Criminal law Essay Example | Topics and Well Written Essays - 2500 words

Criminal law - Essay Example Hawthorne, as shall be seen. Discussing the Criminal Liability of Andrew Chances for Andrew’s criminal liability are very high. As previously stated, the Black Letter Law specifies the need to factor actus reus and mens rea when determining criminal liability. As touching, mens rea, Andrew clearly has a criminal liability, since his mental elements are voluntary, purposeful and in line with a criminal intent. Facts that support or evidence Andrew’s criminal intent are: him wanting to eliminate Sue (which leads to and is made manifest by); him hiring a hit man to murder Mrs. Sue; and him setting a ? 5,000 bounty on Sue’s head, as the hit man’s reward. The aforementioned elements immediately above are serious and interrelate with one another. The idea of Andrew having a mental intent of getting rid of his wife Mrs. Sue, so that he could remain with Beth (the lady he is having extra-marital relations with), becomes self-evident, when he plans Mrs. Sue’ s murder. This is further stressed when Andrew hires not just any murderer, but aseasoned hit man, John to fatally shoot Mrs. Sue. This shows Andrew’s commitment to arranging for Sue’s murder. Andrew’s intent to have Sue murdered is also evidenced by him supplying John with a gun, for the same purpose. Again, the same intent is made manifest in Andrew helping John identify Mrs. Sue, her car and where Mrs. Sue works. All these show that Andrew’s actions are previously thought. In a closely related wavelength, all actions that Andrew carries out readily and indisputably render him compos mentis. According to Dioso-Villa1, to argue otherwise in an attempt to render him non-compos mentis and to therefore insinuate that there can proceed, sustainable order from disorder. Andrew’s cognitive and mental orderliness is confirmed by the elaborate plan he crafted to have Mrs. Sue identified and eliminated. Again, this orderliness is confirmed by his attempts to keep the plan as discreet as possible. Even when he discovers that his son Tim has been mistakenly murdered in place of Mrs. Sue, he does not report the matter to law enforcement authorities. This shows that Andrew knew very well that his acts are criminal and thus preferred to steer clear of polices’ involvement. In another instance, Andrew’s mental intent to commit the crime of murder is confirmed by him driving himself up to their house, to kill Sue, by himself. It is clear that Andrew’s criminal intent is the very factor that made him to drive to their home. He does this after realising that his previous plan to murder Sue had fatefully backfired. He then willfully opens up an argument with Sue to provoke an argument, so that he can be enraged into murdering Sue. This plan becomes successful. In respect to the immediately foregoing, the previous planning by Andrew rules out any chances for considering Andrew’s murderous acts as second or/ and third degree. Moreover, Andrew’s act of repeatedly stabbing Mrs. Sue speaks of a mental criminal intent and rules out third or second degree murder.This is to mean that Andrew is certainly answerable for first degree murder. The converse is also true that Andrew also is responsible, based on his actions (actus rea).Indeed, Andrew performs actions that are criminal in nature, or before the law. Andrew hires the services of an experienced hit man (John), for the

Coursework Assignment Example | Topics and Well Written Essays - 2000 words

Coursework - Assignment Example Highly technology driven companies, both Nintendo and Sony have invested heavily in e-commerce activities which is quite apparent from their websites. Through their websites, both the companies facilitate their user relating to the placing new orders, acquiring customer’s feedbacks in order to enhance their services and also using it as a plat form for releasing new products and features. The report presents an analysis of both the companies in terms of operational and marketing strategy, what models they have adopted in order to generate revenue, striking marketing tactics and methods as portrayed in the websites of the both the companies. Competitor Analysis The method used in the competitor analysis of the Nintendo (Wii and Nintendo 3DS) and Sony (Playstation) is the Michael Porter’s five forces model. According to the model, there are five forces prevailing in the market which affects the competitive rivalry between the components. The analysis assists the companies in identifying the factors keeping which into consideration the company can devise its marketing and operational strategy. This model gives importance to the financial as well operational aspects of a business and sets criteria according to which the company can assess the activities of its competitors and counter them through effective and efficient management. The five forces according to the Porter’s model are as follows [2] The bargaining power of the customer can be regarded as the influence that the consumer base has on the pricing strategy of the company. Currently the Playstation and Nintendo 3DS are sold at prices $399 and $249 respectively. Since Playstation offers a more advanced and high tech gaming experience thus its prices are steeper as compared to its competitor. The fact that bargaining power of customer can cast significant impact on the profitability of the company can be corroborated from the fact that initially the Playstation was sold considerably belo w its per unit cost, causing a significant decline in the profitability of the company. In order to justify their demand prices, both the companies must communicate with their consumer base and make them aware the latest add-ons the product comes with and assuring them that the prices are justified. This requires innovation and smart marketing tactics. Suppliers of both the companies are the companies providing raw material for the manufacturing of the product. Software houses can also come under this category as they provide important technical expertise in devising interactive user interface. Bargaining power of supplier means that the supplier wants to obtain benefits through increased prices of raw material, reduction in the credit terms etc. This can also affect the financial outlook of the company with increased cost of goods sold and reduced profit margin. Other factors which the model takes into account are the threat of new entrants into the market and threats of the substi tute products. The biggest competitor of Playstation in the console gaming market is the Microsoft’s product ‘X-box 360’ which also offers high tech gaming experience. As per the Nintendo president Satoru Iwata said that the battle with Sony is over — referring to that the Wii has won over the PS3 — and that the new enemy is Apple, with its ever expanding mobile lineup. [3] Both the

Entering an international market Essay Example | Topics and Well Written Essays - 4000 words

Entering an international market - Essay Example Porter contended that a lot depends upon the differences in the extent of geographical location and the degree to which the company is centralized for decision making. International marketing is different from home-country marketing and the success or failure of the decision basically depends astute analysis which is deployed in making and entry in the international market and positioning oneself in such a market keeping in mind all cultural dimensions of the international market. This paper examines an international market entry strategy of the chosen company i.e. Barclays Bank in China. Barclay's origins can be traced back to a modest business founded more than 300 years ago in the heart of London's financial district when goldsmith-bankers provided monarchs and merchants money for funding their business ventures. John Freame and his partner Thomas Gould established one such in Lombard Street in 1690. The name Barclay became associated with the company in 1736, when James Barclay also became a partner. The company amalgamated with the London, Provincial and South Western Bank in 1918 to become one of the UK's 'big five' banks. By 1926 the bank had 1,837 outlets. The modern banking business though started picking up in 1925, with the merger of three banks - the Colonial Bank, the Anglo Egyptian Bank and the National Bank of South Africa to form Barclays international operations. This helped the bank in adding more business in Africa, the Middle East and the West Indies. Besides the banking operations the Barclays' group has business interests in a range of fields li ke fund/ capital management, investment advisors, insurance, etc. This paper, however, limits its analysis to Barclay's banking operations.Barclays acquired Martins Bank in 1969, the largest UK bank to have its head office outside London. In 1981, it became the first foreign bank to file with the US Securities and Exchange Commission and raise long-term capital on the New York market. Taking giant strides towards global acceptance Barclays listed its shares on the Tokyo and New York stock exchanges in 1986, thus becoming the first British bank to do so. In 2000 it took over the Woolwich, a leading mortgage bank and former building society founded in 1847. In July 2003 Barclays acquired the Banco Zaragozano, one of Spain's largest private sector banking groups, which was founded in 1910. Keeping pace with technological advancements Barclays started the telephone banking service Barclaycall in 1994 and later on-line PC banking in 1997. Barclays has also introduced customised services with introduction of Barclays Private Bank and Premier Banking. In July 2005 Barclays Bank PLC also acquired a majority stake in Absa Group Limited, South Africa's largest retail bank with over seven million customers. With such international strides Barclays has now grown from a group of English partnerships to a global bank having its footprints in Europe, the USA, Latin America, Africa, the Caribbean, Asia, the Middle East and Australasia. On the domestic front Barclays has more than 11.3m current accounts and 10.9m savings accounts serving them through 2,014 branches in UK. Total number of UK Banking staff at present is about 41,500. On a wider horizon Barclays is operating with 25

