ETH301 MODULE 2 Assignment Example | Topics and Well Written Essays - 750 words

ETH301 MODULE 2 - Assignment Example Others thought that the law must be followed. In this case the law does not allow anyone access to emails of deceased. Agreements are between an individual and the service providers, which in this case, Yahoo. The agreement meant that no third-party should get access to the email for it would be a violation to the agreement signed (Herold, 2012). The military have tried to advice soldiers on having a letter with IDs and passwords to their e-mail accounts. This letter should be kept by someone they trust and delivered ‘only when the solider dies (Kopetski, 2012). But this still raises many concerns on how the person should be trusted since privacy can be compromised (Wilkens, 2011). According to Herold, (2012) privacy is important and many people would not want to share their emails with others whether alive or dead. Another case is having important data stored on ones email. When the person dies it will mean that this information is lost forever. The family will not be able to get what they could have inherited from the deceased (Kopetski, 2012). The case of Ellsworth is viewed either in the Utilitarian or Deontological point of view. According to Utilitarian theory, actions are considered to be right provided they promote happiness and satisfaction and wrong when they cause sadness (Latus, 2012). The Utilitarian in Ellsworths case appeared to have had more meaning to many people who were in support of the familys request as stated by Kopetski. Ellsworths parents wanted some comfort and satisfaction by getting access to their sons emails. They were not happy when Yahoo denied them access to these emails. The action by Yahoo to deny Ellsworth parents access to their sons e-mails was wrong according to Utilitarian since it led to sadness on their part (Latus, 2012). From what Susan Llewelyn wrote, she does not see the difference between an e-mail address and any

Portfolio Management Plan Essay Example | Topics and Well Written Essays - 500 words

Portfolio Management Plan - Essay Example Any external or internal factor of communication or dealings may allow the employee to be distracted from the current task assigned. The performance of the organization would be affected if Employee Y is distracted with multiple tasks. Employee needs to work upon the emotions and be engaged to the task assigned. Employee Z needs to be strictly monitored as it has been observed that he does not have a good ethical background and has the potential of violating the rules and regulations of the organization. Employee should be observed under the manager and should not be given any vital task of the organization (Woods, 2003). The performance of the organization would be affected negatively if employee Z performs unsupervised. Employee Z needs to also work upon controlling emotions and focus on being satisfied with the job rather than opting for unethical work practices. Other additional assessments that can be recommended for the employees are firstly the Employee Passion Survey. This survey would allow the organization to depict the level of passion that employees have for performing the job roles at the firm. The results of this survey would allow the organization to determine the needs of the employees, the level of passion persisting in the employee, the level of trust that needs to be build by the organization and employee for better productivity of the firm. The second assessment that can be conducted for the employees is the Team Alignment Survey. This survey would allow the organizations to determine the ability of the employees to work in teams and to what extent are the teams aligned in achieving the goals and objectives for the firm. Trust and alignment are two elements that need to be present for teams to become successful and perform successfully for the firm. Specifically employee X can take up assessments such as What’s my basic Personality? and How Involved I am in

Financial Statement Analysis A.G. Barr

Financial Statement Analysis A.G. Barr Financial Statement Analysis Introduction A.G. Barr p.l.c. is based in United Kingdom it maufacture, distribute, and sell soft drinks. A.G. Barr. operates in carbonates and water. Company has a wide range of brand’s which includes IRN-BRU, Rubicon, Barr Brands, KA, Strathmore, Simply, Tizer, D’N’B, St. Clement’s, Findlays and Abbott’s. Company also has some partnership brands which includes Orangina, Rockstar and Snapple. The manufacturing area located in United Kingdom. Findlays Limited, subsidairy of A.G. Barr P.l.c., is engaged in Rubicon Drinks Limted and natural mineral water as well as the manufacture and distribution of soft drinks. Schweppes International Limited is also a franchise partner of A.G. Barr p.l.c in United Kingdom, authorized for manufactures and sells Orangina. It also has collaboration with Rockstar Inc. in the United States to sell and distribution of energy drink, Rockstar brand in Ireland and United Kingdom. The following pie-chart represent market share of soft dr inks and low calorie drinks. They strategy have developed in a way to deliever long term