Premium Essay

Finance Study

In: Business and Management

Submitted By ashok0311
Words 849
Pages 4
A bank acts as an intermediary between savers and borrowers and manages the whole process by paying equity and cash to savers and cash to net borrowers and in this process the bank earns its profit.
A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers that have capital deficits to customers with capital surpluses. So bank is a very important part and identity of this whole transaction phenomenon. The TED Spread is the difference between the interest rates on interbank loans and on short-term U.S. government debt ("T-bills"). TED is an acronym formed from T-Bill and ED, the ticker symbol for the Eurodollar futures contract and is an indicator of perceived credit risk in the general economy. This is because T-bills are considered risk-free while LIBOR reflects the credit risk of lending to commercial banks. When the TED spread increases, lenders believe the risk of default on interbank loans is increasing. The 2008 financial crisis led to the failure of a number of banks in the United States. Twenty-five banks failed and were taken over by the Federal Deposit Insurance Corporation (FDIC) in 2008, while 140 failed in 2009, 157 in 2010 and 92 in 2011. A bank failure is the closing of a bank by a federal or state banking regulatory agency. The FDIC is named as Receiver for a bank's assets when its capital levels are too low, or it cannot meet obligations the next day. After a bank's assets are placed into Receivership, the FDIC acts in two capacities—first, it pays insurance to the depositors, up to the deposit insurance limit, for assets not sold to another bank. Second, as the receiver of the failed bank, it assumes the task of selling and collecting the assets of the failed bank and settling its debts, including

Similar Documents

Premium Essay

Finance Study Guide

...Calculating Interest Rates Based on Expectations Theory Suppose the real risk-free rate (r*) is 2% Investors demand a 0.1% maturity risk premium per each year remaing until maturity We will further assume that DRP = 0 and LP = 0  -Treasury bonds have almost-zero default risk and liquidity risk Finally, yearly inflations are expected to be: 1.0% in Year 1 1.8% in Year 2 2.0% in Year 3 Question: How do we calculate the inflation premium for 1-year bond, 2-year bond, and 3-year bond? Inflation Premium (IP) for N-year bond is calculated by: IPN = (INFL1 +  INFL2... + INFLN) / N Let's get the interest rate for a 2-year Treasury Bond: IP2 = (1.0% + 1.8%) / 2 = 1.4% MRP2 = 0.1% x 2 = 0.2% Remember that r* was 2% and DRP = 0 and LP = 0 r = rRF + Risk Premium = (r*+IP)+(DRP+LP+MRP) =(2% + 1.4%) + (0+0+0/2%) =3.6% In general, when the market interest rate increases, stock prices decrease Two main reasons: (1) Increased interest rate makes simple savings more appealing -Stock market is competing with commercial banking industries To attract investors -A massive fund outflow from the stock market in response to Rising interest rates will lower stock prices (2) Discount rate r in the firm value formula increases, as the market rate increases Homework: Bonds with higher liquidity will demand lower interest rates in the Market since they can be easily converted into cash on...

Words: 946 - Pages: 4

Premium Essay

Finance Cas Study

...Lesson 7 case study extra credit 1. If Stephenson wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase? Explain. If Stephenson wants to maximize its total market value it should use debt to finance the $100 million dollar purchase. By using the debt to finance it will decrease the overall taxable income the company reports. Since interest payments are tax deductible it will create a tax break for the company which will increase the overall total value of Stephenson Real Estate. 2. Construct Stephenson’s market value balance sheet before it announces the purchase. Stephenson has 15 million shares of common stock at $32.50 per share. The market value of the company is $487.5 million. Balance sheet before purchase Assets $487,500,000 Debt 0 Equity $487,500,000 Total assets $487,500,000 Total debt and equity $487,500,000 3. Suppose Stephenson decides to issue equity to finance the purchase. a. What is the net present value of the project? NPV= -100,000,000 + (15,000,000/0.125) = $120,000,000. b. Construct Stephenson’s market value balance sheet after it announces that the firm will finance the purchase using equity. What would be the new price per share of the firm’s...