Music affect the growth of a plant Essay Example for Free

Music affect the growth of a plant Essay Plant growth is the development of seeds of a plant, which might be surrounded by a protective and nutrient rich layer called the fruit, into plant tissue that includes roots, leaves, and the stem (along with all the cells and other things that this tissue is composed of) to create a fully functioning, living, multi-cellular, eukaryotic organism that lacks the ability to move (a plant). Their growth is affected by several factors that include soil moisture, soil pH, sunlight, nitrogen-content of the soil and more. If some these factors are affected in negative ways, then there can be some negative outcomes on the plant itself which could include death. Music might also be one of these affecting factors. In this experiment, two very young plants (pinto bean sprouts Phaseolus vulgaris) will be planted at the same time and will have the same amount of everything; from sunlight to the amount of water they get daily. After they have grown a little and the stem has begun to emerge from within the cotyledons of the bean, they are then separated, and one plant sits in the peace and quiet as a control while the other is subjected to some serious loud music. If conditions are right, the music should stimulate the plants growth. Hypothesis If a pinto bean sprout (Phaseolus vulgaris) plant is grown in a quiet area and another pinto bean sprout is grown in an area with loud music playing, the plant in the area with music will grow to be much larger. The amount of growth will be measured with a metric ruler in centimeters Variables Independent Variables: Temperature, Light, Water: These three factors are equally distributed among both plants, so only variable that would affect plant growth is the music played. Type of Plant and soil: same type of bean sprout used for both plants as to ensure that there are no other variables other than the music being played for the plant along with the same type of garden soil Dependent Variables: The height of both plants after a day of one plant being exposed to silence and the other to music. Control of Variables: 1. Get to pinto beans (Phaseolus vulgaris) to be grown that are identical to ensure no other affecting variables in this experiment other than the music being played. 2. Expose both plants to identical conditions of moisture, temperature, sunlight and have both of them grow in the same type of garden soil and they will be grown in containers with the same size as well. 3. For the plant being exposed to music, the same album is played over and over so the type of music is consistent. Materials and Method Materials 2 pinto bean sprouts (Phaseolus vulgaris) 180 ml of water 2 plant pots top opening is 4 inch diamter 2x 500g of garden soil 500 watt stereo Metric Ruler Linkin Park Album Hybrid Theory 100 ml graduated cylinder Method and Procedure 1. Take the 2 plant pots and fill them each with 500 g of garden soil 2. Then, take a pinto bean and plant it in each of the pots; plant each bean so that it is just barely submerged under the soil. 3. Then, take each pot to a different location, but a location in which both plants will be exposed to the same amount of sunlight, heat, etc 4. Then, just leave one plant in the serenity of its surroundings (its the control) and place the 500 watt stereo next to the other plant. Put the CD into the stereo and have the stereo play at about three-fourths its full volume and have it play next to the plant and have it play for a minimum of 7 hours next to the plant. Look at the diagram below for more information. 5. At noon give both plants 30 ml of water using the graduated cylinder. Do this again at 6 p. m. 6. The next day, note your observations and record your findings in a table. 7. Then feed the plants again and play the music for at least 7 hours and record the observations once more the next day. SETUP Data Collection and Evaluation Table: The effect of music on plant growth Day Plant without Music Plant with Music 1 The plant had sprouted and a small stem began to appear- 2 cm in length The plant had also sprouted and a stem larger than that of the other plants appeared- about 2. 47 cm 2 The plant continued to grow and the stem had reached a height of approximately 3. 22 cm. The plants stem also continued to grow but the stem had now reached a height of about 3. 85 cm Data Evaluation From the numbers and observations presented in the above data, that as time passed and the plants were closely monitored, the plant that had the music playing seemed to grow a lot more than the plant that grew in the quiet and serene environment; the quiet plant ended with a height of 3. 22 cm while the plant with music ended with a height of about 3. 85 cm. Conclusion and Evaluation Conclusion. In the above data, it is deciphered that plants that grow with music grow much more than plants that grow in a quieter environment. This all has to do with the fact that different factors affect or stimulate plants, and sound is one of them. And, from the data, sound is a positive stimuli as it increased plant growth in one of the plants. This verifies the hypothesis and, since there are other results on the internet as well to verify that music really does stimulate plants, the results are plausible and reliable. Limitations Not everything can go according to plan or as hoped and so these errors that occurred during the experiment provide a basis from which the experiment can be proved: 1. There was only one trial instead of several and the experiment in this one trial was over a 48 hour period and it should have been longer so that the true comparison of the difference between a plant grown with music and a plant grown without music can be easily made. 2. Only one type of music (rock) was used and so it is now unknown whether different kinds of music and sound also act as a different stimulus for the plant. Suggestions for Improvement To create a much better and more reliable experiment, the experiment should be carried on for about a 4 day period in order to acquire more results than can show the differences between plants with and without music. Then, there should be at least 3 different plants; one control, one with a type of music, and another with a different type of music. This then will help to go deeper and explore this stimulus of sound toward plants on different levels. This entire experiment should then be at least repeated one more time to ensure plausible results. Bibliography http://forums. gardenweb. com/forums/load/teach/msg0113244514471. html? /teach/msg0113244514471. html http://www. sproutnet. com/toc. htm http://www. gcagators. org/Activities/fair/jason/analysis. htm.

My Photo Album :: Writing Education Teaching Essays

My Photo Album Overheard at University College London: "Because when you write this way- with this pomp and circumstance covering for any substantive thought- you aren't fooling me"...... CRASH. "OUCH! Old son- you seem to have just thrown me out a window!" If I had been given this little lecture by Mr. Pomp and Circumstance, the previous scene is what would have been witnessed. I would have thrown him out a window for two reasons. First and foremost, he sounds like an obnoxious, holier than thou prick. Second and more importantly, everything he said is right on the mark. As they say, "the truth hurts." He seems to have the ability to see through my themes and realize that I am really not saying anything at all. I like the concept that our previous work is just like an old photograph. Needless to say, I have a few photographs in my collection which I might want to hide under the bed. As I page through my photo album from college, I notice that I seem to be wearing the same outfit in almost every picture. Let's just look at a few. "By becoming acquainted with the Pardoner in both the general prologue and the prologue to his tale, we become aware of his hypocritical nature. In his prologue, we find that the Pardoner is a very immoral person." Yep, that one was taken just outside of a class on Chaucer. Look at those nicely pressed khaki slacks and that perfectly ironed shirt. I can't believe I'm standing with my hand pressed to my chin deep in thought. I don't think I ever noticed those people from English 220 snickering in the background before. Here's another good one. Lanham would have a Paramedic field day with this one. "Lawrence Frederick Kohl's book, The Politics of Individualism is at once an account of America's political turmoil in the Jacksonian era and an interpretation of the relationship of these political views to the psychological nature of the American citizen during the era. In this account of the Jacksonian era, the reader is able to recognize the framework for the politics which will dominate the nineteenth century." I think this one was taken outside Gerry Schnabel's history class. That looks like my Chaucer outfit again. I used to wear that outfit for every occasion which I thought was important. I can't help but notice that it doesn't look like there is anything behind that outfit.

