Answer:
d. to make informed decisions about Banks and their financial condition.
Explanation:
Financial regulatory agencies are saddled with the responsibility of providing financial supervision and regulations to Banks and financial institutions. They also maintain integrity in the financial system inorder to boost the confidence of investors, creditors, depositors and the general public.
However, one of the major reasons why financial information is provided by the regulatory agencies to investor, creditors and depositors is to make informed decisions about Banks and their financial conditions.
This means that various groups that have interest in Banks and financial institution are kept abreast of happenings in the financial sector of the economy and are able to know which bank and financial institution is healthy in terms of finances and to know where to invest subsequently.
Answer:
1)
Some of the major reasons why Garden Haven might to choose to either invest in debt or equity securities are as follows;
- They want to generate earnings. It is better to earn money from excess cash than keep it idle.
- They invest in debt or securities because they provide liquidity. Investments in debt or securities can be sold through exchange the day decision is taken to see and convert it cash
.
- To meet cyclical cash needs.
- They may have policies as regard to quantum of cash that can be kept
.
2)
In terms of classification, Garden Haven's investment falls in short term investments.
Investments made for a period less than a year are classified as short term investments. Investments made for longer than one year are classified as long term investments. Since Garden Haven is making this investment for four months, this is be classified as short term investment.
Answer: Stock B
Explanation:
Use CAPM to calculate the required returns of both stocks.
Stock A
Required return = Risk free rate + beta * ( Market return - risk free rate)
= 5% + 1.20 * (9% - 5%)
= 9.8%
Stock B
Required return = 5% + 1.8 * (9% - 5%)
= 12.2%
Both of them have Expected returns that are higher than their Required returns so both of them are good buys.
The better buy would be the one that has more expected value excess over required return.
Stock A excess = 10% - 9.8% = 0.2%
Stock B excess = 14% - 12.2% = 1.8%
<em>Stock B offers a higher excess and is the better buy. </em>
The answer is B. Financially protect against unexpected accidents
<span>Considering WACC, if the federal government suddenly stopped allowing deductibility of corporate debt interest, what would happen to the value of all corporations that issue step in their capital structure is that the risk of the project are the same as that of those other assets of the firm and would remain during the duration of the project and the project would support the same fraction of debt to value as the overall capital structure that remains constant for the life of the project. </span>The weighted average cost of the capital or WACC is the company's average rate of return to compensate all its different investors and they represent the source of finance in the target capital structure of the company.