Words: 658 - Pages: 3

Premium Essay

Finance Case Study

...FIN 6310 Case Studies Purchase Case Studies (4) • Harvard Case Studies (2) o Courses available at o https://cb.hbsp.harvard.edu/cbmp/access/18322840 • Ivey Case Studies (2) o Register for an account at Ivey Cases https://www.iveycases.com/RegisterUser.aspx o Put the following two cases studies in your cart. Make sure Digital Download is selected which will cost $3.40 per case. o Burgundy Asset Management: The Wescast Investment Decision https://www.iveycases.com/ProductView.aspx?id=31479 o Valuing Wal-mart 2010 https://www.iveycases.com/ProductView.aspx?id=48332 o Download the Wal-mart case spreadsheet for free. o Valuing Wal-mart 2010 – Spreadsheet for students https://www.iveycases.com/ProductView.aspx?id=52705 Case Report Guidelines 1. Place case title at top of first page with team member names (maximum four members per team). 2. Answer questions in numerical order. 3. Include graphs and tables if appropriate. 4. Print out case report and hand-in at the beginning of class. Harvard Management Company (2001) Questions 1. Is HMC’s recent payout policy consistent with the goal of preserving the real (adjusted for Harvard’s expense growth) value of the endowment and its distribution into perpetuity? 2. Could payout be raised to meet recent budget pressures without changing the risk-return profile of the portfolio? 3. What value has the HMC’s policy portfolio...

Words: 1092 - Pages: 5

Premium Essay

Corporate Finances Case Study

...Corporate Finances Case Study Negative Cash Flow This is the phenomenon most common with the business when they experience several expenditures that surpass the earnings of the business thus resulting into a deficit in meeting some of the business financial obligations. This situation is most common with the business in the first and second years (Ross, Westerfield & Jordan, 2011). When the situation arises, some businesses will resort to loans and equity financing as a way of mitigating the crisis of the business. With view of the Mason Corporation, a prognosis can be done to see into it that the business will be in a financial crisis given the financial trend observed. In this case, the business has to take some precautionary measures to cushion the business form such financial meltdown. In a business, it does not matter the amount of profit your company is making in a day, a month or quarterly, the most important thing to ensure is the continuity of the cash flow of the business. In this case a cash flow forecast is important and an integral part of any business successes. Without doing the forecast, one is destined to have problems in paying suppliers as well as meeting the basic business financial obligation and this will results into failure of the business to operate (Ross, Westerfield & Jordan, 2011). In this regard based on the information of the cash flow of the business, there are several options open for the business to evade the financial crisis. There are...

Words: 867 - Pages: 4

Premium Essay

Personal Finance Case Study

...1. What is the most important thing that you can do when saving money? Financial Expert Michelle Singletary believes that putting money aside each week is key to a successful budget. 2. What is a subsidized loan? There is generally no interest until the loan is due. 3. What are some of the financial challenges that individuals face when they first live on their own? They do not put their money where it needs to go. They need money for rent and groceries. They buy extra stuff like $6 coffee. They have toi be able to have enough money to pay their bills and take care of themselves first. 4. How can you prepare to manage your money on your own? You can keep everything that is important and you also need to budget each week. You should keep important...

Words: 356 - Pages: 2

Free Essay

International Finance(Case Study on Ruritanian Project)

...This report will present a discussion on the financial challenges and issues based on the Ruritanian Project case study. The report is concerned with analyzing the investment environment of the host nation, maximizing the investment return and minimizing the risks which could have a negative impact on the financial performance of the Ruritanian project. Firstly, the national economy environment will be discussed based on the national GDP growth and inflation rate; secondly, there is a discussion on the foreign exchange risks of Rutitania Crown against international currency; third, the issue of joining the Euro zone will be analyzed in terms of benefits and drawbacks; next, the taxation effect in the investment decision making will be accessed and finally there will be a discussion on the political environment. THE NATIONAL ECONOMY AND THE IMPLICATIONS FOR THE PROJECT 2.1 The Relationship between National Economy and the Foreign Direct Investment (FDI) The economic growth of the host nation has always had a positive relationship with the foreign direct investment decision making. The positive effect of host country economic growth on investment decision making has been supported by various studies (Ericsson and Irandoust, 2000; Dhakal, Kamal and Upadhyaya, 2007; Barrell and Pain, 1996; Grosse and Trevino, 1996; Taylor and Sarno, 1999; Trevino et al., 2002). Traditionally the economic growth of the host nation induces FDI inflow when FDI is seeking consumer markets, or when...