Free Handmaids Tale Essays: Life and Times of Margaret Atwood :: Handmaids Tale Essays

The Life and Times of Margaret Atwood Three Sources Cited Atwood was born in Ottawa, Ontario, on November 18, 1939. She lived in a cabin in the Canadian wilderness for most of her childhood (her father was a forest entomologist), and that is where she gained her love for books and reading - probably from boredom. She also took up writing during this time, at the age of six (Margaret Atwood). Sshe came to want ot be a writer her senior year in high school when she says, "all of a sudden a big thumb came out of the sky and touched my head and a poem was formed." Who would have thought that the young girl who lived in the woods would grow to become a prominent female writer and poet? Atwood went on to attend Victoria College at the University of Toronto. She received a bachelor's degree there in 1961 and went on to receive her Master's from Radcliffe College in Cambridge, Mass. In addition, she attended Harvard University in 1962 - 63 and 1965 - 67 (Information Page). When she made the decision to be a writer she said s he wanted to "lead a double life. (Margaret Atwood). This double life would include going "places I haven't been; to examine life on earth; to come to know people in ways, and at depths, that are otherwise impossible; to be surprised...to give back something of what [I have] received," said Atwood (Margaret Atwood). She certainly achieved this goal of a double life. Atwood managed to live many places around the world in order to "examine life on earth." Here is a time line of the places she lived during certain years of her life. 1939 - 1945: Ottawa 1945: Sault Ste. Marie 1946 - 1961: Toronto 1961 - 1963: Boston 1963 - 1964: Toronto 1964 - 1965: Vancouver 1965 - 1967: Boston 1967 - 1968: Montreal 1968 - 1970: Edmonton 1970 - 1971: England (London), France, Italy 1971 - 1972: Toronto 1973 - 1980: Alliston, Ontario 1980 - 1983: Toronto 1983 - 1984: England, Germany 1985: Alabama 1986 - 1991: Toronto 1992: France 1992 - Present: Toronto As is evident, she liked to move around a lot and to see different people and different things (Information Page). Although Atwood would have preferred to stay home and write all day she did have a number of jobs over the years.

International Finance: Study Notes

1) Market seeker design strategy focuses on current market, and current consumer’s needs for quick return on investment. For example US automobile firms manufacturing in Europe for local consumption are an example of market-seeking motivation. 2) Raw Material seekers extract unfinished goods used in the manufacture of a product. For example, a steelmaker uses iron ore and other metals in producing steel. A publishing company uses paper and ink to create books, newspapers, and magazines. Raw materials are carried on a company's balance sheet as inventory in the current assets section. 3) Political safety seekers acquire or establish new operations in countries that are considered unlikely to expropriate or interfere with private enterprise. For example, Hong Kong firms unvested heavily in the United States, United Kingdom, Canada, and Australia in anticipation of the consequences of China’s 1997 takeover of the British colony. ) Production Efficiency seekers produce in countries where one or more of the factors of production are underpriced relative to their productivity. Labour-intensive production of electronic components in Taiwan, Malaysia, and Mexico is an example of this motivation. 5) Knowledge seekers operate in foreign countries to gain access to technology or managerial expertise. An example, German, Dutch, and Japanese firms have purchased US located electronics firms for their technology. Source: Investopedia Question 2: Political risk is a type of risk faced by investors, corporations, and governments. It is a risk that can be understood and managed with reasoned foresight and investment. Broadly, political risk refers to the complications businesses and governments may face as a result of what are commonly referred to as political decisions—or â€Å"any political change that alters the expected outcome and value of a given economic action by changing the probability of achieving business objectives. †. Political risk faced by firms can be defined as â€Å"the risk of a strategic, financial, or personnel loss for a firm because of such nonmarket factors as macroeconomic and social policies (fiscal, monetary, trade, investment, industrial, income, labour, and developmental), or events related to political instability (terrorism, riots, coups, civil war, and insurrection). †Portfolio investors may face similar financial losses. Moreover, governments may face complications in their ability to execute diplomatic, military or other initiatives as a result of political risk. A low level of political risk in a given country does not necessarily correspond to a high degree of political freedom. Indeed, some of the more stable states are also the most authoritarian. Long-term assessments of political risk must account for the danger that a politically oppressive environment is only stable as long as top-down control is maintained and citizens prevented from a free exchange of ideas and goods with the outside world. Understanding risk as part probability and part impact provides insight into political risk. For a business, the implication for political risk is that there is a measure of likelihood that political events may complicate its pursuit of earnings through direct impacts (such as taxes or fees) or indirect impacts (such as opportunity cost forgone). As a result, political risk is similar to an expected value such that the likelihood of a political event occurring may reduce the desirability of that investment by reducing its anticipated returns. There are both macro- and micro-level political risks. Macro-level political risks have similar impacts across all foreign actors in a given location. While these are included in country risk analysis, it would be incorrect to equate macro-level political risk analysis with country risk as country risk only looks at national-level risks and also includes financial and economic risks. Micro-level risks focus on sector, firm, or project specific risk. Political risks are classified as follows: 1) Blocked Fund – Term for â€Å"reserving† funds by one bank for the benefit of another bank. Blocking of funds is an often used banking procedure to ensure that the same funds are not used twice. Often more beneficial to an investor than a bank guarantee. ) Ownership – Is the state or fact of exclusive rights and control over property, which may be an object, land/real estate or intellectual property. Ownership involves multiple rights, collectively referred to as title, which may be separated and held by different parties 3) Religion Heritage – Is the faith in which a person was predominantly raised or the faith a person's parents or previous generations have traditionally held. 4)Terrorism – Is the systematic use of terror especially as a means of coercion. No universally agreed, legally binding, criminal law definition of terrorism currently exists. Common definitions of terrorism refer only to those violent acts which are intended to create fear (terror), are perpetrated for a religious, political or ideological goal, deliberately target or disregard the safety of non-combatants (civilians), and are committed by non-government agencies. Some definitions also include acts of unlawful violence and war. The use of similar tactics by criminal organizations for protection rackets or to enforce a code of silence is usually not labeled terrorism though these same actions may be labeled terrorism when done by a politically motivated group. The word â€Å"terrorism† is politically and emotionally charged, and this greatly compounds the difficulty of providing a precise definition. Studies have found over 100 definitions of â€Å"terrorism†. The concept of terrorism may itself be controversial as it is often used by state authorities to delegitimize political or other opponents, and potentially legitimize the state's own use of armed force against opponents (such use of force may itself be described as â€Å"terror† by opponents of the state). Terrorism has been practiced by a broad array of political organizations for furthering their objectives. It has been practiced by both right-wing and left-wing political parties, nationalistic groups, religious groups, revolutionaries, and ruling governments. An abiding characteristic is the indiscriminate use of violence against noncombatants for the purpose of gaining publicity for a group, cause, or individual. 