risk Default risk represents the probability (or chance) that the issuer of the bonds will not be able to pay the coupon payments on time and the principal on the maturity date. The bond issuer will have to declare bankruptcy if it defaults on its bond issues. In general, Treasury securities (i.e. Tbills...
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...Issues Operations Management Definition An operations system is defined as one in which several activities are performed to transform a set of inputs into useful output using a transformation process Operations Management is a systematic approach to address all the issues pertaining to the transformation process that converts some inputs into output that are useful, and could fetch revenue to the operations system Mahadevan (2010), “Operations Management: Theory & Practice”, 2nd Edition © Pearson Education Operations Management (OM) Salient Aspects OM is a systematic approach using scientific tools & techniques and solution methodologies to analyze problems OM is about addressing several issues varying in terms of time horizon, nature of decisions Transformation processes are central to Operations Focusing on keeping costs to the minimum Developing a set of measures to assess performance of the system Mahadevan (2010), “Operations Management: Theory & Practice”, 2nd Edition © Pearson Education Manufacturing Sector Salient Aspects Index of Industrial Production* 2003‐04 2004‐05 2005‐06 2006‐07 Average Manufacturing 9.20 9.10 12.50 10.27 Capital goods 13.60 13.90 15.80 18.20 15.38 Consumer goods 7.20 11.70 12.00 10.10 10.25 Intermediate goods 6.40 6.10 2.50 12.00 6.75 # Corporate Sector Performance Sales/Income: Manufacturing 13.30 20.50 18.30 23.10 18.80 Sales/Income: Services (other than financial) 27.00 21.40 15.70...
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...possibly have higher cost of capital with higher leverage. Second, capital structure may affect the valuation of the firm, with more leveraged firms, being riskier, being valued lower than less leveraged firms. If we consider that the manager of a firm has the shareholders' wealth maximisation as his objective, then capital structure is an important decision, for it could lead to an optimal financing mix which maximises the market price per share of the firm. Capital structure has been a major issue in financial economics ever since Modigliani and Miller (henceforth referred to as MM) showed in 1958 that given frictionless markets, homogeneous expectations, etc., the capital structure decision of the firm is irrelevant. This conclusion depends entirely on the assumptions made. By relaxing the assumptions and analysing their effects, theory seeks to determine whether an optimal capital structure exists or not, and if so what could possibly be its determinants. If capital structure is not irrelevant, then there is also another thing to consider: the interaction between financing and investment. But in order to try to distinguish the effects of various determinants on capital structure, it is assumed in this paper that the investment decision is held constant. II. TRADITIONAL VIEW OF CAPITAL STRUCTURE In 1959, Durand listed the alternative approaches to valuation (Van Horne, 1990:321). Let kd represent the yield on debt, ke the yield on equity, and ko the WACC (weighted average...
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...Part 2 – Chapter 4 The Risk and Term Structure of Interest Rates Two ques3ons about interest rates of bonds ¤ Why bonds with the same maturity have different yields/ interest rates? => Risk structure of interest rates ¤ Why bonds with iden3fied characteris3cs have different yields/ interest rates? => Term structure of interest rates FIGURE 1 Long-‐Term Bond Yields, 1919– 2008 Sources: Board of Governors of the Federal Reserve System, Banking and Monetary Sta4s4cs, 1941–1970; Federal Reserve: www.federalreserve.gov/releases/h15/data.htm. Risk Structure of Interest Rates ¤ Bonds with the same maturity have different interest rates due to they have different characteris3cs of: ¤ Default risk ¤ Liquidity ¤ Tax considera3ons/ tax status ¤ Special provisions Default risk ¤ Default (credit) risk: probability that the issuer of the bond is unable or unwilling to make interest payments or pay...
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...Game Theory and Strategy Spring 2012, Assignment 2 The assignment must be done by 6-00 p.m. May 1st. You should submit your assignment assignments before the class begins. Good luck! Part 1 (30%) For multiple choice questions choose a letter corresponding to your answer. For true- false questions the answer is “TRUE” if you agree with the sentence and “FALSE” otherwise. 1. Mixed strategy is A) When a player plays different actions in response to different actions taken by other players B) When a player uses advises from different people C) When a player chooses each action with some probability 2. “The game where players undertake actions with uncertain outcomes” is a definition of the game with asymmetric information. Falls 3. In a separating equilibrium with two types of informed player and two possible actions each type of informed player chooses different action.. True 4. Auction is a public sale in which property or merchandise are sold to the highest bidder. True 5. Private Value Auction is one where True * Each bidder knows his or her value for the object * Bidders differ in their values for the object 6. Common Value Auction is one where the item has a single though unknown value. True 7. English auction is one where: Falls * Bidders call out prices (outcry) * Auctioneer calls out prices (silent) * Bidders hold down button (Japanese) * Second-Highest bidder gets the object 8. Second-price auction...