growth in value and focusing on core brands and markets, brand portfolio, route to market, partnerships, efficient operations, people development, sustainablity and responsibility. Financial Review The business performance throughout 2013 of A.G. BARR has perform well in U.K soft drinks market especially in second half of the financial year with double digit growth rate. The economic conditions in the core market segments survied difficulties in 2012, as well as the increasing cost of promotion effect margins. A.G.BARR growth rate for volume and revenue increased more rapidly then the market in carbonates ans still segments. The overall growth of softdrinks experienced carbonates growth rate of 3.8% in value but decreases in terms of volume, showed growth of 1.9% with avolume declining 1%. In 2013 A.G. BARR carbonates volume increased by 6.0% and revenue increased by 7.1%. On the other hand stills also performed better with a growth of 4.3% in revenue and 4.1% in volume. In addition to delievering a growth higher then the market and much of the build program associated with their new production and storage facility at Crossley Road, Milton Keynes. The Milton Keynes site is an i mportant asset for future business developments. Adverse whether condition in 2012 impacted soft drinks category according to Nielsen research, reflects 0.7% decline while to volume grew by approximately 3%. Conumer participation in the carbonates category has remained at high level supported by price-driven promotions across the main brands. Ratios analysis over the last 3 years Profit Margin: According to the financial statements ended January 2013, Company declared a profit after tax of  £ 25.564 million which represent 10.76% of its sales. Current year revenue grew by approximately 7% from prior year and 3.42% on the basis of average growth rate from the last three year. Profit before tax and exceptional item in 2013 increased by 4.3% but profit margin was slightly reduced in 2013 as compare to 2012, due to higher cost of goods. In 2012, observed as a climate of continued economic uncertainty and increasing cost. Despite these challenges companys profit before tax and exceptional item increased by 6.2% from 2011. In 2011, Profit before tax increased by 13.3% from 2010. In 2011 AG Barr observed 10.4% growth in revenue as compare to 7% in UK soft drink market. Current ratio: measure the financial stability of a company to pay its current liability. According to the financial statement, in 2013 current ratio represent 1.31(in times) thus company has enough to pay its financial obligation. Current ratio in 2012 represent 1.46 (in times) which shows that company financial stability in 2012 is better among 2011 and 2013. Quick ratio: measures the financial stability after deducting inventories and prepaid expense because they cannot be easily converted into cash at fair value. Quick ratio show clearer picture then current ratio, the company’s financial stability in 2012 of having 1.043(in times) as compare to average 0.9 (in times) in the rest of year. Working capital: is defined as the financial ability of a company to pay its short term obligation. Working Capital is an important factor used to measure its financial health. Working Capital Management is the strategy of a company to maintain efficient levels of both asset and liabilities to improve their earnings. It is calculated as current assets minus current liabilities. It involves management of inventories, cash, accounts payable and account receivable. Working capital is required to support the day to day business operation it is treated as life blood for smooth and effective business operations. Working capital in 2013 and 2011 is less as compare to the 2012. In 2012 company has  £ 20.934 millions more than its liabilities. Thus in 2012 company has managed their day to day operations effectively. Dividend: A.G. Barr’s efficient performance through the year enabled them to distribute per share dividend. In 2012 company’s profitability reflected in its dividend, declared  £ 25.96 per share, which is high through the rest of years. Inventory turnover ratio: measures the number of times the company sold its inventory throughout the year. AG Barr have inventory turnover of 6.51(in times) in year 2013 which means that company has 1.84 month of supply of inventory on hand. In 2012 and 2011, company has 2.02 (in times) and 2.05 (in times) months of supply of inventory on hand. ROE ROA: Return on equity in 2013 is greater then return on asset by 12.55% across the year it means that company is utilizing its asset perfectly as well as optimizing its debt effectively. It also shows that management is generating good result from shareholders’ investment. Account receivable turnover: Account receivable shows credit policy of a company according to which average time allow to customer to pay their debt. In 2013, 12.64 days took to recover their credit sales. Among the three year, in 2012 company was recovering their sales quickly at the rate of 7.70 days as compare to the rest of years. Operating Risk: can be defined as the more the proportion of fixed cost and lower variable cost is said to be high operating leverage. A