5)Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to discourage imports and prevent foreign take-over of domestic markets and companies. This policy contrasts with free trade, where government barriers to trade and movement of capital are kept to a minimum. In recent years, it has become closely aligned with anti-globalization. The term is mostly used in the context of economics, where protectionism refers to policies or doctrines which protect businesses and workers within a country by restricting or regulating trade with foreign nations. Source: Wikipedia Question 3: Hedging means reducing or controlling risk. This is done by taking a position in the futures market that is opposite to the one in the physical market with the objective of reducing or limiting risks associated with price changes. Hedging is a two-step process. A gain or loss in the cash position due to changes in price levels will be countered by changes in the value of a futures position. For instance, a wheat farmer can sell wheat futures to protect the value of his crop prior to harvest. If there is a fall in price, the loss in the cash market position will be countered by a gain in futures position. Hedging is a mechanism to reduce the risk of adverse price movements of an asset. It’s an investment undertaken to reduce the risk of adverse movements of the underlying assets. We all agree with the fact that in investment risks and returns are the two sides of a coin. The underlying asset can be a security, currency, debt instruments or a commodity like crude oil. A Perfect Hedge is an offsetting investment which completely eliminates the risk of the price movements. However, this is practically not possible, as all investments do carry a risk. Reason for hedging Participating in hedging has reasons that are connected with price risk. Typically, traders take part in hedging so they can more effectively plan on set pricing (often employing the hedge ratio). Considering of course, gold or silver futures for instance as a hedge against inflation and falling currencies. Farmers, growers and producers alike near the source hedge to get a lock on pricing at some appointed time. Often they buy futures basically in order to protect against price drops. Producers, manufacturers and large consumers are commonly in the practice of hedging but rather to get a better handle on their cash flow or finished product/service costs. Surely in commodities that are known to be volatile in nature, where prices need a stabilization factor. Example : Where precious metals are used as raw materials. Trucking companies, the airlines and transportation companies all hedge to lock in lower prices. Electricity generation, in its used of natural gas also provides ample reason for hedging. Larger food companies needing the ingredients of grains and wheat flour for breads, cereals and baked goods (not to mention coffee and cocoa) and hedge for price protection. When successful it becomes an integral part of delivering their product to consumers. Some companies even hedge so that consumers may not be so hard pressed in the event of price climbs, perhaps seen as unreasonable by consumers. Reason against hedging The management of financial risk is difficult and conceptually demanding. Probably the most difficult issue is the actual recognition of where and how much financial risk is being incurred. Example: An Australian metal producer who borrows in USA as a partial hedge because their product is priced in USD in world markets. The problem with this â€Å"hedge† is that it actually would increase risk. The AUD is a commodity currency and when metal prices fall the AUD will generally be weaker. This means that our metal exporter finds that their USD loan is costing those more in AUD terms at the same time as revenue is collapsing. The reason for the problem is that the company failed to recognize the correlation between metal prices and the AUD exchange rate. Source: wikipedia Question 4: A balance of payments (BOP) sheet is an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country's exports and imports of goods, services, and financial capital, as well as financial transfers. The BOP summarizes international transactions for a specific period, usually a year, and is prepared in a single currency, typically the domestic currency for the country concerned. Sources of funds for a nation, such as exports or the receipts of loans and investments, are recorded as positive or surplus tems. Uses of funds, such as for imports or to invest in foreign countries, are recorded as a negative or deficit item. When all components of the BOP sheet are included it must balance – that is, it must sum to zero – there can be no overall surplus or deficit. For example, if a country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counter balanced in other ways – such as by funds earned from its foreign investments, by running down reserves or by receiving loans from other countries. While the overall BOP sheet will always balance when all types of payments are included, imbalances are possible on individual elements of the BOP, such as the current account. This can result in surplus countries accumulating hoards of wealth, while deficit nations become increasingly indebted. Historically there have been different approaches to the question of how to correct imbalances and debate on whether they are something governments should be concerned about. Since 1974, the two principal divisions on the BOP have been the current account and the capital account. The current account shows the net amount a country is earning if it is in surplus, or spending if it is in deficit. It is the sum of the balance of trade (net earnings on exports – payments for imports) , factor income (earnings on foreign investments – payments made to foreign investors) and cash transfers. Its called the current account as it covers transactions in the â€Å"here and now† – those that don't give rise to future claims. The capital account records the net change in ownership of foreign assets. It includes the reserve account (the international operations of a nation's central bank), along with loans and investments between the country and the rest of world (but not the future regular repayments / dividends that the loans and investments yield, those are earnings and will be recorded in the current account). Expressed with the standard meaning for the capital account, the BOP identity is: [pic] The balancing item is simply an amount that accounts for any statistical errors and assures that the current and capital accounts sum to zero. At high level, by the principles of double entry accounting, an entry in the current account gives rise to an entry in the capital account, and in aggregate the two accounts should balance. A balance isn't always reflected in reported figures, which might, for example, report a surplus for both accounts, but when this happens it always means something has been missed—most commonly, the operations of the country's central bank. An actual balance sheet will typically have numerous sub headings under the principal divisions. For example, entries under Current account might include: †¢ Trade – buying and selling of goods and services Exports – a credit entry o Imports – a debit entry ? Trade balance – the sum of Exports and Imports †¢ Factor income – repayments and dividends from loans and investments o Factor earnings – a credit entry o Factor payments – a debit entry ? Factor income balance – the sum of earnings a nd payments. Especially in older balance sheets, a common division was between visible and invisible entries. Visible trade recorded imports and exports of physical goods (entries for trade in physical goods excluding services is now often called the merchandise balance). Invisible trade would record international buying and selling of services, and sometimes would be grouped with transfer and factor income as invisible earnings. In the case of any particular country, a balance reflecting the ratio of monetary receipts from foreign countries to total payments to foreign countries, as computed for a year, quarter, or other period of time. A favorable balance of payments results when receipts exceed payments, whereas an unfavorable balance of payments, or deficit, results when the reverse is true. The balance of payments reflects the diverse economic relations that exist between countries and lead to various international payments; these relations include foreign trade and the export of capital. The balance of payments also reflects international relations in the political, scientific, technological, and cultural spheres; this is seen, for example, in expenditures that arise from the maintenance of representations in foreign countries, from trips by official delegations and tourists, from the acquisition of patents and licenses, and from private transfers. In developed capitalist countries, the chief principals in international economic relations are private companies, including those engaged in commerce, industry, banking, insurance, and transport. The balance of payments forms as the spontaneous result of many isolated transactions an operation, for which no accurate account can be maintained. The balance of payments tables compiled in bourgeois states therefore represent only an approximate evaluation of receipts and payments. The item in the balance of payments tables that is called errors and omissions provides particular evidence of this fact. The balance of payments encompasses only the payments actually made during a given period. By contrast, the balance of international indebtedness, or balance of claims and liabilities, is the ratio of the foreign claims of a given country to the foreign liabilities of that country. The balance of payments in capitalist and developing nations includes scores of diverse items, which usually are grouped in the following categories, as recommended by the International Monetary Fund: foreign trade (exports and imports of commodities), services (including transport, tourism, insurance, government expenditures, banking