Explain the strategy of high frequency trading firms. Describe the typical time horizon of an investment that is relevant to high frequency traders, and how that varies from other institutional investors.
> Recall that if the economy continues to be strong, Carson Company may need to increase its production capacity by approximately 50 percent over the next few years to satisfy demand for its products. It would need financing to expand and accommodate this
> Recall that if the economy continues to be strong, Carson Company may need to increase its production capacity by about 50 percent over the next few years to satisfy demand. It would need financing to expand and accommodate this increase in production. R
> Offer an argument for why the terrorist attack on the United States on September 11, 2001 could have placed downward pressure on U.S. interest rates. Offer an argument for why those attacks could have placed upward pressure on U.S. interest rates.
> Carson Company currently has a mortgage on its office building through a savings institution. It is attempting to determine whether it should convert its mortgage from an adjustable rate to a fixed rate. Recall that the yield curve is currently upward sl
> If the economy continues to be strong, Carson Company may need to increase its production capacity by approximately 50 percent over the next few years to satisfy demand. It would need financing to expand and accommodate the increase in production. Recall
> If the economy continues to be strong, Carson Company may need to increase its production capacity by about 50 percent over the next few years to satisfy demand. It would need financing to expand and accommodate the increase in production. Recall that th
> During a financial crisis, liquidity in financial markets declines dramatically, and many surplus units no longer participate in financial markets. Nevertheless, if the markets are efficient, securities prices should decline due to existing economic cond
> The key components of a market interest rate are the risk-free rate and the credit risk premium. During a credit crisis, these two components may change substantially, but in different ways. Write a short essay that describes how the risk-free rate and t
> Given your knowledge of how interest rates are influenced by various factors reflecting the demand for funds and the supply of funds available in the credit markets, write a short essay to explain how and why interest rates will change over the next thre
> Write a short essay explaining why there is so much uncertainty surrounding the valuation of a firm that is engaged in an IPO. Why do you think some investors overvalue firms at the time of their IPO?
> Many critics argue that greed in the mortgage markets caused the credit crisis. Yet, many market advocates suggest that greed is good, as the thirst for profits by firms that participate in mortgage markets allows for economic growth. Write a short essay
> The credit crisis was caused by the mortgage market, yet it had a serious impact on bond markets. Write a short essay on how the bond market was affected and offer your opinion on how the bond market may attempt to insulate itself from a credit crisis in
> The Fed intervened heavily in the credit crisis. Write a short essay explaining whether you believe the Fed’s intervention improved conditions in financial markets or made conditions worse.
> War tends to cause significant reactions in financial markets. Why might a war in the Middle East place upward pressure on U.S. interest rates? Why might some investors expect a war like this to place downward pressure on U.S. interest rates?
> Consider a state pension fund that needs to generate a series of fixed payments for its retirees. Yet, assume that its compensation for its portfolio managers is tied to the return earned on the investments each year. Write a short essay that explains ho
> Consider a life insurance company that needs to ensure that it can make a steady stream of payments over time to beneficiaries of its policyholders. Assume that the compensation for the insurance company’s portfolio managers is tied to the return earned
> Should large securities firms be allowed to be independent and insulated from bank regulation, or should they be required to register as bank holding companies, and subject to bank regulations? Write a short essay that supports your opinion.
> A critic recently claimed that hedge funds cause market volatility to increase when they publicize (and document) that a public corporation exaggerated its earnings. The critic argued that hedge funds should not be allowed to make such public statements
> Write a short essay on the future of finance company operations? Should finance companies be merged into the banking industry, or should they remain distinctly different from commercial banks?
> Write a short essay on the future of thrift operations? Should they be merged into the banking industry, or should they remain distinctly different from commercial banks?
> In recent years, many banks are relying more heavily on non-interest income as a proportion of their total income. Write a short essay explaining whether banks that rely more heavily on non-interest income will have better or worse performance than banks
> Some bank managers argue that U.S. bank’s access to capital is restricted because the capital requirements imposed by U.S. regulators are too high. Write a short essay that can offer logical insight into why high capital requirements may restrict a bank’
> The Volcker Rule is intended to prevent banks from engaging in proprietary trading. Write a short essay offering your opinion on whether banks should be allowed to engage in proprietary trading.