ratio which is commonly used to determine the effect of operating leverage at given level on the firm’s potential earning is calculated by dividing, % change in EBIT by % change in Sales. Financial Risk: is the use to debt in it is calculated by dividing % change in EPS by % change in EBIT. Financial risk is not dependent on sales because whether a company has high or low sales it has to pay fix interest. By calculating financial leverage of AG BARR it appears that only 1% change in EBIT, Earning per share would change by 0.93. Preparation of financial statement: Financial statements of A.G. BARR p.l.c. have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union. They have been prepared under the historical cost accounting rules except for the derivative financial instruments and the assets of the Group pension scheme which are stated at fair value and the liabilities of the Group pension scheme which are valued using the projected unit credit method. FINANCIAL MARKETS AND THEIR IMPACT Financial market is a market where an individual and corporation can trade financial securities, commodities. This table shows classification of market and instrument through which corporations can raise funds. Raising funds from equity market may lead the investor to think that the company financial flexibility is weak, and they are unable to get funds from banks or other sources. Stock issue leads to decreased earnings per share. Raising capital from foreign investor involves two main risks which are relevant for foreign investor. They include economic risk and political risk. Economic risk is less in countries with strong and stable economy situation. On the other hand political risk is linked with the economic stability of a country. Political decision and policies plays an important role in an economy. Political risk also called sovereign risk, the ability of a company to pay its foreign financial obligation. Risk is defined as uncertainty. The indication of risk and reward guide the investor that it would have a possibility to loss some or whole of its investment, an investor may experience bullish trend on his investment. Risk and return are directly correlated. The more you take risk, the more the likely return is, because investor demands additional return for additional risk. In finance this relationship is known as the security market line. Common stock and corporate bonds are two asset classes. Corporate bond is a debt instrument and common stock is equity. Corporate bonds and, TFCs are issued by a corporation and sold to investors. Government bonds are less risky then corporate bonds. Common stock is riskier then corporate bond because if an organization goes bankrupt, common stock holders get last priority until debt holders and preferred stock holder have received their assets. But common stock holders have the possibility to earn greater or lower return as compare to stable return on corporate bonds. As far as A G BARR, capital structure for the last two years shows that debt weight-age of the total asset was 42.64% and 50.44% in 2012 and 2013 respectively. So the company has raised fund through debt in order to meet the financial need of company. One of the major benefits by using debt financing is tax advantage and borrowing has a fixed return to stock holder. It has positive impact on the firm but because company failed to control its operating expenses, net profit in 2013 is less than 2012. Future Prospects A.G. BARR has observed a healthy performance in a marketplace impacted by the mixture of very poor summer weather conditions and the continuing economic challenges faced by consumer goods companies, especially raw material cost pressures and unpredictable consumer demand. Looking ahead it is doubtful that these challenges will significantly change, however they remain carefully confident that the combination of our established operating model, continued focus on efficiency, building brand equity, sound balance sheet and ability for growth prospect leave them well placed to continue to build on this performance. In the year ahead, they expect some decrease in the pace of input cost inflation which we expect to be at a low single digit level. Current market pricing for PET is down year on year, fruit pulp costs are lower but the cost of sugar remains persistently high Conclusion A.G. BARR has delivered strong financial performance in challenging year markets. Their products continue to respond well to equity investors. They have driven strong growth in revenue and volume and have continued to increase market share across the soft drinks market. Product and supply chain innovation enabled numbers of consumers to their brands. They are further investing in assets, acquiring additional capacity that enables them to grow according to consumer demands and in line with the market pace. Following a challenging 2011, last financial year survived with strong in terms of operational performance. Last year reported growth in products availability and customer service has improved and cost managed effectively. During 2012 the potential merger received overwhelming shareholder support. In 2013, financials reported profit before tax