THE BUSINESS SCHOOL – ACCOUNTANCY, FINANCE & LAW
CURRENT ISSUES IN FINANCE ACC10916
finance代考 Investment in hedge funds is riskier than investment in fixed-income securities such as bonds issued by government and corporate firms.
Academic session:
Exam duration: 3 hours
Reading time: 10 minutes
(excluding reading time)
Total exam time: 3 hours 10 minutes
Please read full instructions before commencing writing
Exam paper information
Total number of pages: 9
Number of questions: 8
Attempt two questions from Section A and two questions from Section B
Special instructions
Dictionaries may only be used during reading time. After reading time, all
dictionaries must be placed on the floor for the rest of the exam.
Special items
None
Section A (Attempt any 2 questions) finance代考
Question 1
a) Critically discuss the following statements:
i.Banks use credit derivatives more for credit risk management than trading
activities.(10 marks)
ii.“AIG’s collapse was caused largely by its $527 billion portfolio of credit default
swaps (CDSs)…” (Sjostrom, 2009, p. 945).(10 marks)
b) Evaluate whether the empirical evidence provided in Broccardo, Mazzuca and
Yaldiz (2014) is consistent with the hedging hypothesis.(5 marks)
(Total: 25 marks)
Question 2
a) Critically discuss whether you would agree with the following statements:
i.“Hedge funds prosper from buying Greek debt” (Financial Times, 1 March 2010)(10 marks)
ii.Investment in hedge funds is riskier than investment in fixed-income securities such as bonds issued by government and corporate firms.(10 marks)
b) Based on your reading of Ling, Yao and Yiu (2015), discuss some of the features of the Chinese hedge fund industry that are similar to the global hedge fund industry.(5 marks)
(Total: 25 marks)
Question 3 finance代考
a) Critically discuss the following statements:
i.Executive pay can be a rent-seeking tool as well as an interest alignment tool.
(10 marks)
ii.There are governance mechanisms that can be employed by debtholders in mitigating the risk-shifting problem in the context of “nexus of contracts”.(10 marks)
b) Discuss the role of corporate governance as suggested in Chang, Yu and Hung(2015).(5 marks)
(Total: 25 marks)
Question 4
a) Critically discuss the following statements:
i.Musharakah and murabahah promote profit and loss sharing.(10 marks)
ii.Sukuk are risk-free investments from investors’ perspective.(10 marks)
b) Based on your reading of Farooq and Zaheer (2015), discuss the experience of
Islamic banks during financial panics.(5 marks)
(Total: 25 marks)
Section B (Attempt any 2 questions) finance代考
Question 5
Researchers have spent decades investigating how companies structure their capital between debt and equity and several main theories have emerged. These include Trade-Off Theory and Pecking Order Theory.
Note: the requirements below do NOT ask you to discuss Modigliani and Miller’s theory of Capital Structure Irrelevance. finance代考
a) Discuss reasons why increased gearing usually increases the risk associated with the returns available to shareholders of a company and the company itself.(10 marks)
b) Citing relevant literature, discuss the concepts of Trade-Off Theory and Pecking Order Theory in the context of companies’ financing.(10 marks)
c) Discuss Serrasqueiro Z & Caetano A, (2015)’s research and findings on Trade-Off Theory versus Pecking Order Theory in Portugal.(5 marks)
(Total 25 marks)
Question 6
The Capital Asset Pricing Model (CAPM) has been essential reading for university students since its development. Industry professionals and investment analysts continue to use the model as the basis for making investment decisions. Yet, the model has been shown to be flawed in a number of different ways. As a result, alternative models have been developed, including the Fama and French Three-factor Model, the Inter-temporal CAPM and Arbitrage Pricing Theory.
(a) Analyse with reference to literature flaws identified in the CAPM.(10 marks)
(b) Explain briefly two of the alternatives to the CAPM.(10 marks)
(c) Briefly analyse the findings of Baek and Bilson (2015) in relation to size and value risk in financial firms.(5 marks)
(Total: 25 marks)
Question 7 finance代考
From 2000 to 2007/08 house prices in the USA increased dramatically causing a“housing bubble”. It has been argued that there are two main reasons for this rapid increase in prices: the US economy was operating as a low interest economy and the banking system changed from a traditional model to a transformed model which caused a flood of cheap credit into the mortgage market.
(a) Discuss the factors that caused the USA to have low interest rates in the period leading up to the housing bubble.(10 marks) finance代考
(b) Analyse the changes in banking mortgage lending which resulted in the rapid increase in sub-prime lending from 2000 to 2007/08.(10 marks)
(c) Briefly discuss the aim and findings of Serrano-Cinca et al (2014) regarding the causes and symptoms of the banking crisis.(5 marks)
(Total 25 marks)
Question 8
“The empirical literature is unanimous that takeovers are expected to create value for the target and bidder shareholders. However, the evidence on the wealth effects for the bidder shareholders is not consistent: some companies gain whereas others make losses.”
Martynova, M. and Renneboog, L., (2008)
Required:
a) Critically discuss some of the reasons why people believe that mergers and acquisitions can add value to a company’s shareholders.(10 marks) finance代考
b) Analyse any relevant research evidence or theories showing why gains are not always the result of an acquisition or takeover.(10 marks)
c) Briefly explain the findings of Levi et al (2014) in relation to whether director
gender influences decisions regarding mergers and acquisitions.(5 marks)
(Total 25 marks)