> During the credit crisis in the 2008-2009 period, banks were criticized for restricting their credit. Write a short essay to explain why you think banks should or should not be allowed to restrict their credit during the credit crisis.
> Why might you expect the interest rate movements of various industrialized countries to be more highly correlated in recent years than they were in earlier years?
> Recently, a government official in Europe stated that the European Central Bank needs to weaken the euro so as to improve the European economy. Write a short essay that explains the logic behind this recommendation, and state whether you believe the stra
> A critic recently mentioned that the creation of credit default swaps caused the credit crisis in the 2008-2009 period. Write a short essay that supports or refutes this statement.
> An investment newsletter suggests that because the prevailing stock market conditions are subject to much uncertainty, investors should purchase call options on the CBOE volatility index (VIX). Write a short essay on the logic behind how the valuation of
> Explain the motivation of hedge funds to rely on expert networks in recent years.
> Explain the difference between how equity mutual funds generate returns for their investors, versus how private equity funds generate returns for their investors. Which fund do you think would be more capable of capitalizing on a weak publicly traded fir
> Money that had previously been invested by individual and institutional investors in stocks is now being invested in private equity funds. Explain why this should result in improved business conditions.
> Explain why hedge funds may be able to achieve higher returns for their investors than mutual funds do. Explain why the risk of hedge funds may differ from mutual funds. When the market is overvalued, why might hedge funds be better able to capitalize on
> Compare the portfolio managers of closed-end funds with an open-end fund. Given the differences in the fund characteristics, explain why the portfolio manager’s management of liquidity is different in the open-end fund as compared with the closed-end fun
> Dakota Bank has a branch overseas with the following balance sheet characteristics: 50 percent of the liabilities are rate sensitive and denominated in Swiss francs; the remaining 50 percent of liabilities are rate insensitive and are denominated in doll
> Oregon Bank has branches overseas that concentrate in short-term deposits in dollars and floating-rate loans in British pounds. Because it maintains rate-sensitive assets and liabilities of equal amounts, the bank believes it has essentially eliminated i
> How might expectations of higher prices in the U.S. affect the demand for loanable funds, the supply of loanable funds, and interest rates in the U.S.? Offer a logical explanation of why such an impact on interest rates in the U.S. might spread to other
> Explain the possible signal that would be transmitted to the market if a country abandoned its use of the euro.
> Assume a horizontal yield curve exists. How do you think the yield curve would be affected if foreign investors in short-term securities and long-term securities suddenly anticipate that the value of the dollar will strengthen? (You may find it helpful t
> Explain how the Financial Reform Act of 2010 and the rules issued to implement it attempted to reduce the risk in the financial system resulting from the use of credit default swaps.
> Explain why the failures of Lehman Brothers caused prices on credit default swap contracts to increase.
> Credit default swaps were once viewed as a great innovation could make mortgage markets more stable. However, the swaps were sometimes criticized for making the credit crisis worse. Why?
> Rider Company negotiates a forward swap to begin two years from now, in which it will swap fixed payments for floating-rate payments. What will be the effect on Rider if interest rates rise substantially over the next two years? That is, would Rider be b
> How would you interpret a large increase in the CBOE volatility index (VIX)? Explain why the VIX increased substantially during the credit crisis that began in 2008.
> The price of Garner stock is $40. There is also a call option on Garner stock that is at the money, with a premium of $2.00. There is a put option on Garner stock that is at the money, with a premium of $1.80. Why would investors consider writing this ca
> Three savings and loan institutions (S&Ls) have identical balance sheet compositions: a high concentration of short-term deposits that are used to provide long-term, fixed-rate mortgages. The S&Ls took the following positions one year ago. Assum
> Explain how and why high frequency trading affects spreads.