increased to  £ 35.0 million, showed 4.3% increase from the previous years. Earnings per share increased during the year by 10.9%. Their ba lance sheet measures have improved, showed net assets of  £130.6 million, during the year company also generated free cash flow to the firm of  £ 22.0 million. A.G. BARR p.l.c. group brands, as well as their franchise brand Rock star, showed 8.6% growth. This performance is above as compare to the market reflects that they continued opportunities to develop availability, innovation and distribution among their brands. Their geographical growth rates grew by 4%, and investment except U.K. grew by 12%, showing both important long term growth opportunities and comparably important share from their brands. References A.G. BARR p.l.c. Annual report 2013 pages 70 124 http://www.agbarr.co.uk/pdf/Final Results Announcement January 2013.pdf [Accessed: 12th May 2014] A.G. BARR p.l.c. Annual report 2012 pages 62 – 94 http://www.agbarr.co.uk/pdf/Final results announcement January 2012.pdf [Accessed: 12th May 2014]

Connectivity, Reading/Writing, and the Cyber Age :: Technology Technological Essays

Connectivity, Reading/Writing, and the Cyber Age I own a cell phone. And a desktop computer. And I carry this old laptop around to all the coffee shops and bars in whose noise I try to drown out the mean little voices of writerly anxiety so I can just get my fucking homework done. At work I use a touch screen ordering system to get my drinks from the bar and artichoke dip from the kitchen. I check my horoscope online (as well as those of the men I’m interested in—blushing with shameJ,) stay in touch with friends via email, and use my college’s online services to register for classes. I do a great deal of my research for class via the electronic databases Eastern Michigan maintains, I have a blog, I’ve tried to get my poetry published at online literary magazines. With the help of a very patient friend, I even filed my federal taxes online this year. The internet and wireless technology make my life easier to move through quickly. I am grateful. But somewhat ashamed. In the same way that I feel guilty every time I drive the old pollution-mobile a mile and a half to work, using all this high-speed information technology feels like being seduced away from my principles by the lure of ease. I believe in slowness. I love speed. It’s a difficulty. I am not the only person struggling with the conflict between the speed modern life demands and that at which actual life happens. Women’s magazines are full of tips on organizing the kitchen, the carpool, the craft supplies, so that more time can be found for the important things in life—hanging out with the kids, spending time with parents, maybe even having sex with partners. Advertising companies pitch scads of products as time-savers, from meals-in-a-bag to blocks of cleanser that clean the toilet with every flush. All my friends complain about not having enough time to get everything done. My girlfriend who is working on her PHD and Master’s degrees at the same time doesn’t have enough time to see her lover and spend time with her mother in the nursing home. My other dear girlfriend with two [fabulous] kids, a husband [that’s out of this world,] a house, two cars, and two jobs doesn’t have enough time for anything. Most of my men friends don’t have enough time to work their jobs, take care of their bodies, support their ladyfriends in whatever way and still know what they’re feeling from moment to moment.

European Renaissance

Empire and the Pope Renaissance is the name traditionally bestowed upon the remarkable outpouring of intellectual and artistic energy and talent that accompanied the transition of Europe from the middle ages to the modern epoch. The term is extended to politics and economics as well. The Renaissance was one of the most significant movements in European history, because it effected a change in man's attitude towards the problem of human existence. However, historians have long debated what is meant by the term ‘Renaissance'.For some it is a distinctive period, for others a momentous event and for a third group a definable movement of ideas and beliefs. Each choice has its problem and detractors. The Dutch historian Johan Hugging wrote. ‘At the sound of the word ‘Renaissance' the dreamer of past beauty sees purple and gold'. More exactly he or she sees in the minds eye Botulism's Birth of Venus, Michelangelo David, Leonardo Monomials, Erasmus, the Chateaux of the Loir e and Faerie Queen, all rolled into one, into a composite picture of a golden age of creativity and culture.Jacob Bureaucrat in his famous Civilization of the Renaissance in Italy (1860) defined the period in terms of two concepts, individualism and modernity. He wrote, ‘In the Middle Ages human consciousness †¦ Lay dreaming or half awake beneath a common veil†¦ Man was conscious of himself only as a member of a race, people, party, family or corporation – only through some general category. In Renaissance Italy, however, the veil first melted into thin air†¦ An became a spiritual individual and recognized himself as such, Renaissance meant modernity. It began in Italy and at a later