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...Servant Leadership This type of leadership emphasizes increased service to others, a holistic approach to work promoting a sense of community and the sharing of power in decision making. The term servant leadership was first shared in a 1970 essay by Robert Greenleaf (1904-1990) entitled “The Servant as Leader” Greenleaf spent most of his organizational life in the field of management research, development, and education at AT&T. He also consulted for Ohio University, MIT, Ford Foundation. His series of books and essays on the theme of “The Servant as Leader”- had the objective to stimulate thought and action for building a better, more caring society by the natural feeling to serve others. 10 Characteristics to the development of servant leaders: Listening- the need to listen intently to others. listening and reflecting regularly is essential for the growth the servant leader Empathy- people need to be accepted & recognized for their special & unique spirits especially when their behavior or performance is unacceptable Healing- learning to heal is a powerful force for transformation & integration. This is a great strength for servant leaders to help make people they connect with whole Awareness- general awareness and self awareness strengthens the servant leader Persuasion- rather than using the leaders position of authority these leaders are effective at building consensus in groups Conceptualization- Servant leaders have the ability to think beyond day to day and...
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...The Financial Environment: Markets, Institutions, and Interest Rates In addition to these notes, please read chapter 3 and pages 191 through 206 of chapter 5. Problems 5-18 through 5-23 of chapter 5 are related to this topic. Since this part of the course deals with different types of markets, let us start by defining what these markets are. What are markets in general? Markets are transactions where individuals or organizations exchange items. The exchange could be goods for goods, goods for service, or goods and services for money. Whenever you exchange something for another you have a market. Again a market is a transaction, not a physical location. Now, let us look at the different types of markets: Markets for physical assets（财产，有利条件）: These are markets where tangible（有形的） assets, things you can touch are exchanged for money. Markets for financial assets: These are markets where financial assets sold and bought. Financial assets are intangible. Examples of financial assets include stocks （股票，存货）and bonds（债券）. By buying a financial asset you become an owner of a company or a lender to one. Buying a stock makes you one of the owners of a corporations and buying a bond makes you one of the lenders. Money versus capital markets: Money markets are markets where money is borrowed for short time periods, usually less than a year. Here the loans are used mainly to manage cash in a corporation. If a firm has...
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...does this question mean?”, “how do I find out what it looks like?”, “who are the judges and by what gauge or yard stick are they measuring this goodness?” The implications of this question can be confusing and unclear. However, what was not confusing and unclear was the insinuation that these “good girls” were the definition of a lady, a lady who sits with her legs closed, uses good manners, dresses modestly, and waits for love and marriage before engaging in sex. Good girls were appealing to boys/men, and would be the girls that were wanted and desired. In "You Men," the poet Sor Juana Ines de la Cruz exposes the sexual double standard that exists between men and women through the use of voice, allusion, gender roles, and the feminist theory. She accurately identifies the inequality that discriminates against women and subjects them to sexual harassment and victimization. 2 In "You Men," Sor Juana Ines de la Cruz uses voice to mock and blame men for perpetuating a sexual double standard. She uses words like “child”, “silly”, and “witless” to communicate that men are immature. She then defines them as egotistical when she writes they are “presumptuous beyond belief”, righteous and arrogant. Her unsavory description continues as she reveals to the reader that she sees right through their attempts to manipulate women and assign them blame when she describes their “urgent plea”, and their behavior intended to coax with whimpers and sneers. I have watched this dynamic play...
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...has created specialized functional pools of talent at head office level, regional level, & at the city level. As a result, the decision-making is much better. • The structure at both regional & city level will accommodate geographic growth relatively easily and will also help focus employee attention on the services or public rather than tasks. Weaknesses • Greater emphasis on subunit than organizational goals. • Lack of communication due to distance. • Employees at both regional & city level may be lacking a broader understanding of the business or other departments. • Duplication of tasks and inefficient use of resources. • Dilutes accountability, the HQ functional AD and regional managers may have conflicting interest and expectations from employees and can continue to increase dysfunctional conflict and ambiguity. • Require more control because there is lower coordination between the units. 2. Can FTCA operate...
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...Chapter 5 The Financial Environment: Markets, Institutions, and Interest Rates ANSWERS TO END-OF-CHAPTER QUESTIONS 5-1 a. A money market is a financial market for debt securities with maturities of less than one year (short-term). The New York money market is the world’s largest. Capital markets are the financial markets for long-term debt and corporate stocks. The New York Stock Exchange is an example of a capital market. b. Primary markets are the markets in which newly issued securities are sold for the first time. Secondary markets are where securities are resold after initial issue in the primary market. The New York Stock Exchange is a secondary market. c. In private markets, transactions are worked out directly between two parties and structured in any manner that appeals to them. Bank loans and private placements of debt with insurance companies are examples of private market transactions. In public markets, standardized contracts are traded on organized exchanges. Securities that are issued in public markets, such as common stock and corporate bonds, are ultimately held by a large number of individuals. Private market securities are more tailor-made but less liquid, whereas public market securities are more liquid but subject to greater standardization. d. Derivatives are claims whose value depends on what happens to the value of some other asset. Futures and options are two important types of derivatives...