> Assume a savings institution has a large number of fixed-rate mortgages and obtains most of its funds from short-term deposits. How could it use options on financial futures to hedge its exposure to interest rate movements? Would futures or options on fu
> Explain how some high frequency traders used a form of front running to capitalize on faster access to specific markets.
> Describe the Flash Crash on May 6, 2010 and explain why it caused so much concern to investors and regulators.
> Explain how the Galleon Fund case led to stronger enforcement against insider trading.
> Describe inside information as applied to the trading of stocks. Why is it illegal to trade based on inside information? Describe the evidence that suggests some investors use inside information.
> What are dark pools? How can they help investors accumulate shares without other investors knowing about the trades? Why are dark pools criticized by public stock exchanges? Explain the strategy used by public stock exchanges to compete with dark pools.
> Why did the SEC impose a temporary ban on short sales of specific stocks in 2008? Do you think a ban on short selling is effective?
> Your friend just told you about a penny stock that he purchased, which increased in price from $0.10 to $0.50 per share. You start investigating penny stocks, and after conducting a large amount of research, you find a stock with a quoted price of $0.05.
> Explain how foreign stock exchanges have reduced transactions costs.
> Explain why participants in the stock market monitor the VIX index. What does a decline in VIX imply about a change in expected volatility by market participants?
> Write a short essay explaining how financial futures might reduce systemic risk, and how financial futures might increase systemic risk within financial markets.
> Should an accounting firm be prohibited from offering both auditing services and consulting services to the same client? Explain your answer. If an accounting firm offered only one service, could there still be conflicts of interest due to referrals (and
> The calculations in PERT allow you to determine the probability that as project will be completed. Suppose you calculate that the probability a project will be completed by a target deadline is only 0.25. What steps might you take if you were the project
> Crashing in the Critical Path Method (CPM) assumes that the cost of crashing an activity is linearly proportional to the amount of time the activity is crashed; that is, the rate of cost increase is constant (see Exhibit 19.12). Is this a reason- able as
> Find an application of project management in your own life (e.g., in your home, fraternity, or business organization). List the activities and events that comprise the project, and draw the precedence network. What problems did you encounter in doing thi
> Develop a small example consisting of no more than ten activities and illustrate the ideas, rules, and mechanics of forward and backward passes through the project network to compute the critical path.
> Perhaps the most well-known software for project management is Microsoft Project™. Investigate its capabilities and write a short paper (two pages maximum) that describes its features.
> The local chapter of the Project Management Institute is planning a dinner meeting with a nationally known speaker, and you are responsible for organizing it. How could the methodology discussed in this chapter help you?
> Research and write a short paper (two pages maximum) on the skills needed to be a successful project manager.
> Exhibit 19.2 lists a number of impediments to project success. How might you minimize or eliminate these impediments?
> Identify at least five additional examples of projects that are not cited in this chapter.
> Prepare a job profile for a newspaper or on-line advertisement for a project manager.
> Provide examples of perishable inventory. How does fresh fruit differ from a concert seat even though both are perishable?
> Marta Tompkins, a graduate in industrial engineering from Purdue University, was excited. She had accepted a new job in South Carolina as the Operations & Logistics manager at Kempfer Furniture, Incorporated. Marta had work for Honda Manufactur
> Research and write a short paper on the impact of global supply chains on JIT.
> Research JIT practices and how they impact purchasing. How do you think JIT systems affect purchasing functions and practices? Answer this question in a short paper of no more than two typed pages.
> Interview a manager at a local company that uses JIT. Report on how it is implemented and the benefits the company has realized.
> Research and briefly describe one or two lean initiatives in service organizations and then make an argument for or against adopting lean principles in service businesses. What is different about applying lean in a factory versus a service situation? Des
> Search the Internet for manufacturing or service tours similar to the ones in this chapter. Classify their practices according to the four lean principles in a manner similar to the examples.
> Research and write a short paper (two pages maximum) on applications of the 5S principles in service organizations, such as a hospital. If possible, provide some pictures that illustrate the results of using the 5S principles.