stage spread to the rest of Europe. Peter Burke comments that the grand edifice created by Bureaucrat and his contemporaries has not stood the test of time. It has been undermined by the researchers – the medievalists in particular. They argue that – in the firs t place the ‘Renaissance men' were really rather medieval. They were more traditional in their behavior assumptions and ideals than we tend to think.Two of the most famous books written in 6th century Italy, the ‘Courtier' and the ‘Prince', have turned out to be closer to the Middle Ages than they appear. Secondly, the medievalists have accumulated arguments to the effect that the Renaissance was not such a singular event as Bureaucrat and his contemporaries once thought and the term should really be used n the plural. There were famous ‘Renaissance' n the Middle Ages, notably on the 12th Century and in the age of Charlemagne.Can we therefore assume there was no Renaissance at all? Here Peter Burke comes to our rescue. He says, ‘ if we describe the Renaissance in purple and gold, as an isolated cultural miracle or as the sudden emergence of modernity, my own answer would be ‘no'. If however, the word is used without prejudice to the achievements o f the Middle Ages, or those of the world beyond Europe, to refer to a particular cluster of changes in western culture, then it ay be regarded as an organizing concept which still has its uses. ‘ J. M.Thompson has very succinctly summed up what is meant by the Renaissance. ‘Let the word be freedom. Freedom from the tyranny – none the less cramping because so easily borne – of the medieval world order. Freedom of thought from Aristotle as interpreted by Aquinas. Freedom in history from the parochialism and credulity of the monastic chronicler. Freedom in art, from the illustrated manuscript and the stained glass window. Freedom of literature from the censorship of the Church. In politics freedom from feudalism: in religion from traditionalism.With a new universe in the sky, a new world across the sea and anew learning on his study shelf, the 16th century student might well feel that the old age was passing away and that the dawn off new age was at hand. â₠¬Ëœ SOCIAL ROOTS The Renaissance was actually not so much a particular movement as a concrete expression of changing mentalities in a new world. A movement implies a definite period of activity with a precise beginning and end. The Renaissance had neither. It is however generally assumed to have started with the activities of the first humanist Francesco Patriarch as he is commonly known.The Renaissance flourished due to the patronage of the Popes, princes, cardinals and merchants. The 1 5th century Italy was rich enough to support an extravagant and self-indulgent merchant aristocracy. In the urban centre of Northern Italy which possessed a high degree of cultural self consciousness as well as economic buoyancy, urban identity and pride was reflected in the construction of the churches and public buildings and through the emergence of universities as centre of learning.As the Northern Italian urban society was based on individual property and private contract, the most important ed ucated roofs were those who dealt with commercial and industrial activities, I. E. , lawyers and notaries who had to attain mastery of Roman law and Latin (the language of the law courts) and who were able to quote from the Classical and the Christian authors as well as had developed an interest in the language literature, institutes and customs of antiquity. Patriarch and Vacation are pointed out as the pioneers of the Renaissance, the precursors or pre-humanists were all either lawyers or notaries.Religion still occupied an important place and the Pietas, Madonna's, Crucifixion and he innumerable saints portrayed in Renaissance art, show that the traditional faith of most artists remained Christianity. Renaissance society was essentially aristocratic. It offered economic, intellectual and political opportunities to only a small number. But it did not possess the usually universally accepted standard of nobility. The Commercial Revolution of the high Middle Ages and the social chan ges connected with it had already undermined the aristocracy of blood.The Great Depression of the mid 14th century and the stagnation which followed, shook the financial security of the aristocracy of wealth. The aristocratic structure of the society during the Renaissance period persisted and was not submerged by the growth of the merchant class. The Renaissance witnessed as much penetration of the ideas and manners of the nobility into the ethos of the bourgeoisie as the other way round. Noble births were desired but it was the sophisticated merchants of Florence and Venice who helped to promote civility, and to widen the horizons of the aristocratic life.Now for a soldier, statesman, priest or a merchant to be known as a gentleman, a knowledge of the ancient classics and an appreciation of art, literature, music and of conversation ere necessary. The Renaissance was the work of hundreds of gifted men living in scores of cities like Vaccine, Riming, Ferreira, Robin, Mantra and Pra m. But it was the strongest in the four