1 Week 4 Textbook Problems Week 4 Textbook Problems 6Week 4 Textbook ProblemsWeek 4 Textbook Problems Ch. 10 #17. Role of IMF’s International mutual funds (IMFs) have given investors access to foreign securities because the firm who sponsors IMF makes all their portfolio decisions and completes their transactions. Small investors can also invest in foreign securities by purchasing shares of IMFs, but international capital markets have become more integrated. #18. Spinning and Laddering Spinning is where an investment bank converts its shares from an IPO to corporate executives who may be considering an IPO that requires the help of an investment bank. Laddering is when investors place bids above the offer price on shares the first day they come out. Laddering moves the value of shares up which may not accurately reflect the value of the stock. The owners of the firm may be affected because the will not receive as much profits from the IPO because the spinning and laddering. Spinning can result in shares being sold a lower price, but laddering will only occur if there is a strong demand for the shares. #21. IPO Dilemma The disadvantage of using an offer price of $12 instead of $14 is that they are giving up $2 per share, which means they will receive $8 million less. The advantage of this is that Denton can have a successful offering, which can result in them selling of their shares, which could lead to a secondary offering in the future if needed to raise more for new projects. Denton knows that the securities firm needs to set a low price so that they can attract a lot of investors to sell all the shares. Dividend Yield Problem Dividend yield = 4 x $0.10 =1.01% $39.78 Ch. 12. #1. Orders A limit order is an order to execute a transaction when the price reaches a specific level, and a market order is an order to execute a transaction at market price. #2. Margins Margins specify a proportion of funds to be invested with money that was borrowed versus being paid in cash. Borrowing increases the return earned from the investment in stock, but it also increases the risk because the potential loss goes up, which can happen form investing in stock. Maintenance margin is the minimum amount of margin that must be maintained over the time the investor holds the investment. #13 Bid-Ask Spread of Penny Stock Penny stocks are very risky and the order cost for those kind of stocks are often higher because they do not trade on an organized exchange or on NASDAQ. Penny stocks also have zero or very few market makers and competition, and their stocks are usually illiquid, so they are hard to sell. Ch. 13 #1. Future Contracts A future contract is a standardized agreement to receive or deliver a specific amount of a financial instrument at a specified date and price. The clearinghouse records all transactions on future contracts, which gives a need for a purchaser of a future contract to check the creditwo.

1. 1
Week 4 Textbook Problems
Week 4 Textbook Problems
6Week 4 Textbook ProblemsWeek 4 Textbook Problems
Ch. 10
#17. Role of IMF’s
International mutual funds (IMFs) have given investors access
to foreign securities because the firm who sponsors IMF makes
all their portfolio decisions and completes their transactions.
Small investors can also invest in foreign securities by
purchasing shares of IMFs, but international capital markets
have become more integrated.
#18. Spinning and Laddering
Spinning is where an investment bank converts its shares from
an IPO to corporate executives who may be considering an IPO
that requires the help of an investment bank. Laddering is when
investors place bids above the offer price on shares the first day
they come out.
Laddering moves the value of shares up which may not
accurately reflect the value of the stock. The owners of the firm
may be affected because the will not receive as much profits
from the IPO because the spinning and laddering. Spinning can
result in shares being sold a lower price, but laddering will only
occur if there is a strong demand for the shares.
#21. IPO Dilemma
The disadvantage of using an offer price of $12 instead of $14
is that they are giving up $2 per share, which means they will
receive $8 million less. The advantage of this is that Denton can
have a successful offering, which can result in them selling of
their shares, which could lead to a secondary offering in the
future if needed to raise more for new projects. Denton knows

2. that the securities firm needs to set a low price so that they can
attract a lot of investors to sell all the shares.
Dividend Yield Problem
Dividend yield = 4 x $0.10 =1.01%
$39.78
Ch. 12.
#1. Orders
A limit order is an order to execute a transaction when the price
reaches a specific level, and a market order is an order to
execute a transaction at market price.
#2. Margins
Margins specify a proportion of funds to be invested with
money that was borrowed versus being paid in cash. Borrowing
increases the return earned from the investment in stock, but it
also increases the risk because the potential loss goes up, which
can happen form investing in stock. Maintenance margin is the
minimum amount of margin that must be maintained over the
time the investor holds the investment.
#13 Bid-Ask Spread of Penny Stock
Penny stocks are very risky and the order cost for those kind of
stocks are often higher because they do not trade on an
organized exchange or on NASDAQ. Penny stocks also have
zero or very few market makers and competition, and their
stocks are usually illiquid, so they are hard to sell.
Ch. 13
#1. Future Contracts
A future contract is a standardized agreement to receive or
deliver a specific amount of a financial instrument at a specified
date and price. The clearinghouse records all transactions on
future contracts, which gives a need for a purchaser of a future

3. contract to check the creditworthiness of the contract seller.
#10. Long versus Short Hedge
A short hedge is a sale of financial futures and it used when
liabilities are more rate-sensitive than assets, and a long hedge
is a purchase of financial futures and is used when assets are
more rate-sensitive than liabilities.
#18. Hedging with futures
The yield curve reflects a decline in interest rates because
Elon’s assets are more rate sensitive than its liabilities and it
should consider hedging with financial futures. Elon would also
buy financial futures to hedge because it will be affected by
declining interest rates.
Ch. 14
#1. Writing Call Options
Assumed Stock Price at the Time Net Profit of Loss
per Share to Be Earned
The call Option Is About to Expire by the Writer
(Seller) of the Call Option
$37
$5
$39
$4
$41
$2
$43
$0
$45
-$2