Words: 4204 - Pages: 17

Premium Essay

Case Studies in Finance - Managing for Corporate Value Creation,

...MBA Program Course: Financial Analysis and Decision Making MBA730 Instructor: Marlena L. Akhbari Wright State University Finance and Financial Services McGraw-Hill/Irwin =>? McGraw−Hill Primis ISBN: 0−390−42334−3 Text: Case Studies in Finance: Managing for Corporate Value Creation, 4/e Bruner This book was printed on recycled paper. MBA Program http://www.mhhe.com/primis/online/ Copyright ©2003 by The McGraw−Hill Companies, Inc. All rights reserved. Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without prior written permission of the publisher. This McGraw−Hill Primis text may include materials submitted to McGraw−Hill for publication by the instructor of this course. The instructor is solely responsible for the editorial content of such materials. 111 MBAP ISBN: 0−390−42334−3 MBA Program Contents Bruner • Case Studies in Finance: Managing for Corporate Value Creation, 4/e II. Financial Analysis and Forecasting 1 1 6 16 16 39 52 52 60 66 66 84 100 100 6. The Financial Detective, 1996 11. ServerVault: ‘‘Reliable, Secure, and Wicked Fast’’ III. Estimating the Cost of Capital 12. ‘‘Best Practices’’ in Estimating the Cost of Capital: Survey and Synthesis 15. Teletech Corporation, 1996 IV. Capital Budgeting and Resource Allocation 19. Diamond...

Words: 54708 - Pages: 219

Premium Essay

Why Do I Study Managerial Finance?

...Name: Hany Samuel William Why do I study Managerial Finance? MBA in Finance Telecom Egypt Company It gives me much pleasure to give a snapshot on the benefit of studying this course, Managerial finance. I can get the best use of this course not only on my career path but also on my personal life. First, regarding my career path, I am working in the payroll department in Telecom Egypt and actually I cannot find my passion in this field but really I adore the field of finance and investment so I studied a post-graduate diploma in investment and Finance Management also I am studying MBA now and I will specialize in finance to be qualified to change my career, inside Telecom Egypt or outside it, into the field of investment and finance specially the financial analysis. Secondly, regarding my personal life I would like to enter the field of stock market but not as an employee but as an investor so managerial finance course taught me how to analyze the securities, how to calculate the return of each security, how to calculate the expected return, how to maximize my wealth and how to minimize the risk. This course gave me the knowledge of how to depend on myself in making the decision of buying and selling in the stock market not just depending on the advices of brokers who may cheat me for a certain reason specially in the atmosphere of speculation happening nowadays in the Egyptian stock market...

Words: 274 - Pages: 2

Premium Essay

Finance Case Study

...bru6171X_case02_023-038.qxd 11/24/12 2:24 PM Page 23 CASE 2 Bill Miller and Value Trust Bill Miller’s success is so far off the charts that you have to ask whether it is superhuman. Quite simply, fund managers are not supposed to be this good. Is it mortal genius, or is it celestial luck?1 By the middle of 2005, Value Trust, an $11.2-billion mutual fund2 managed by William H. (Bill) Miller III, had outperformed its benchmark index, the Standard & Poor’s 500 Index (S&P 500), for an astonishing 14 years in a row. This record marked the longest streak of success for any manager in the mutual-fund industry; the next longest period of sustained performance was only half as long. For many fund managers, simply beating the S&P 500 in any single year would have been an accomplishment, yet Miller had achieved consistently better results during both the bull markets of the late 1990s and the bear markets of the early 2000s. Over the previous 15 years, investors in Value Trust, one of a family of funds managed by the Baltimore, Maryland–based Legg Mason, Inc., could look back on the fund’s remarkable returns: an average annual total return of 14.6%, which surpassed the S&P 500 by 3.67% per year. An investment of $10,000 in Value Trust at its inception, in April 1982, would have grown to more than $330,000 by March 2005. Unlike the fund’s benchmark, which was a capitalization-weighted index composed of 500 widely held common stocks, Value Trust only had...

Words: 10398 - Pages: 42

Premium Essay

Finance Case Study

...Case Three CHEF’S TOOLKIT INC. Cash Budgeting 企业现金需求分析和预算 1 Case Explanation: cash budgeting      History: Jefferys, invention of Pasta server Production: data Marketing: data Financial Implication: data Data: Composition of Canadian Households; Balance sheet(July 15, 1994) Jefferys Personal balance sheet (July 15, 1994) Production Schedule in Unit 2 Study Questions Q1:What is the Case? (1)event?(2)Companies?(3)Persons?(4)Time? What is the problem?(5)Why is the problem?(6)Possible Solutions? Q2:Analyses (1) Background of Chef’s Toolkit Inc. ? (2) CV of managers? (3)What is the invention? (4)Company Size-up: production, marketing, and financial status? Q3:Budgeting(monthly sales : 10,000; 5,000; 30,000): production schedule, cash budget, Pro-forma income statement, Pro-forma balance sheet Q4:How can the firm avoid loss? Break –even calculation? Q5: How much money do the firm need for financing? Should Dale Raid invest? What are his risks? 3 Case Summary(案例) M r. P eter Jeffery President of Chef’s Toolkit Inc. M r. Dale Reid Private Investor 风险投资家 Obtain funds to start manufacturing and marketing a new pasta server. 4 Case Summary(案例) Produce Sell Chef’s Toolkit Inc. Pasta Server 意大利通心粉 Chef or Housewife 5 Objectives(目标)   Produce projected income statements, balance sheets, and cash flow statement up to July 31, 1995. 预计财务报告 Obtain fund from Dale Reid. 6 Why Budget? 预算 If you know where you are going...