services, and income from investments), unilateral transfers, the movement of long-term capital, the movement of short-term capital, change in the gold and currency reserves, and errors and omissions. The first three categories constitute the current account balance of payments, the next two are the balance of capital movements, and the last two are the balancing items. Analysis of the balance of payments is very important in describing a country’s place in the system of international economic relations, especially with respect to world trade. When receipts from the export of commodities consistently exceed import payments, this generally points to a country’s strength in world markets; this was the case with Japan and the Federal Republic of Germany in the late 1960’s and early 1970’s. On the other hand, import payments that exceed export earnings are an indication of economic difficulties related to the deficit of the balance of payments; this was the position of the USA in these same years. An important item in the current account balance of payments concerns the receipts and payments for foreign investments. This item reflects profit received from abroad and paid abroad, in the form of dividends, interest, and so forth. The profit represents a source of enormous income for capital-exporting imperialist states with large capital investments abroad, either in the form of direct investments or in the form of loans and credits. In 1971, for example, the income of Great Britain from foreign investments was ? 667 million, more than double the positive trade balance. The profit from foreign capital investments repatriated to the United States amounted to $10. 7 billion in 1971 and was the second most important item of receipts in the nation’s balance of payments, after the income from export commodities. This attests to the role of the United States as the center of financial exploitation in the capitalist world. The overwhelming majority of developing countries are importers of capital, and payments on foreign investments are one of the chief reasons for the overall balances of payments deficits. The payments on foreign investments absorb an ever greater portion of the export earnings of the developing countries. Foreign military expenditures are also included in the current account balance of payments. These expenditures are due to imperialist states’ policy of aggression and the maintenance of numerous military bases abroad. This is one of the most important reasons for the deficit in the balance of payments and the ensuing monetary crises. The enormous rise in state military and political expenditures abroad underlies the chronic deficit in the US balance of payments. Expenditures from the early 1960’s through the early 1970’s totaled more than $100 billion, some 40 percent more than the surplus for all other items in the USA’s balance of payments. Capital movement as reflected in the balance of payments is primarily in the form of the movement of long-term capital. Long-term capital movement includes direct investments, which provide for full ownership of enterprises or control of their operations; portfolio investments, made in the form of investments in overseas securities; and loans, credits, and subsidies. The export of capital—the outflow of capital from a given country—is reflected as an expenditure in the balance of payments; the import of capital, on the other hand, represents an influx of funds and is included as income. The export of capital, for example, to the developing countries, causes a flow of profit from the countries where the foreign capital has been placed; this ultimately has a negative effect on the balance of payments of the countries receiving foreign capital. At the same time, increased export of capital sometimes directly worsens the balance of payments of the imperialist states. The export of capital and military expenditures are precisely the reasons for the balance of payments deficit in the USA. The movement of short-term capital is related to the way money on deposit in foreign banks is constantly transferred between countries. These transfers are to a significant degree related to speculation with respect to change in exchange rates or interest on deposits. The indicator of a surplus or deficit of the balance of payments is important in describing the economic situation of a country. In capitalist nations, several methods are used for determining this balance; in the USA, for example, three methods are employed. The balancing indicator is most often the balance of the current transactions and the balance of the change in the gold and currency reserves. Various methods are used to regulate the balance of payments. One basic method involves the export of gold when there is a deficit balance and the import of gold when there is a surplus balance. The chronic balance of payments deficit in the USA in the 1960’s and early 1970’s led to a significant outflow of gold and a reduction in US gold reserves. The balance of payments deficit may also be covered by increasing short-term or long-term debts to creditor nations, which accumulate the corresponding obligations of their debtors. Because the gold reserves of the capitalist and developing countries are limited, foreign credits and loans are becoming the basic means of covering the balance of payments deficit; this is especially true in the case of developing countries. To improve the balance of payments situation, capitalist states frequently resort to a currency devaluation, which helps increase export receipts from tourism, the import of foreign capital, and so forth. The balance of payments situation of a capitalist country is a basic factor in determining the state of that country’s currency. For example, the crisis of the US dollar basically resulted from a sharp deterioration in the US balance of payments, which had a deficit of almost $10 billion in 1972. The US government was forced to devalue the dollar in 1971 and 1973 because of the drop in gold and currency reserves and the increase in foreign debts, both of which were caused by the chronic balance of payments deficit. In socialist countries, foreign economic relations are based on the state monopoly of foreign trade and the foreign-exchange monopoly. The balance of payments is planned as a component part of a general plan embracing the national economy, foreign trade, and currency. Payments of the member countries of the Council for Mutual Economic Assistance (COMECON) are mutually balanced through long-term planning of trade and payments between the countries; payments in transfer rubles are used. Because of the foreign-exchange monopoly, the balance of payments does not influence the situation of the monetary units of the socialist countries. In relations with the capitalist states, the Soviet Union and other socialist countries avoid balance of payments deficits through the planned use of foreign-exchange and gold resources and anticipated foreign-exchange receipts. Source: Finance Asia Question 5: Annualized  Ã‚  Ã‚   =  Ã‚     Ã‚  Ã‚  Ã‚  Ã‚  Forward Price – Spot Price  Ã‚  x  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  12  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚     Ã‚  Ã‚  Ã‚  x  100% Forward Premium  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚     Ã‚   Spot Price  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  # of months   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   forward Direct Quotation represents the value of a foreign currency in dollars (number of dollars per currency). In this case, the Japanese Yen is taken as the local currency and USD is taken as the foreign currency. Direct = ((120 -140) / 140)*(12 / 6)*100 = – 28. 5714% forward discount Indirect = 1 / Direct = 1/-28. 5714% = 3. 5% forward discount Question 6: A  type of diagram  where the curve falls at the outset and eventually rises to a point higher than the starting point, suggesting the letter J. While a J-curve can apply to data  in a variety of fields, such as medicine and political science, the J-curve effect is most  notable in both economics and private equity funds; after a certain policy or investment is made, an initial loss is followed by a significant gain. An example  of the  J-curve effect  is seen in economics  when a country's trade balance initially  worsens following a devaluation or depreciation of its currency. The higher exchange rate will at first correspond to more costly imports and less valuable exports, leading to a bigger initial deficit or a maller surplus. Due to the competitive, relatively low-priced exports, however, a country's exports will start to increase. Local consumers will also purchase less of the more expensive imports and focus on local goods. The trade balance eventually improves to better levels  compared to before devaluation. In private equity funds, the J-curve effect occurs when  funds experience negative returns for the first several years. This is a common experience, as the early years of the fund include capital drawdown and an investment portfolio that has yet to mature. If the fund is well managed, it will eventually recover from its initial losses and the returns will form a J-curve: losses in the beginning dip down below the initial value, and later returns show profits above the initial level. The theory of the J-curve is an explanation for the J-like