Review Questions for Fin 5329 Final Exam fall 2009 by xiaopangnv


									Review Questions for Fin 5329 Final Exam fall 2009

       1. If the expectation for job loss over a particular time periodis expected to be 169,000
           jobs and the Labor department published on the first friday following that time
           period that there were actually 185,900 which is 10% higher than expected. What
           would you expect the reaction of the Federal Reserve? How would this impact
           interested rates? (David)
       2. 1/4th of mortgages are underwater, what might be the effects if those
           1/4 walked on their mortgages? (Kristin)
       3. What solutions have been proposed to deal with systemic risk posed by ‘too big to
           fail’ financial institutions? (Davorin)
       4. "Explain the differences between ETFs and Mutual Funds"or "What are the risks
           involved in mortgage securitization? Why were they thought to have been default
           free?" (James)
       5. Define Option, Forward, Future and swap. Compare and contrast among these
           financial instruments? In your opinion, what are the advantages or disadvantages for
           a multinational corporation to hedge currency exposure by using these derivatives.
       6. During a financial crisis, liquidity is king. What does this statement mean? Why is this
           NOT the case under normal economic conditions? (Brent)
       7. Over the course of the semester we have discussed a variety of investment tools.
           Rank them in order of riskiness. Then explain whether or not a corporation and
           individual can have the same investment strategy and how or why this could be
           possible. (Chin)
       8. Refer to the link of wsj:
       What did Federal Reserve, especially chairman Ben Bernanke, do wrong during the
       housing bubble and the recession? As a finance student, what do you expect the Fed
       should do? (Huaxin)
       9. If i buy a call option with a strike price of $45 with a premium of $3.5, is the option
           in the money, out of the money, or at the money? Also, calculate the profit/loss of
           this derivative and show the break even price? (Cas)
       10. What is the duration of a 20 year T-bill (sic!)? Does this have more, less or the same
           interest rate risk than a 20 year semi-annual coupon bond? (Eric)
       11. Why are derivatives used in Finance and what is meant by the term zero-sum game
           related to derivatives? (Chris)
12. What do you mean by "HOT MONEY" in the banking industry.Explain why Ally Bank
    sometime back was in the news in regards to their loan disbursement and interest
    rates given to the depositors and what did FDIC asked the bank to do. (Rajat)
13. The unemployment rate for this month came down to 10% from 10.5% (sic) last
    month, and the number of jobs lost were also way below expected. This has led to
    speculations that the Fed would increase the rates sooner than expected. What
    imlications would a rate increase by Fed have in the current economy ? (Sumedh)
14. Define "Principle-Agent Conflict" and describe an occurrence of this event from the
    cases or discussion in class. How might this occurrence impact the Fiduciary Duty of
    the participant. (Michael)

1. How recent news in wall street about very few job cuts in November(10%) will affect
   Interst Rate, and news for strong dollar will affect the Intrest Rate, dose these good
   news will push Fed to rise Intrest rate? (Gaurav)
2. U.S. Federal Reserve Chairman Ben Bernanke reaffirmed plans to keep interest rates
   at a record low for "an extended period". With the unemployment rate down to 10%
   in November, and the futures market pricing the fed funds rate to increase to 0.5%
   on the June 2010 meeting, what could be the possible economic reasons for Ben
   Bernanke to keep the rates low? Why does market believe that the rates would rise
   to 0.5% (Gaurang)
3. Give an example of a popular technical indicator that we talked about in class, and
   explain why techinical indicators can be important to students in finance. (talk about
   the TED spread). (Eric)
4. “Writing covered call options is a popular profit making strategy by investors.
   Explain what a covered call is and some common errors made by investors that
   attempt to increase returns by using this risk management strategy.” (Carl)

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