Words: 563 - Pages: 3

Premium Essay

Finance Case Study

...McDonald’s MCD: McDonald’s Corp (NYSE) Case Study Worksheet and Template Version 0.0: 1-9-2015 Presented by: Ashley Westbrook Worksheet Company information Name | McDonald’s Corporation | Address | 2111 McDonald’s Dr. | City, state, ZIP Code | Oak Brook, IL 60523 | Phone number | 1 (800) 244-6227 | Biography: McDonald’s has been serving the community since 1955, making billions in revenue and serving over 62 million customers daily. McDonald’s focuses on providing affordable fast dine-in food—burgers, shakes, and fries, The Mac Brothers, Dic and Mac McDonald, were approached by Ray Kroc to make the corporation what it is today. McDonald’s history includes operating in 119 countries since 2011, celebrating its 50th anniversary in 2005, and one of its signature meals, the Happy Meal, turns 25 years old. McDonald’s has a global structure, and it’s business structure includes CEO, President and branches off to Purchasing Department, Personal Development, Vice President Operations and Chief Financial Officer and starts to become catered to the main fast food chain with Managers. Even the international markets have individual Presidents. McDonald’s main products and services include their menu which involves selling hamburgers, shakes, fries, and other fast food items and international growth. With it having a global structure, McDonald’s is located almost everywhere. The fast food chain is located in United States, Canada, Australia, Japan...

Words: 253 - Pages: 2

Free Essay

Finance Case Study

...Will Semsch 17/02/2015 Case Study #1 In offer number one you would receive $1,000,000 now, $200,000 from year 6-15, then 3,000,000 if the product did $100,000,000 in sales, which had a 70% probability. To calculate to present value of 3,000,000 in 15 years you first have to multiply it by the possibility, 0.7 giving you 2,100,000. I then used the equation. 2,100,000* 1/(1.1)^15 giving an answer of $502,723.30. After that I calculated the value of the ordinary annuity from year 6-15 by using the equation 200,000*1/(1.1)^6 with the exponent increasing by one for each year. The annuity came to a total of $763,058.55. Once I added up all three payments it comes to a total present value of $2,265,781.85. Year | Payment | Present Value | 1 | $360,000 | $327,272.73 | 2 | $504,000 | $416,528.93 | 3 | $705,600 | $530,217.72 | 4 | $987,600 | $674,544.09 | In offer two 30% of the Bayer pharmaceutical profits were offered per year for four years. Bayer’s gross profit margin was 60% and sales were expected to increase 40% each year, with the expected first year sales of $2,000,000. With all that said here was what the payments would look like over four years. I used 1 as the “N” which increased by one for each payment. The payment amount I used as future value and 10% interest. This offer results in a total cumulative present value of $1,948,563.47 For offer number three I found the present value to be $2,275,931.61. To find this I used 16 as the total number of...

Words: 349 - Pages: 2

Premium Essay

Case Study for Finance

...Orhun Akbulut Case 1 PLRe88 Case Based Course in Finance 1,2) Stock Rate | Total Dividend,2003 ($) | 5-yr Dividend Growth (%) | Beta | Price ($) | Ke | Intrinsic Value ($) | 1 | 0.95 | 0.58 | 0.74 | 14.89 | 0.1002 | 10.122 | 2 | 0 | -100 | 2.3 | 29.02 | 0.2250 | 0 | 3 | 0 | 0 | 1.89 | 18.83 | 0.1922 | 0 | 4 | 1.25 | 8.50 | 1.31 | 93.48 | 0.1458 | 22.306 | 5 | 0.78 | 1.25 | 1.52 | 67.29 | 0.1626 | 5.270 | 6 | 0.06 | -9 | 1.04 | 3.28 | 0.1242 | 0.25 | 7 | 0 | -100 | 1.99 | 9 | 0.2002 | 0 | 8 | 0 | 0 | 0.89 | 55.91 | 0.1122 | 0 | 9 | 6.22 | 0.98 | 1.06 | 98.47 | 0.1258 | 54.14 | 10 | 1 | -0.48 | 1.76 | 43.07 | 0.1818 | 5.33 | 11 | 0 | -100 | 0.91 | 37.55 | 0.1138 | 0 | 12 | 0.25 | 2.10 | 1.8 | 38.30 | 0.1850 | 1.57 | 13 | 0.98 | -2 | 0.82 | 76.33 | 0.1066 | 7.6 | 14 | 2.25 | 4 | 1.12 | 67.09 | 0.1306 | 25.82 | 15 | 5.8 | -8 | 0.99 | 193.05 | 0.1202 | 26.65 | 16 | 1.02 | 13 | 1.01 | 38.33 | 0.1218 | -140.55 | 17 | 6 | 5 | 0.67 | 71.11 | 0.0946 | 141.26 | 18 | 0 | 0 | 1.11 | 9.23 | 0.1298 | 0 | 19 | 1 | 9 | 0.78 | 19.35 | 0.1034 | 81.34 | 20 | 0 | -100 | 1.2 | 29.92 | 0.1370 | 0 | 3) The differences between intrinsic values and the actual market prices are caused by characteristics and complexity of the markets. Because of the fact that some stocks did not pay any dividend at all and the value is related to the divident that has been paid in 2003, the intrinsic value formula will return zero and this endangers the formula’s usefulness...