pattern of change in a country's trade balance in response to a sudden or substantial depreciation (or devaluation) of the currency. Consider the adjoining diagram depicting two variables measured, hypothetically, over some period of time; the dollar/foreign exchange rate, E$/*, and the US current account balance, CA = EX – IM. The exchange rate is meant to represent the average value of the dollar against all other trading country currencies and would correspond to a dollar value index which is often constructed and reported. Since the units of these two data series would be in very different scales, we imagine the exchange rate is measured along the left axis, while the CA balance is measured in different units on the right-hand axis. With appropriately chosen scales we can line up the two series next to each other to see whether changes in the exchange rate seem to correlate with positive or negative changes in the CA balance. Source: Investopedia Question 7: Tax is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities. Taxes consist of direct tax or indirect tax, and may be paid in money or as its labor equivalent (often but not always unpaid labour). A tax may be defined as a â€Å"pecuniary burden laid upon individuals or property owners to support the government, a payment exacted y legislative authority. † A tax â€Å"is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority† and is â€Å"any contribution imposed by government whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name. † The legal definition and the economic definition of taxes differ in that economists do not cons ider many transfers to governments to be taxes. For example, some transfers to the public sector are comparable to prices. Examples include tuition at public universities and fees for utilities provided by local governments. Governments also obtain resources by creating money (e. g. , printing bills and minting coins), through voluntary gifts (e. g. , contributions to public universities and museums), by imposing penalties (e. g. , traffic fines), by borrowing, and by confiscating wealth. From the view of economists, a tax is a non-penal, yet compulsory transfer of resources from the private to the public sector levied on a basis of predetermined criteria and without reference to specific benefit received. In modern taxation systems, taxes are levied in money; but, in-kind and corvee taxation is characteristic of traditional or pre-capitalist states and their functional equivalents. The method of taxation and the government expenditure of taxes raised is often highly debated in politics and economics. Tax collection is performed by a government agency such as Canada Revenue Agency, the Internal Revenue Service (IRS) in the United States, or Her Majesty's Revenue and Customs (HMRC) in the UK. When taxes are not fully paid, civil penalties (such as fines or forfeiture) or criminal penalties (such as incarceration) may be imposed on the non-paying entity or individual. Taxes are sometimes referred to as â€Å"direct taxes† or â€Å"indirect taxes†. The meaning of these terms can vary in different contexts, which can sometimes lead to confusion. An economic definition, by Atkinson, states that â€Å"†¦ direct taxes may be adjusted to the individual characteristics of the taxpayer, whereas indirect taxes are levied on transactions irrespective of the circumstances of buyer or seller. According to this definition, for example, income tax is â€Å"direct†, and sales tax is â€Å"indirect†. In law, the terms may have different meanings. In U. S. constitutional law, for instance, direct taxes refer to poll taxes and property taxes, which are based on simple existence or ownership. Indirect taxes are imposed on events, rights, privileges, and acti vities. Thus, a tax on the sale of property would be considered an indirect tax, whereas the tax on simply owning the property itself would be a direct tax. The distinction between direct and indirect taxation can be subtle but can be important under the law. The Advantages of Direct and Indirect Taxes Governments collect taxes by direct and indirect means. An example of a direct tax is payroll tax, where tax is deducted by an employer from an employee's income, and paid directly to a collection agency, such as the Internal Revenue Service in the United States. An indirect tax is a tax which is not paid directly to the collection agency by the person paying the tax, but goes an intermediary, who then passes the tax to the collection agency. Sales taxes are examples of indirect taxes. Progressive Advantage of Direct Taxes One advantage of direct taxation is that it is easy to apply in a progressive manner. Progressive taxes are a fair way of generating revenue, because multiple rates of taxation can be applied, based on the ability of the tax payer to pay the tax, especially if tax rates increase marginally. For example, a government may apply income tax to earnings at a rate of 10 percent, for all income earned up to $20,000. Then it applies a rate of 15 percent to income over $20,000. A person earning more than $20,000 will pay tax at a rate of 10 percent on the first $20,000 earned, and only pays 15 percent on earnings over that amount. Progressive, marginal, direct taxation is therefore fair because higher earners bear a greater part of the tax burden, based on their ability to pay higher rates of tax. Transparency of Direct Taxation Direct taxes, which go directly by the person bearing the burden of the tax, are transparent taxes. For example, when an employer deducts taxes from the wages of an employee, the employee can see the amount of tax deducted, as it is included on his or her wage statement, or pay-slip. Self-employed tax payers can also see the amount of tax they need to pay to the government, hen they complete their tax returns. In a democracy, tax transparency means that governments have to justify taxes they impose to their voters, and tax-paying voters always aware of the tax burdens imposed on them by politicians. Environmental Benefits of Indirect Taxation Governments use Indirect taxes, such as taxes added to the price of goods and services, to modify the behaviour of individuals in order to help a chieve environmental goals. For example, the true price of gasoline, at point of delivery to the public is low. The price does not encourage people to reduce their use of gasoline by using public transport, or buying more fuel-efficient vehicles. If a government wishes to reduce the use of gasoline as part of an environmental protection goal, it can artificially inflate the price of gasoline to the consumer, by imposing a sales tax to increase the price. When a government imposes a high enough tax on gasoline, it results in a reduction of demand for gasoline, and thus aids the government in implementing its environmental policy. Source: Wikinvest Question 8: The Bretton Woods system was established in 1944 as the major capitalist powers initiated a program of national regulation aimed at containing the contradictions of the world economy and preventing the development of socialist revolution. Its demise in 1971 inaugurated a new stage, characterised by the development of globalised production and the domination of an international financial market. When the US pulled the rug from under the previous system it did so in order to maintain its position of global hegemony in the new economic order which was beginning to emerge. It managed to do so but at great cost. The free market program it has so strenuously promoted over the past 30 years has intensified all the contradictions of the capitalist mode of production. At the same time, starting with the unilateral decision of August 15, 1971, the basis for collaboration between the major capitalist powers has been narrowing. The combined impact of these two processes has created the conditions for major economic, social and political upheavals in the world capitalist economy in the period immediately ahead. Source: Wordiq Question 9: There are many factors that influence the exchange rate of US dollar. Generally speaking, there are mainly four reasons: first, the health condition and the rate of return for investment of the US economy, secondly, the balance of international payment in the US, thirdly, the level of interest rates in the US compared with those in other countries, and fourthly, the rate of inflation. The following might be the reason why it’s expected to continue tight throught to the basement floor: †¢ Massive budget and trade deficits. †¢ Ultra-low interest rates. (Zero on the short end. ) †¢ $59 trillion in unfunded liabilities for Social Security, Medicare and Medicaid. Bernanke conjuring extra trillions out of thin air to buy Treasuries and mortgage-back securities and patch various holes in the U. S. economy. There is no reason to believe any of these problems will vanish in the months ahead. Yet the dollar will soar in 2010. Here’s why†¦ Two Reasons for a Dollar Rebound There are two main forces that could drive the dollar high er: †¢ All the problems mentioned above are already well recognized and priced into the greenback. †¢ Dollar psychology is overwhelmingly bearish. Just as 10 years ago, investors couldn’t imagine Internet stocks doing anything but soaring higher. Five years ago, they couldn’t imagine real estate doing anything but barrelling down the same one-way street. Record lows for the dollar are coinciding with enormous confidence that the dollar has nowhere to go but down. When extreme valuations are accompanied by unbridled optimism or abject pessimism, it virtually always marks a turning point – and an opportunity. This is no exception. Commentators seem to forget that all currency values are contingent. You can’t just look at fundamentals in the United States. You have to look at them abroad, too. And there isn’t uch out there right now that’s terribly positive†¦ America’s Fellow Heavyweights Have Problems, Too Take Europe, for example†¦ †¢ Eurozone: In the third quarter, the 16-nation Eurozone grew at a 1. 