Essays on Bondholders

In the 2000s, Argentina’s financial system fell into a serious recession. For this reason, the leaders in Argentina took financial loans from International Monetary Funds (IMF) and other agencies. However, the country was not able to pay its debt installments on time due to which Argentina failed to pay around US$93.2 billion of its external debt. In the year 2001, the country defaulted on a total of around $81 billion in bonds. The issues faced by the financial system of Argentina made the trading sector suffer as well. The foreign investment fled from Argentina and multinational companies ...

Abstract

When an organization has cash inflows and outflows of foreign nature, the cash forecast for every currency will help during the identification of the currency exposures. The format of the estimation should allow the users to determine the balance for every currency and whether there is a growing shortage or extra money over time based on reasonable cash flows. The increasing gaps between the cash inflows and outflows may need hedging, and the cash flows that offset over time represents the issue of timing effectively. The management of foreign exchange transaction can be achieved through the offsetting transactions to ...

Basic Facts of the Case

The Ethical Issues Involved Under utilitarianism, the GM bailout was certainly ethical because it focused on the maximization of the overall good of the company, the people, and the government. However, when one keenly scrutinizes justice and rights issues involved, there is contention with the bailout. The executives of General Motors were allowed to enjoy the organizational profits for the longest period with the taxpayers bearing the losses. Economist Joseph Stiglitz wrote the debate about whether or not to bail out car manufacturers had been mischaracterized, and that the profits were privatized, and the losses socialized. According to him, ...

Rights of the shareholders

While the shareholders are the most important stakeholders of the company, however, very few control the day to day running of the company’s business activities. Therefore, in order to safeguard their interest, the company range multiple rights of the shareholders and provide them the eventual power to influence the company’s decisions. Below we have discussed the rights of the shareholders: a) Right to attend the general meeting and cast their vote All the shareholders of the company have the right to receive notice of the general meeting, including, Annual General Meeting(AGM) and Extraordinary General Meetings(EGM). ...

Article 1: The case for minimizing risk in your bond holdings by William Bernstein

There is always a trade-off between risk and return. Investors are rational and risk-averse hence, they require additional returns when the risk involved in any investment is high. In this article, William Bernstein explains how investors can reduce the risk in their investments in bonds without necessarily interfering with the expected returns on the bonds. One of the risks affecting bondholders is the interest risk. Changes in interest rates affect the return on bonds. When interest rates rise, bondholders lose since the prices of bonds fall. This is because the bond will be paying a lower coupon interest compared ...

Question 1 Directors’ Duties

Issue For a business to register as a company it should satisfy the following requirements: a name, one or more shares and shareholders having limited and unlimited liability. Having directors is also a requirement. Once a venture has this, it can go ahead, apply for registration as stated in section 11, and send an application to the registrar. The application must be in a prescribed form and signed by each applicant; this includes the named directors and shareholders. The proposed company’s name and constitution should be included in the application, as stated in section 12. Once the application ...

The primary issue in this case is related to pending litigation of the company and increasing competition in the tobacco industry that is likely to erode the market share of the company.

Why is UST Inc. considering a leveraged recapitalization after such a long history of conservative debt policy?

UST is considering a leverage capitalization in order to benefit from the tax shield associated with the debt financing. The increase in value along with existing enterprise value will be distributed amongst lower number of shareholders. Moreover, considering the past performance of UST, the company has a high cash generative capacity of the company’s business. Evaluate the business risks of UST from the viewpoint of a ...

In the present era of Corporate Modernization, unlike the traditional activities, it is not the owners which runs the company, infact they hire competent management to work on their behalf. Moreover, every owner(shareholder) consider that the managers so appointed to work on their behalf will act in the best interest of their owners and will assure shareholder’s wealth maximization. Infact, in present complex corporate era, the performance of the company depends upon, how competent the management is adapting the dynamic business environment and related circumstances. Thus, the ability to properly adapt and implement the changes in the ...

In the game theory, it is assumed that there are several players who are rational. They are interested in their gain in the entire process and the choices they make are geared towards their self-fulfillment. The classical example of the game theory is the prisoner’s dilemma. Two prisoners are held by security officials for a serious crime. There is no judicial evidence. Their conviction is based on both or either of the prisoners confessing to the crime. If one confesses, he gets immunity from prosecution while the other prisoner is jailed for a long time. If they both confess, they ...

How should Jonathan describe the rationale of the dividend discount model (DDM) and demonstrate its use in calculating the justifiable price of PCU share? Firstly, Jonathan should explain to Dwayne that there are different methods how a financial or a security analyst can analyze the fundamental and technical aspects of a security, which in this case is the PCU share, including its price, the forecasted growth rates, and a lot of other aspects. There is more than one way of predicting the future stock price of a company . A security analysis can focus on the fundamental aspects of the company such as the ...

The Roaring Years

In the 1920’s, USA changed vastly in its social, political and economical trends. The wake of the First World War is dubbed by historians as the roaring 20’s. A revolution in most aspects of living was witnessed in the United States. There was a massive economical, social and political change. The changes were mostly brought about by country’s encounter of cultural, political and economical diversity of other countries during the First World War. The thesis of my essay is to discuss the various changes that the country encountered in cultural, economical and political aspects.

Economical change

The Cultural ...

The author attempts to put a case that would essentially place liability on the bondholders that finance banks upon the occurrence of financial crisis. This would depart from the common practice in which the bank bondholder is protected and safe from the adverse effects that hit the financial world upon collapse of the system. He equates this latter practice to impunity and signals its end in the events that characterize the Spanish financial system where the bank financiers are likely to suffer losses. The developments in America and Europe have seen the attempt by policy formulators to amend the law ...

Introduction

All of us constantly strive to satisfy our needs and improve our economic welfare. According to Certified Financial Planner Board of Standards (2011), they define this as personal financial planning, which denotes the process of determining whether and how an individual can meet life goals through the proper management of financial resources. Thus, personal financial planning is both an organized process and attitude that considers improved lifestyle elements of an individual’s financial affairs and is focused at fulfilling his or her financial set-goals. This confronts everyone – including recent college graduates, professionals to senior corporate executives to develop a personal ...

1. Bevan Industries’ current cost of capital

Discussed hereunder is the step by step calculation of Bevan Industries’ current cost of capital (Barber, 2004).

Cost of Debt (Cd) Cd = I (1 - TR)

Where I is the Interest Rate on Debt

TR is the Tax Rate Cd = {(30,000,000 X 0.06) / 25,000,000} X (1 – 0.28)

= 0.072 X 0.72 = 0.05184

= 5.184%

Cost of Common Stock (Ccs)

Based on the given information, the cost of common stock is calculated using the formula Ccs = Cd + risk premium rf = (20 X 8) / 160 = 1 (rf is the risk free rate) Ccs = 5.184 + 0.75(1)

= 5.934%.

Cost of Preferred Stock (Cps)

...

Abstract

The world is characterized by different kinds of organizations which have different obligations that they carry out. In order for the organizations to run smoothly, they must have capital to sustain their activities or rather to fulfill their obligations. It is quite unfortunate that many of the organizations are normally characterized with lack of funds to carry out their activities. Presbyterian Homes Inc. is one such organization which is affected by lack of funds. For this reason, its members opted to look for an alternative and that is to apply for a loan to some of the markets for credits ...