4. $48
-$5
#5. Covered Call Strategy
A.
Profit or Loss per Share
Profit or Loss per Share
Possible Price of Stock E If a Covered Call Strategy If a
Covered Call Strategy
In 6 Months Is Used
Is Not Used
$47
$-1
$-3
$50
$2
$0
$52
$4
$2
$55

5. $5
$5
$57
$5
$7
$60
$5
$10
B.
There is a fifty percent chance that covered call writing will
make and extra $2 per share, and there is a 16.7 percent change
that the two possible strategies will generate the same gain.
There is also a 33.3 percent chance that covered call writing
will have a lower gain.
References
Madura, J. (2015). Financial Markets and Institutions. (11 ed.).
Cengage
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The Good, The Bad & the Tardy;
Unintended Kronos ALendance

8. Tracking Consequences
Nov 2, 2011 3:12:00 PM
Aiendance
problems are oBen
at the top of the list
whenever HR
managers are
surveyed as to
where they spend the majority of their Cme.
Without automaCon it can be an extremely
burdensome and complicated process to deKne
and track tardies, absences, and leaves not to
menCon the warnings, counseling sessions, and
terminaCon protocols called out by
company/union polices when employees cross
various thresholds. Throw in diVerent policies
across diVerence unions and/or departments
within the same organizaCon and the chances
of doing this accurately and consistently
without soBware enforcing the rules becomes
almost zero.
This was the lament of a labor relaCons
manager I spoke with that was very hopeful
the Kronos Workforce Aiendance Module
(WAM) could resolve so many of the issues
stemming from aiendance policy enforcement
in his organizaCon. The good news is that the
soBware was very well suited to their tracking
and policy enforcement management
requirements. It would go a long way to
enforcing the rules consistently. The bad news
is that consistency is not all it is cracked up to
be. Here is an interesCng issue that came up

9. during our discovery process for the customer
to think about that you might want to consider.
One of the assumpCons made is that good
employees have good aiendance records and
bad ones have bad aiendance records. ABer
all, companies use aiendance policy violaCons
as cause for discipline up to and including
terminaCon. In WAM, this whole process
oBen pivots on whether an event such as a late
punch or absence is ‘excused’ or ‘unexused’.
Once this determinaCon is made by the
manager (or Cmekeeper) in Kronos TimeKeeper
the WAM module ruthlessly applies the
occurrence rules. It doesn’t look at their
performance review, or their union seniority, or
the incredible shortage of personnel in that
industry or market. WAM doesn’t but
managers historically have and so the
disconnect between the TimeKeeping side and
the Occurance Tracking side was not
altogether unwelcome. This means that what
TimeKeeper showed as an unexcused absence
would not always go down in the spreadsheet
as an occurrence—or maybe it would unCl the
threshold was about to be crossed.
At the end of a period you could have an
employee that technically should be disciplined
or even let go because of aiendance policy
violaCons but would not if they had saving
graces elsewhere. Want to Kre your best nurse
with the best paCent outcomes instead of the
worst one because of a diVerence of one
tardy?
As with most companies this client decided
that having clear and consistently enforced
policies are more important than any parCcular

10. individuals in the organizaCon and steeled
themselves for what the system would do. Of
course, this also put the burden on HR as they
could now see speciKcally which managers
were not enforcing policy violaCons. They
were now accountable for enforcing
accountability at the next level.
Now if you think this is the obvious course of
acCon. That aiendance policies should be set
and administered uniformly with no other
informaCon being taken into account then
consider the $20 million seilement Verizon,
Inc. paid for violaCons of the American
DisabiliCes Act in July of this year. The EEOC
claimed Verizon and its subsidiaries violated
the ADA “by failing to make excepCons to its
‘No-Fault’ aiendance plan.” In the EEOC's
view, this plan resulted in Verizon's failure to
reasonably accommodate employees whose
"chargeable absences" were due to disabiliCes.
Sears, Inc. had a similar case they seiled for $6
million for terminaCng employees not too long
before the Verizon case.
According to Barry Taylor, a legal advocacy
director for Equip for Equality, "Employers
should deKnitely review any blanket policies
that they have related to people with
disabiliCes," Taylor also said the seilements
highlight the interacCve process duCes the
ADA requires of employers.
"The ADA is very clear that employers have a
requirement to engage in the interacCve
process and conduct an individualized
assessment to determine whether it can
provide a reasonable accommodaCon to
employees with disabiliCes," Taylor said.

11. "Blanket policies ignore this requirement."
At the end of the day we are sCll somewhere in
the middle between rote events and common
sense applicaCon of policies. Aiendance
tracking soBware like Kronos Workforce
Aiendance Module will facilitate the logging,
occurrence counCng, and workvow associated
with counseling and terminaCons consistently
but that sCll may not keep you out of court.
The Case for Gap Analysis!
ImplementaRon Strategies!
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