Words: 688 - Pages: 3

Premium Essay

A Study on Pharmaceutical Industry of Bangladesh from the Perspective of Corporate Finance ( Company Under Research: Beximco Pharmaceuticals Ltd & Square Pharmaceuticals Ltd)

...A STUDY ON PHARMACEUTICAL INDUSTRY OF BANGLADESH FROM THE PERSPECTIVE OF CORPORATE FINANCE ( Company under research: Beximco Pharmaceuticals Ltd & Square Pharmaceuticals Ltd) Course Title : Corporate Finance (PF 604) Submitted to Professor Shabbir Ahamad Department of Finance University of Dhaka Prepared by- Haroon Islam (ID: Fin -01- 15-001) Md. Syedur Rahman( ID: Fin-01-15-027) Md. Abdur Rahman Babu(ID: Fin -01- 15-036) Farzina Sulvia (ID: Fin -01- 15-054) MPF Program, Department of Finance University of Dhaka Date: 03 June 2016 Table of Contents Chapter 01: Introduction 5 1.1 Introduction 5 1.2 Objective 5 1.3 Methodology 5 1.4 Limitation 5 Chapter 02: Brief Company Overview 6 2.1. Beximco Pharmaceuticals Ltd 6 2.2. Square Pharmaceuticals Ltd 7 Chapter 03: Capital Structure 8 3.1. What is a 'Capital Structure' 8 3.2. BREAKING DOWN 'Capital Structure' 8 3.3. Corporate Finance - Factors that Influence a Company's Capital-Structure Decision 8 3.4. Study on the Debt Equity Ratio Analysis 10 3.5. Observation: 11 Chapter 04: Dividend Policy & Dividend Payout 13 4.1. Dividend theories 13 4.2. Dividend Policy: 14 4.3. Dividend Policy of Beximco & Squar Pharma 15 4.4. Dividend Payout Ratio: 16 4.5. Analysis on Dividend Payout Ratio and its impact on average share price in the long run 19 Chapter 05: Effect of Dividend Declaration & Dividend Payment on Share price 20 5.1. Beximco Pharmaceuticals...

Words: 7998 - Pages: 32

Premium Essay

International Studies in Banking & Finance

...AFX 5860 Assignment International Studies in Banking & Finance Visit 1: UN Food and Agricultural Organization [pic] Place: Rome Italy Brief Introduction: The Food and Agriculture Organizaiton of the United Nations (FAO) is a special agency of the United Nations that leads international efforts to defeat hunger. FAO acts as a forum where all nations meet equally to negotiate agreements and debate policy, it also a source of knowledge and information which help developed and developing countries in transition modernize and improve agriculture, forestry and fisheries practices and ensure good nutrition for all (FAO, 2010). Rome Italy is head quarters. It has 191 member states as well as Europe Union and the Faroe Islands, which are associated members (FAO, 2010). FAO is composed of 8 different departments, the meeting is conducted by finance division. Relevant Key Points & Issues The fist half of the presentation briefly introduced the FAO’s role as UN’s agency, its structure, business environment and management. FAO’s mandate is contribute to the growth of world economy and to increase the level of nutrition, with the mission of helping build a food secure world. In order to achieve such mandates, they involves 4 activities which are putting information within reach, sharing policy expertise, providing a meeting place for nations and bringing knowledge to the field. It used result- based management which is an approach that integrates strategy, people,...

Words: 5165 - Pages: 21