5% annual rate. The U. S economy, by comparison, grew at 3. 5%. European consumers and most business sectors are still feeling the pain from the deepest recession since the 1930s. The continent is likely to be the weakest region for global expansion next year, according to Julian Callow, Chief European Economist at Barclays Capital in London. †¢ United Kingdom: This is no bastion of strength, either. Europe’s biggest economy outside the Eurozone is still in recession, due to overly indebted British households and tight credit. British GDP contracted at an annualized 1. 6% in the third quarter. †¢ Japan: The world’s second-largest economy has its own problems, too. At 172% of GDP, Japan’s government debt is by far the largest among rich nations. What’s more, it’s expected to reach 200% next year – and hit 300% within a decade. Rising social security costs and the weak economy are the primary culprits. The new government there is trying to prevent a double-dip recession by spending even more. But with government debt soaring to records, talk of new stimulus measures is already pushing up long-term rates and threatening to curtail the impact of fresh spending. Source: Economics help Question 10: Standard deviation is a widely used measurement of variability or diversity used in statistics and probability theory. It shows how much variation or â€Å"dispersion† there is from the â€Å"average† (mean, or expected/budgeted value). A low standard deviation indicates that the data points tend to be very close to the mean, whereas high standard deviation indicates that the data are spread out over a large range of values. Technically, the standard deviation of a statistical population, data set, or probability distribution is the square root of its variance. It is algebraically simpler though practically less robust than the average absolute deviation. A useful property of standard deviation is that, unlike variance, it is expressed in the same units as the data. Note, however, that for measurements with percentage as unit, the standard deviation will have percentage points as unit. In addition to expressing the variability of a population, standard deviation is commonly used to measure confidence in statistical conclusions. For example, the margin of error in polling data is determined by calculating the expected standard deviation in the results if the same poll were to be conducted multiple times. The reported margin of error is typically about twice the standard deviation – the radius of a 95 percent confidence interval. In science, researchers commonly report the standard deviation of experimental data, and only effects that fall far outside the range of standard deviation are considered statistically significant – normal random error or variation in the measurements is in this way distinguished from causal variation. Standard deviation is also important in finance, where the standard deviation on the rate of return on an investment is a measure of the volatility of the investment. When only a sample of data from a population is available, the population standard deviation can be estimated by a modified quantity called the sample standard deviation [pic] Risks can be reduced in four main ways: Avoidance, Diversification, Hedging and Insurance by transferring risk. Systemic risk, also called market risk or un-diversifiable risk, is a risk of security that cannot be reduced through diversification. Participants in the market, like hedge funds, can be the source of an increase in systemic risk and transfer of risk to them may, paradoxically, increase the exposure to systemic risk. Unsystematic risk also called the diversifiable risk or residual risk. The risk that is unique to a company such as a strike, the outcome of unfavorable litigation, or a natural catastrophe that can be eliminated through diversification. A ratio developed by Nobel laureate  William F. Sharpe to measure risk-adjusted performance. The  Sharpe ratio  is calculated by subtracting the risk-free rate – such as  that of the  10-year U. S. Treasury bond –  from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns. The Sharpe ratio formula is: [pic] The Sharpe ratio tells us whether a portfolio's returns  are due to smart investment decisions or a result of excess risk. This measurement is very useful because  although one portfolio or fund can reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been. A negative Sharpe ratio indicates that a risk-less asset would perform better than the security being analyzed. A variation of the Sharpe ratio is the Sortino ratio, which removes the effects of upward price movements on standard deviation to measure only return against downward price volatility. The Treynor ratio (sometimes called the reward-to-volatility ratio or Treynor measure), named after Jack L. Treynor, is a measurement of the returns earned in excess of that which could have been earned on an investment that has no diversifiable risk (e. g. Treasury Bills or a completely diversified portfolio), per each unit of market risk assumed. The Treynor measure is similar to the Sharpe measure, but the Treynor measure uses the portfolio’s beta instead of the portfolio’s standard deviation. The Treynor measure is calculated as follows: (rp – rf) / ? p In this equation, rp = the average return on the portfolio, rf = the average risk-free rate, and ? p = the weighted average beta of the portfolio. The Treynor measure is found by dividing the portfolio risk premium by the portfolio risk as measured by the beta. An asset’s Treynor measure in isolation also means little. It also must be measured against the market’s Treynor measure, which is calculated by dividing the market risk premium, or the return on the market minus the risk-free rate by the beta of the market, which is 1. 0. If the asset’s Treynor measure is greater than the market’s Treynor measure, the asset has outperformed on a risk-adjusted basis. Source: Investopedia SECTION B: ESSAY QUESTIONS Question 1: One of the primary uses of PPP is in lessening the misleading effects of shifts in a national currency. This is particularly an issue when calculating a nation's Gross Domestic Product (GDP). For example, if the riel falls in value to 80% of its value on the dollar, the GDP as expressed in US dollars will also drop to 80%. This does not accurately reflect the standard of living in that country (a common use of GDP), however, because the devaluation of the riel is most likely due to international trade issues that will not yet have had any effect on the average Cambodian. By using purchasing power parity, however, one is not misled by the temporary devaluation of the riel in relation to the dollar — a Big Mac ® still costs 9,000 riel in Cambodia and $3 USD in the US, and so the Big Mac ® index exchange rate remains the same. Purchasing power parity is, of course, an imperfect device for determining things such as GDP, as the exchange rate will vary based on the basket item used for the index. This effect is lessened by looking at a large sample of commodities, rather than one or two, but this simply minimizes the problem rather than eliminating it entirely. It is also worth noting that PPP lumps items together into broad classes, not taking into account things such as quality — a hat is a hat is a hat, and its value in the index remains static, even though a shoddy hat's value on the international market would be much lower than a well-made hat's value. According to interest rate parity the difference between the (risk free) interest rates paid on two currencies should be equal to the differences between the spot and forward rates. If interest rate parity is violated, then an arbitrage opportunity exists. The simplest example of this is what would happen if the forward rate was the same as the spot rate but the interest rates were different, then investors would: 1. borrow in the currency with the lower rate 2. convert the cash at spot rates 3. enter into a forward contract to convert the cash plus the expected interest at the same rate 4. nvest the money at the higher rate 5. convert back through the forward contract 6. repay the principal and the interest, knowing the latter will be less than the interest received. Therefore, we can expect interest rate parity to apply. However, there is evidence of forward rate bias. Covered interest rate parity Assuming the arbitrage opportunity described above does not exist, then the relations hip for US dollars and pounds sterling is: (1 + r? )/(1+r$) = (? /$f)/(? /$s) where r? is the sterling interest rate (till the date of the forward), r$ is the dollar interest rate, /$f is the forward sterling to dollar rate, ?