00008428 CF - COURSEWORK ON CORPORATE FINANCE PDF

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COURSEWORK ON CORPORATE FINANCE...

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WESTMINSTER INTERNATIONAL UNIVERSITY IN TASHKENT COURSEWORK SUBMISSION FORM STUDENT USE STAFF USE Corporate Finance First Marker’s Module Name (acts as signature) 4ECON009C Second Marker’s Module Code (acts as signature) Abdulaziz Buriev Agreed Mark Lecturer Name For Registrar’s office use only (hard copy UoW Student IDs submission) WIUT Student IDs 00008428 Deadline date

March 28

Assignment Type

GroupIndividual

SUBMISSION INSTRUCTIONS COURSEWORKS must be submitted in both HARD COPY (to the Registrar’s Office) and ELECTRONIC unless instructed otherwise. For hardcopy submission instructions refer to: http://intranet.wiut.uz/Shared %20Documents/Forms/AllItems.aspx - Coursework hard copy submission instructions.doc For online submission instructions refer to: http://intranet.wiut.uz/Shared %20Documents/Forms/AllItems.aspx - Coursework online submission instructions.doc MARKERS FEEDBACK (Continued on the next page)

Question 1

WESTMINSTER INTERNATIONAL UNIVERSITY IN TASHKENT Financial markets play a significant role in developing economic efficiency as long as they offer chances for people with no investment opportunities to transfer their funds to those who have it. There are no possibilities to accomplish such processes in undeveloped markets. In developing countries with low-level financial markets, funds cannot properly reach people who can efficiently deal with them. In turn, this can lead to economic regress as entrepreneurs cannot obtain funds in order to establish businesses.

Question 2

It can be highly considered that sharing of risk is beneficial for both financial intermediaries and private investors. Firstly, by risk sharing financial intermediaries gain a spread between the yield earned by high risky assets and the figure of returns that are paid from the sales of low-risky assets. Regarding individual lenders, their investments in the more diversified portfolio can be responsible for overall risk decrease due to sharing of risk among investments that are involved in the portfolio.

Question 3

This statement is completely true. Financial intermediaries are the link between lenders and borrowers. Because of these intermediaries, the levels of cost and risk are relatively reduced. In cases when there is no cost and risk, financial mediators become worthless as long as transactions then can be done easily and freely by people.

Question 4

WESTMINSTER INTERNATIONAL UNIVERSITY IN TASHKENT Joe has a rational expectation. Accordingly, as the theory claims, rational expectation relies on previous experiences, events, facts as well as complete information. Here, in the case of Joe, he used to drive to work every day and made an accurate expectation of time spend on driving. Therefore, we could make an inference that Joe has complete information to make rational expectations. As for his misjudgment of the time during the snowing, considering the fact that there is rare snow (it is snowing every 10 years), Joe`s expectation is assumed not to be biased. Hence, based on past events and complete information, his expectation is considered to be rational.

Question 5

In case if the money supply has sharply raised in the past week, it is recommended not to buy the stocks. This is because, the information about the significant increase in money supply is publicly available, hence the price change is already reflected in the stock price. It is not possible to earn more than the equilibrium return with the information on the money supply.

Question 6 The stock price was overvalued and had increased well above the fundamental values. Explanation. It is known that the overvaluation of the market may result in different consequences as of the fall of the company`s stock prices. Moreover, there is a possibility of economic bubbles to appear due to the continuous overvaluation that causes prices to be inflated. Despite the fact that there was the advancement of new technologies that occurred, still, investors had faced many uncertainties, where they made valuations of the stocks based on the best information they had.

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