cities – Florence, Milan, Rome and Venice. Florence cradled the Renaissance and produced a remarkable number of gifted artists while Rome and Milan patronized these artists.The Renaissance reached Venice late but stayed here longer. The Renaissance enriched artistic influence spread all over Europe. One of the reasons as to why the Renaissance was Italian in origin was the continuous reminder of her read past provided by the ruins of temples and villas especially in the city of Rome. From the 1 5th century a new appreciation of these classical ruins appeared and the Renaissance Popes ordered their preservation and encouraged their excavation. Pope and princes competed with each other in making collection of ancient objects.The interest in Greek thought and literature, among those who discovered and collected ancient manuscripts, was also stimulated by contacts with the Byzantine Empire through Venetian and Genomes traders. The princes a nd republics of the Renaissance lived in dangerous and unsafe times but they desired fame, which could be expressed in something more concrete and permanent than war, such as buildings, arts, pageants and patronage. They all tried to immortality their greatness by constructing buildings and encouraging painting and sculpture.Leonardo dad Vinci sought the patronage of Cesar Boring as well as Spoors, Raphael began his career in war ravaged Peruvian, Ladino's frescoes, Liberties churches and Vitiation's influence in education, all brought fame to Mantra. Social circumstances were also very favorable to the artists and craftsman. There was a deep rooted tradition of early Christian Europe that buildings were a part of Christian life. So the wealthy ordered their parish churches and founded and patronized monasteries, nunneries and cathedrals. The Popes were the foremost in this field.It was also a custom for the princes to adorn their palaces, and so provide an impetus to the crafts of metal work, jewelry, tapestries and frescoes. Since the competitive state system of the Renaissance Italy was obsessed not only with power and war but also with the furtherance of art, Venice and Florence, the two republics were Jealous of their menus. Money and social energy was poured into art. In the competition of artists was added the competition for artists. Now merchant princes and despots were vying for the service of the great architects, sculptors, painters and scholars.Many of the rulers of the smaller states cultivated a princely style of generosity to arts and magnificence in order to popularize their rule. The patrons spent their fortunes in ways that would benefit the community. The building of chapels and the commissioning of many public works of art were a result of a new conception of wealth spent for civil purposes. New modes of religious thought and feeling underlay new styles in architecture, sculpture and painting. With patronage becoming competitive, the arts became more costly.Renaissance society was meant for rich men, rich cities and rich Popes. To maintain the expenses of the Renaissance art, culture and society, an active and profitable commerce was essential. Venice, Florence, Milan and Rome were full of wealthy men who patronized the Renaissance achievements and nurtured genius. Among the Italians, the Florentine especially revered the wisdom, grace, philosophy and literature of the antiquity. By 1400 there ere hundreds of merchants of Italy who could afford to patronize art when earlier it was only the prerogative of the aristocracy.In Florence, Milan, Rome and Venice, the practice and patronage of art had become a civic virtue. Ferreira, Bologna and Robin also had talents. Though the cities of the papal states was war torn because the Pope was in Avignon, and both trade and population had declined there, yet artistic life did flourish in Peruvian (Perusing frescos, Bastion's and Repeal's paintings). Constant fighting turned the Renaissance historians and political philosophies into supporters f tyranny, since it ensured peace and order, as in the case of Machiavelli.Renaissance statecraft is typified by a single man – Nicola Machiavelli – who belonged to Florence. He was highly influenced by the constant warfare of those times and also by the fact that Florence continued to be a republic in spite of the ambitions of the Duke of Milan. By resisting him, the Florentine saved the liberty of both Florence and Italy. The outcome of the crisis made Florence the centre of new humanism, a new appreciation of political liberty and civic virtue and a new attitude towards man's place in society.It was this attitude that ensured the independence of the major Italian states and consequently the vigor and diversity of Italian artistic and cultural development which characterized the Renaissance. Trade, high finance, a large and a partially urbanize population, quickening industry and the absence of a deepl y rooted, all-powerful political structure, all helped the future development of Renaissance Italy. Renaissance was a movement of cities where a rich urban class, free from the pressures of feudalism flourished. The Italian city-state formed a perfect domicile for the Renaissance art and literature.

