Answer:
number of contracts needed to hedge is 3714
Explanation:
given data
asset duration = 5 years
liability duration = 2.5 years
assets = $1,000 million
liabilities = $750 million
time = 8.5 years
currently selling = $99,000
contract = $100,000
to find out
How many futures contracts does the bank need to fully hedge itself against interest rate risk
solution
we get here no of contract that is express as
no of contract = (DA - k × DL) A ÷ (DF × PF) .......................1
here DA is asset duration and DL is liability duration and A is assets and DF is time and PF is currently selling and
here K is 
k = 
k = 0.75
so now put all value in equation 1
no of contract = (DA - k × DL) A ÷ (DF × PF)
no of contract = (5 -0.75 × 2.5) 1000 ÷ (8.5 × 99000)
no of contract = 3714
so number of contracts needed to hedge is 3714
This best describes <span>escalation of commitment.</span>
Advantages:
<span>Current employees already know the rules, regulations and culture of the organisation.Employees have understanding of how the organisation operates and do not need an induction programme.The organisation knows employees and have detailed records from previous supervisorsOffering opportunities to internal employees may boost the morale of the staff members.Allowing employees to move vertically and horizontally within the organisation could reduce the possibility of her looking for another job.A positive image is created in the organisation</span>
Disadvantages:
<span>No new or fresh ideas are brought into the organisationThe job advertised may require skills not currently available within the organisationPromotion of an internal employee could cause resentment amongst other employees, who may feel they deserve the post more than the promoted employee.The number of applicants from which to choose may be too high or limited.It is possible to promote less qualified employees than those from outside of the organisation, in order to comply with the internal recruitment policy or the Employment Equity Act.Most internal applicants have been stagnant in their posts for so long and will not positively contribute any new ideas.Harden negative attitudes of internal employees cannot be changed by promotion.Lazy employees cannot suddenly change into ‘star’ employees because they have been promoted.<span>Contagious negative habits and behaviour by one negative employee can easily be passed on to other divisions.
</span></span>
Answer:
D) Stock prices of companies that announce increased earning in January tend to outperform the market in February.
Explanation:
The above is consistent with the Efficient Market Hypothesis. All others are a direct contravention.
<em>The efficient market hypothesis (EMH), also known as the efficient market theory, is a hypothesis that states that the prices of shares contain all information and that consistent alpha generation is impossible.</em>
According to the hypothesis, stocks always trade at their fair value on exchanges, making it impossible for investors to purchase undervalued stocks or sell stocks for inflated prices.
This means that it should not be possible to outperform the overall market through professional stock selection or market timing.
The only way according to EMH that an investor can obtain better returns is by purchasing riskier investments.
By implication, this also means that it is not possible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information.
You would note that in the option D, earning (which is a key driver for demand of stock) is announced in one month. The natural reaction would be for the demand for that stock to surge in the next month.
Answer:
a) The return on stockholders’ equity = 15%
b) The return on common stockholders’ equity = 16%
Explanation:
a) Return on Stockholders’ Equity = (Net income)/(Average stockholders' equity)
= ($375,000)/$2,500,000
= 15%
b) Return on Common Stockholders’ Equity = (Net income - Preferred dividends) /(Average return on common stockholders' equity)
= ($375,000 - $75,000) / $1,875,000
= 16%
