Assignment

On
"Financial Markets & Institutions"

Course No: EMBA - 5501

Course Title: Financial Markets & Institutions

Submitted To
Prof. S.M Zahidur Rahman
Professor
Business Administration Discipline
Khulna University.

Submitted By
Efath Ferdush Shaikat
ID: EMBA-190352
Business Administration Discipline
Khulna University.

Date of Submission: April 04, 2021

 Chapter 1
Problem 2: The spreadsheet of George’s asset at the end of the month:

Assets The Value of asset ($) The liabilities ($) Net Asset Value ($)
(i) House 150,000 80,000 70,000
(ii) Car 20,000 2,000 18,000
(iii) Stock Portfolio 50,000 50,000
(iv) Bank Account 10,000 10,000
(v) Other Belonging 45,000 45,000
Total Net Asset 193,000

(vi) Monthly Paycheck 6,000 6,000

(vii)Monthly Expenses 3,000 -3,000
(viii)Interest Rate 17 17
Additional Net Income 3,017
Total Net Asset at the End of the Month 196,017

a) If he pays of his car loan

Assets The Value of asset ($) The liabilities ($) Net Asset Value ($)
(i) House 150,000 80,000 70,000
(ii) Car 20,000 20,000
(iii) Stock Portfolio 50,000 50,000
(iv) Bank Account 10,000 10,000
(v) Other Belonging 45,000 45,000
Total Net Asset 195,000

(vi) Monthly Paycheck 6,000 6,000

(vii)Monthly Expenses 3,000 -3,000
(viii)Interest Rate 17 17
(ix) Pay Off Auto Loan 2,000 -2,000
Additional Net Income 1,017
Total Net Asset at the End of the Month 196,017
So, if he pays of car loan he can still go on vacation because he need $1000 to a visit the Local
beach and his additional income is $1017. It can be said that he can go on a vacation to the
local beach his additional income after visiting the local beach will be:

Assets $ $
Net Income after paying car loan $1017
(-) Vacation to Local beach -$1000
Income Remaining after vacation $17

He will have $17 additional income and be added to the bank account, and his net total asset at
the end of the month will be:

Assets $ $
Net Total Asset after paying car loan $195000
(+)Income Remaining after vacation $17
$195017

Again, after repayment of can loan he decides not to go on a vacation his additional Income
after paying car loan is $1017 and This income will be transferred to the bank account. The
net total asset at the end of month will be $195000 + $l017 = $196017

b) If he makes one monthly payment of car loan

Assets The Value of asset ($) The liabilities ($) Net Asset Value ($)

(i) House 150,000 80,000 70,000

(ii) Car 20,000 1,000 19,000

(iii) Stock Portfolio 50,000 50,000

(iv) Bank Account 10,000 10,000

(v) Other Belonging 45,000 45,000

Total Net Asset 194,000

(vi) Monthly Paycheck 6,000 6,000

(vii)Monthly Expenses 3,000 -3,000

(viii)Interest Rate 17 17

(ix) Pay Off Auto Loan 1,000 -1,000

Additional Net Income 2017

Total Net Asset at the End of the Month 196,017

So we can see that if he to makes one monthly payment of $1000 then he can visit Bahamas
because he has additional income of $2017 and he needs only $2000 to visit Bahamas. Then
his remaining income will be

Assets $ $
Net Income after paying car loan $2017
(-) Vacation to Bahamas -$2000
Income Remaining after vacation $17

$17 will be transferred to the bank account and his total net assets at the end of the month is

Assets $ $
Net Total Asset after paying one month car loan $194000
(+)Income Remaining after vacation -$17
$194017

Again, if he pays of $1000 for can loan and decides not to go on a vacation his additional
income will be $2017 and his net total assets end of $194000 + $2017= $196017 at the will be
at the end of month.

Problem 3: The market each of the following financial transactions takes place
a. A three-year auto loan from a bank.
Capital market; primary market; negotiated market; spot market.
b. A share of Google stock bought at its initial public offering (IPO).
Capital market; primary market; open market; spot market.
c. A six-month CD purchased from your local credit union.
Money market; primary market; negotiated market; spot market.
d. A contract for the delivery of hog bellies six months from today.
Money market; primary market; open market; futures/forward market.
e. A municipal bond purchased from a broker.
Capital market; secondary market; open market; spot market.
Problem 5:

The Banking systems net financial wealth is = $3786-$3631 = $155

It earned on its previously accumulated assets = $3786 – ($3639 + $53) = $94

We know,

Yt = wt . rt
OR, rt = (yt ÷ rt)
OR, rt = 53 ÷ 3639
OR, rt = 0.015
SO, rt = 1.5%

Again
Δwt = st + rt . wt-1

OR, 3786b- 3639 = 53 + 0.015 . w t-1

OR, 147-53 = w t-1 . 0.015

OR, w t-1 = 94 ÷ 0.015

SO, wt-1 = $6367

Banking systems net financial wealth at the end of the year was $6367
 Chapter 2
Problem 1:

The following sectors are deficit-budget sectors, because net increase in liabilities exceeds net
acquisitions of financial assets: Nonfarm nocorporate businesses, nonfinancial corporations,
U.S. government, and Private nonbank financial institutions.

The following sectors are surplus-budget units, because net acquisitions of financial assets
exceed net increase in liabilities: Households, Farm businesses, State and local governments,
foreign individuals and institutions, and Commercial banking.

The Federal Reserve System could be classified as balanced-budget sector given that the
difference is so small.

The largest net lenders are the households and the largest net borrowers are U.S. government.
More funds appear to have been borrowed ($1,645.8 billion) than loaned ($1,614.3 billion).
This discrepancy is probably due to incomplete (omitted groups and statistical discrepancies)
or incorrect reporting of financial transactions, especially those of foreign individuals and
institutions

Problem 4:
Given,
1. Current Operating Expenditures = $577 million,
2. Current Sales Receipts = $542 million
3. Net New Debt issued = $5 million.

Because: R - E = ΔFA - ΔD

$542 - $577 = ΔFA - $5

And: ΔFA= $5 - $35 = - $30 million

Here,
R = Current Income Receipts
E = Expenditures out of Current Income
ΔFA = Change in debt and equity outstanding
ΔAD =Change in holdings of financial Assets.

Because current operating expenditures exceed current receipts by $35 million, ITT was a
deficit-budget unit (DBU) in the most recent period.