Assignment: Economics Essay

1. Economists in Funlandia, a closed economy, have collected the following information about the economy for a particular year: Economists also estimate that the investment function is:  where r is the country’s real interest rate, expressed as a percentage. Calculate private saving, public saving, national saving, investment, and the equilibrium interest rate. Please note: national savings is not related to the interest rate, which means that the supply curve for loanable funds is vertical. (15 points) Private Savings= Y-T-C 10000-1500-6000= 2500 Public Saving= T-G 1500-1700= -200 National Saving= S=(Y-T-C)+(T-G)=(10000-1500-6000)+(1500-1700)= 2300 Investing= I=Y-C-G 10000-6000-1700= 2300 Real interest rate I = 3,300-100r , 100r = 3,300-I 100r = 3,300-2300 ( I=2300) 100r = 1000 100r/100 = 1000/100 (dividing it by 100) r = 10 2. In the summer of 2010, Congress passed a far-reaching financial reform to prevent another financial crisis like the one experienced in 2008-2009. Consider the following possibilities: a. Suppose that, by requiring firms to comply with strict regulations, the bill increases the costs of investment. On a well-labeled graph, show the consequences of the bill on the market for loanable funds. Be sure to specify changes in the equilibrium interest rate and the level of saving and investment. What are the effects of the bill on long-run economic growth (recall: higher investment would increase capital and capital per worker)? (7 points) i. The demand loanable would decline along with the equilibrium. The saving and investments will decline as well hence giving the economy a lower rate for the future. ii. b. Suppose, on the other hand, that by effectively regulating the financial system, the bill increases savers’ confidence in the financial system. Show the consequences of the policy in this situation on a new graph, again noting changes in the equilibrium interest rate and the level of saving and investment. Again evaluate the effects on long run growth. (7 points) i. The supply of loanable funds would increase. The interest rate will decrease while the savings and investments will increase. Which will let the economy growth for the future, ii. Problems for Chapter 14 3. According to an old myth, Native Americans sold the island of Manhattan 400 years ago for $24. If they had access to a financial investment that yielded an interest rate of 7% per year, how much would they have today? (8 points) a. (1.07)^400 x 24= $13.6 Trillion 4. For each of the following kinds of insurance, give an example of a behavior that can be called moral hazard and another example of behavior that can be called adverse selection: a. Medical insurance (6 points) i. A sick person is more likely to apply to medical insurance compared to a healthy person. Meaning it’s an adverse selection. A healthy person may get health insurance too but now he may less likely to take care of himself, this would be a moral hazard. b. Car insurance (6 points) i. A risky driver is more likely to apply for car insurance, this would be an adverse selection. Or once a driver has insurance, they may be driving more reckless, this would be a moral hazrd. 5. For each of the following pairs of bonds, which bond would you expect to pay a higher interest rate? Explain. (5 points each) a. A bond of the US government or a bond of an Eastern European government i. Eastern European because non-US bonds will include risk premiums and also have higher interest rates b. A bond that repays the principal in 2015 or a bond that  repays the principal in 2040 i. 2040 because higher maturity requires higher interest rate. c. A bond from Coca-Cola or a bond from a software company that run in your garage i. The software company due to not being well known so it would be a higher interest rate. d. A bond issued by the federal government or a bond issued by the state of New York i. Definitely federal government because they are not tax-exempted compared to municipal bonds 6. When company executives buy and sell stock based on private information they obtain as part of their jobs, they are engaged in insider trading. a. Give an example of inside information that might be useful for buying or selling stock. (6 points) i. Information on new products or any government involvement that may affect the firm b. Those who trade stocks based on inside information usually earn very high rates of return. Does this fact violate the efficient markets hypothesis? (6 points) i. Who does trade with inside information is not violating the efficient market hypothesis. The hypothesis includes all available information about the future of the firm. Inside information is not available to the public meaning the price of the stock doesn’t reflect this. c. Insider trading is illegal. Why do you suppose that is? (5 points) i. It’s illegal for sure due to the fact that it gives others an unfair advantage over everyone else who doesn’t have access to this. 7. Jamal has a utility function , where W is his wealth in millions of dollars and U is the utility that he obtains. a. Graph Jamal’s utility function. Is he risk averse? Explain. (7 points) i. 1. He is risk averse because of his chances of getting more money for more risk. b. In the final stage of a game show, the host offers Jamal a choice between: i. $4 million for sure ii. A gamble that pays $1 million with 60% probability and $9 million with 40% probability Should Jamal pick choice i or choice ii? Hint: evaluate the utility that Jamal would expect to receive in choice i and choice ii. Jamal would expect to receive utility in the amount of the weighted average of the possible outcomes, where the probabilities are the weights. (7 points) E(Utility) = 0.6*U(1000000) + 0.4*U(9000000) = 0.6*0 + 0.4*1 = 0.4 Jamel should pick option one because he has a only 40% in order to get the 9 million but it might not worth it because he could end up back at 1 million.