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...Tosha Collins Kaplan University LS312: Ethics and the Legal Environment Prof: Westerman April 18, 2012 As an interested stakeholder, Jane is working for R&S Electronic Service Company as head of payroll. She is concerned about her job security since this is her first job since college. Brad is the owner of R&S and wants his employees to be happy and have a profitable company. Eddie is the general manager and has the authority to hire and fire Jane. Greg is Eddie’s brother working as a service technician who is receiving higher commissions for this work. The dilemma here is that Greg is receiving special treatment because Eddie is his brother. Greg is getting the easier work paying him high commission (Helms, 1992). Other stakeholders in this case of interest would be Jane’s family and the importance of her keeping her job. This is her first job since college, but one can’t assume she doesn’t have dependents to take care of. The other employees in the company are stakeholders because they want their salaries kept confidential and want continued employment. The general public and shareholders care about the company being profitable and bringing revenue to the community. The second exception of At-Will Employment seems to be violated in this case. Eddie is telling Jane to lie about seeing the separate tickets of Greg’s. This At-Will law is not lawful because it violates a public policy exception. This means social norms or values are compromised. If an employer...
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...Environmental Model is one of the earliest grand theories. It connects the concepts of the patient, the nurse, the environment, and health. Florence Nightingale pioneered the theory that the environment affects an individual’s health and illness, and that nurses can influence health by controlling environmental factors such as light, temperature, noise, sanitation, cleanliness, and diet. Florence Nightingale’s Environmental Model is still one of the most utilized theories today. It is known as a grand theory, but can also be used at the practice level. Keywords: Florence Nightingale, Environmental Model, environment, grand theory Florence Nightingale: Environmental Model Florence Nightingale was a pioneer of her time. She has had a great influence on what Nursing is today. Many nursing schools all over the world have been named after her and base their teachings after her original thoughts and theories. She was one of the first to inspire ideas such as equality for each patient, independent of their religion, sanitation regulations, and the idea that the environment can influence a patient’s health and illness. Florence Nightingale is known as the “mother of modern nursing.” She defined nursing as putting patients in the, “best possible conditions for nature to restore or to preserve health- to prevent or to cure disease or injury” (Hegge, 2013, p.213). Although it is often used at a practice level, The Environmental Model is a grand theory. It provides universal explanations and...
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...Foundations of Financial Markets and Institutions, 4e (Fabozzi/Modigliani/Jones) Chapter 9 Properties and Pricing of Financial Assets Multiple Choice Questions 1 Properties of Financial Assets 1) Which of the below is NOT one of the eleven properties of financial assets? A) moneyness B) multiplicity and denomination C) reversibility D) cash flow Answer: B Comment: The eleven properties of financial assets are (1) moneyness, (2) divisibility and denomination, (3) reversibility, (4) cash flow, (5) term to maturity, (6) convertibility, (7) currency, (8) liquidity, (9) return predictability, (10) complexity, and (11) tax status. Diff: 2 Topic: 9.1 Properties of Financial Assets Objective: 9.1 the many key properties of financial assets: moneyness; divisibility and denomination; reversibility; cash flow and return; term to maturity; convertibility; currency; liquidity; return predictability or risk; complexity; and tax status 2) Which of the below is NOT one of the eleven properties of financial assets? A) convertibility B) currency C) liquidity predictability D) tax status Answer: C Comment: The eleven properties of financial assets are (1) moneyness, (2) divisibility and denomination, (3) reversibility, (4) cash flow, (5) term to maturity, (6) convertibility, (7) currency, (8) liquidity, (9) return predictability, (10) complexity, and (11) tax status. Diff: 2 Topic: 9.1 Properties of Financial Assets Objective: 9.1 the many key properties of financial assets: moneyness; divisibility...
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...Market values (in theory) Markets are assumed to enhance efficiency of economic and social transactions, to facilitate information diffusion (greater transparency), and to guarantee a fair allocation of resources available according to the willingness and ability to pay. •They best respect individual freedom (libertarian argument). •They maximise social utility (utilitarian argument). Moral limits of markets Michael Sandel argues there are obvious moral limits to markets, because market thinking tends to corrupt the value and integrity of some goods once they are considered a commodity. This also means business practices should be limited to certain areas and be subjected to certain norms and expectations. Market economy: a (valuable and effective) tool for organising productive activity Market society: a way of life in which market values seep into every aspect of human endeavor, Organising markets The market system enables economic agents to exchange goods and services through the price system. The price system adjusts supply and demand, and arguably represents people’s preferences. Limited market efficiency Markets and price system don’t account for moral limits on what is being exchanged. This erodes nonmarket norms, and changes social and moral expectations. Markets purport to allocate goods so as to maximise social welfare, under certain conditions – including pure competition. Yet, these conditions hardly ever occur: monopoly and oligopoly characterise...
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