/$s is the spot sterling to dollar rate Unless interest rates are very high or the period considered is long, this is a very good approximation: r? = r$ + f where f is the forward premium: (? /$f)/(? /$s) -1 The above relationship is derived from assuming that covered interest arbitrage opportunities should not last, and is therefore called covered interest rate parity. Uncovered interest rate parity Assuming uncovered interest arbitrage leads us to a slightly different relationship: r = r2 + E[? S] where E[? S] is the expected change is exchange rates. This is called uncovered interest rate parity. As the forward rate will be the market expectation of the change in rates, this is equivalent to covered interest rate parity – unless one is speculating on market expectations being wrong. The evidence on uncovered interest rate parity is mixed. The effect proposes that if the real interest rate is equal to the nominal interest rate minus the expected inflation rate, and if the rea interest rate were to be held constant, that the nominal rate and the inflation rate have to be adjusted on a one-for-one basis. Real interest rate = nominal interest rate – inflation rate. In simple terms: an increase in inflation will result in an increase in the nominal interest rate. For example, if the real interest rate is held at a constant 5. 5% and inflation increased from 2% to 3%, the Fisher Effect indicates that the nominal interest rate would have to increase from 7. 5% (5. 5% real rate + 2% inflation rate) to 8. 5% (5. 5% real rate + 3% inflation rate). International Fisher Effect theory that the currency of a nation with a comparatively higher interest rate will depreciate in value in comparison to the currency of a nation with a comparatively lower interest rate. It further implies that the extent of depreciation will be equal to the difference in interest rates in those two nations. It is based on the observation that the level of real interest rate in an economy is closely linked to the level of local inflation rate and is independent of a government's monetary policies. Thus, in general, the higher the inflation rate, the lower the value of currency. Source: Investopedia Question 2: Firstly, Comparative advantage was first described by Robert Torrens in 1815 in an essay on the Corn Laws. He concluded it was to England's advantage to trade with Portugal in return for grain, even though it might be possible to produce that grain more cheaply in England than Portugal. However, the concept is usually attributed to David Ricardo who explained it in his 1817 book On the Principles of Political Economy and Taxation in an example involving England and Portugal. In Portugal it is possible to produce both wine and cloth with less labor than it would take to produce the same quantities in England. However the relative costs of producing those two goods are different in the two countries. In England it is very hard to produce wine, and only moderately difficult to produce cloth. In Portugal both are easy to produce. Therefore while it is cheaper to produce cloth in Portugal than England, it is cheaper still for Portugal to produce excess wine, and trade that for English cloth. Conversely England benefits from this trade because its cost for producing cloth has not changed but it can now get wine at a lower price, closer to the cost of cloth. The conclusion drawn is that each country can gain by specializing in the good where it has comparative advantage, and trading that good for the other. Example: Two men live alone on an isolated island. To survive they must undertake a few basic economic activities like water carrying, fishing, cooking and shelter construction and maintenance. The first man is young, strong, and educated. He is also faster, better, and more productive at everything. He has an absolute advantage in all activities. The second man is old, weak, and uneducated. He has an absolute disadvantage in all economic activities. In some activities the difference between the two is great; in others it is small. Despite the fact that the younger man has absolute advantage in all activities, it is not in the interest of either of them to work in isolation since they both can benefit from specialization and exchange. If the two men divide the work according to comparative advantage then the young man will specialize in tasks at which he is most productive, while the older man will concentrate on tasks where his productivity is only a little less than that of the young man. Such an arrangement will increase total production for a given amount of labor supplied by both men and it will benefit both of them. Imperfect market refers to a type of  market that does not operate under the rigid rules of perfect competition. Perfect competition implies an industry or market in which no one supplier can influence prices, barriers to entry and exit are small, all suppliers offer the same goods, there are a large number of   suppliers and buyers, and information on pricing and process is readily available. Forms of imperfect competition include monopoly, oligopoly, monopolistic competition, monopsony and oligopsony. Thirdly, a product life cycle refers to the time period between the launch of a product into the market till it is finally withdrawn. In a nut shell, product life cycle or PLC is an odyssey from new and innovative to old and outdated! This cycle is split into four different stages which encompass the product's journey from its entry to exit from the market. The product life cycle theory is used to comprehend and analyze various maturity stages of products and industries. Product innovation and diffusion influence long-term patterns of international trade. This term product life cycle was used for the first time in 1965, by Theodore Levitt in an Harvard Business Review article: â€Å"Exploit the Product Life Cycle†. Anything that satisfies a consumer's need is called a ‘product'. It may be a tangible product (clothes, crockery, cars, house, and gadgets) or an intangible service (banking, health care, hotel service, airline service). Irrespective of the kind of product, all products introduced into the market undergo a common life cycle. To understand what this product life cycle theory is all about, let us have a quick look at its definition. This cycle is based on the all familiar biological life cycle, wherein a seed is planted (introduction stage), germinates (growth stage), sends out roots in the ground and shoots with branches and leaves against gravity, thereby maturing into an adult (maturity stage). As the plant lives its life and nears old age, it shrivels up, shrinks and dies out (decline stage). Similarly, a product also has a life cycle of its own. A product's entry or launching phase into the market corresponds to the introduction stage. As the product gains popularity and wins the trust of consumers it begins to grow. Further, with increasing sales, the product captures enough market share and gets stable in the market. This is called the maturity stage. However, after some time, the product gets overpowered by latest technological developments and entry of superior competitors in the market. Soon the product becomes obsolete and needs to be withdrawn from the market. This is the decline phase. This was the crux of a product life cycle theory and the graph of a product's life cycle looks like a bell-shaped curve. Let us delve more into this management theory. Source: Buzzle Question 3: | | |Belize |Costa Rica | |Earnings before taxes | |1,000,000. 00 |1,500,000. 0 | |corporate income tax Rate | |0. 4 |0. 3 | |Tax | |400,000. 00 |450,000. 00 | |Earnings after taxes | |600,000. 00 |1,050,000. 00 | | | |300,000. 0 |525,000. 00 | |Dividend wtax rate   | |0. 1 |0 | |Dividend wtax amount | |30,000. 00 |0 | |Remitted amount after wtax | |270,000. 00 |525,000. 0 | | | | | | |Current US Corporate income tax rate | | |5% | |Dividend received by US parent after US Corporate tax | | |26,2500. 00 | |Net Dividend Received | |270,000. 0 |498,750. 00 | | | | | | |Total Earning before tax |250,000. 00 | | | | | | | | |Total Dividend received by Gramboa |768,750. 0 | | | |Total Tax pa id |906,250. 00 | | | | | | | | |Overall effective tax  rate |36. 35% | | | Question 4: Option 1 – No Hedging Assume that the expected spot rate in 90 Days is indeed $1. 7850/?. Now: a) 90 days putX = 1. 75P = 0. 015 b) 90 daysX = 1. 71P = 0. 01 3 months laterExercise Option (a) Received = (1. 75 – 0. 015) * 3mil = $5,205,000. 00 Answer: Do Not exercise Option 2 – Forward Hedge Buy a forward hedge at 90 Days forward rate at $1. 7550/? Now enter F @ 1,755 Money receivable in $ = 1. 755 x 3m = $5. 265m Option 3 – Money Market Hedge 1) Day 1 – Borrow ? , Amount borrowed = ? (3m / (1 + (14/4) /100)) = ? 2,898,550. 00 2) Day 1 – Convert all ? to $ = $1. 762 x 2,898,550. 00 = $5,107,246. 00 Option 1: Put $5,107,246. 0 to US bank @ 6% Option 2: Use $5,107,246. 00 as capital investment 3 months later:Option 1 Received ? 3 mil to pay ? 3 mil to British Bank Dollars in pocket = $5,107,246. 00 * (1+6%* 3/12) = $5,183,854. 69 Option 2 Received ? 3 mil to pay ? 3 mil to bank $5,107,246. 00 (1+12%*3/12) = $5,260,463. 00 Conclusion Money market is the best option as the m oney received is more than Put option hedge. Forward hedge resulted in receiving more than money market hedge wheras no hedging is assuming that the expected spot rate is reached but that is leaving it to chance. — END OF ASSIGNMENT–