Problem 1. The futures markets have potentially unlimited risk for the speculators. If a speculator guesses wrong about the price direction of a commodity, then he or she can incur unlimited losses. When they open a futures account, speculators give their brokers access to all of their assets (to cover losses). Hedge funds use futures contracts and other speculative instruments to create returns for their customers. American banks are currently free to lend unlimited amounts of money to hedge funds. What is your opinion of this reality? If you were the Chairman of the Federal Reserve and had the power to regulate banks in this area, what would you do? Why?
Problem 2. What are some examples of the three practical methods of managing risk (contracts, insurance and hedging, and compartmentalizing) that you have observed in your careers? How effective were these instruments in managing risk, in your opinion?
Problem 3. Many nations have stock exchanges. The most well-known stock exchange is the New York Stock Exchange (NYSE) located in New York City, NY USA. Often students are not aware of how many exchanges operate throughout the world.
Please use Google or any other research source and identify five exchanges located in nations other than the US, Germany, France, or the UK. Please provide the following information in your response:
Location of exchange (nation and city)
Name of the exchange (e.g. the Malaysian exchange is called the Bursa)
List two companies traded on that exchange which is local firms (not multinational companies)
Problem 4. Managers in multinational companies may find themselves facing an ethical dilemma not often faced by their counterparts in a local firm. There can be inherent conflicts of interest at times in a multinational company. To whom do you owe your ultimate loyalty: Your Country or Your Company? While compromise may be possible, most of these conflicts of interest cannot be resolved so easily.
This occurred in the nineties when a US firm had an order from China to buy GPS technology. The sale was ostensibly for non-military use but it was clear that China could easily convert this technology to a military purpose (improve the accuracy of its guided missiles which could be used to threaten the US).
What should a multinational manager do when faced with such a conflict of interest? Be loyal to their company or be loyal to their country? Why?
Problem 5. Use valuation techniques to determine the intrinsic value of debt and equity instruments
Problem 6. I find your response interesting in that the idea of a shareholder is somehow considered more superior than the stakeholder because of his or her position. Consider this, if you were the owner of a company and you possessed 50.1% of your company's shares would you be considered equal to the stakeholders whose job it is to ensure that your stocks and holdings are protected thereby increasing your wealth? Although stockholders and stakeholders may do well in working together, ownership brings with it responsibilities and privileges that being a stakeholder is not automatically entitled to. Consider this, stakeholders may be replaced with other more loyal stakeholders, but without the financial backing of the owners, there is no company. If this is the case, how then is the fact that stockholders considered more superior? I believe that superiority is not the issue but an understanding of rights, benefits, and expectations from roles are necessary.