> Do you think applying operations management concepts and methods such as Six Sigma and lean principles can reduce U.S. health care costs? Explain. Provide examples that show how OM can help the U.S. health care industry.
> Compare the lean service system of Southwest Air- lines to a full service airline such as United Airlines or British Airways on the following: (a) airplane boarding process, (b) cabin service, (c) ticket transfer to other Southwest flights, (d) frequ
> A team at a hospital studied the process of per- forming a diagnostic CT scan. The current process can be described as follows. The CT tech enters a “send for patient” request into a computer when the CT is avail- able for the next patient. The computer
> Interview a manager at a local business about his or her inventory and materials-management system, and prepare a report summarizing its approaches. Does the system use any formal models? Why or why not? How does the manager determine inventory-related c
> A catalog order-filling process can be described as follows:12 Telephone orders are taken over a 12-hour period each day. Orders are collected from each person at the end of the day and checked for errors by the supervisor of the phone department, usuall
> 1. Research and acquire the criteria for diamond appraisals and critique these criteria in terms of objectivity, measurement, and overall accuracy. Are diamond quality criteria as specific and measureable as for manufactured parts? Explain. 2. Develop p-
> Choose one of the lean tools and approaches from Section 18-2 and research and write a short paper (two pages maximum) on how organizations use this tool, and provide specific examples.
> What types of “setups” do you perform in your work or school activities? How might you reduce the setup times?
> Search the Internet for images of visual controls. Select five of them and explain how they contribute to achieving one of the four principles of lean operating systems.
> Some companies use a technique called heijunka, which is a Japanese term that refers to production smoothing in which the total volume of parts and assemblies are kept as constant as possible. Research and write a short paper (two pages max) about this t
> Provide some examples of different types of waste in an organization with which you are familiar, such as an automobile repair shop or a fast-food restaurant.
> Suppose that you were monitoring the time it takes to complete order transactions at a call center. Discuss what might cause such out-of-control conditions as a trend, shift in the mean, or cycles in an –x-chart in this situation.
> Hospital administrators wanted to understand and better control the waiting time of patients in the emergency department (ED). To do this, they constructed –x-chart and R-charts by sampling the waiting times of the first five patients admitted to the ED
> Develop a “personal quality checklist” on which you tally nonconformances in your personal life (being late for work or school, not completing homework on time, not getting enough exercise, and so on). What type of chart would you use to monitor your per
> Find two examples of using RFID technology to monitor and control SKUs and explain the advantages and disadvantages of adopting such technology.
> Discuss some examples of common and special causes of variation in your daily life (for example, at school or at home).
> Provide some examples in business or daily life in which a controlled process is erroneously adjusted and an out-of-control process is ignored.
> The U.S. National Highway Traffic Safety Administration (NHTSA) independently tests over 2,400 types of tires annually. In 2015, they issued over 900 recalls, affecting 51 million vehicles nationwide. Obviously, tire failure is a leading cause of acciden
> Find a customer satisfaction survey from a restaurant or a hotel. How do the questions relate to the five dimensions of service quality introduced in Chapter 2? Discuss how the survey results could be used to control quality. What types of quality contro
> Think about the net promoter score question, “What is the likelihood that you would recommend a company such as a restaurant, airline, or online service?” What factors would drive you to give a 9 or 10 to this question? Base your answer on a specific pro
> Refer to the automobile repair flowchart in Exhibit 7.5 in Chapter 7. Identify three activities where a potentially serious service quality error may occur, and discuss how such errors might be reduced.
> Which of the Seven QC Tools would be most useful in addressing each of the following situations? Explain your reasoning. (You may decide more than one tool is useful.) a. A copy machine suffers frequent paper jams, and users are often confused as to how
> Explain how each of the Seven QC Tools would be used in the five phases of the Six Sigma DMAIC problem-solving approach. For example, in which phase(s) (define, measure, analyze, improve, or control) would you expect to use flowcharts, check- sheets, and
> Provide some specific examples of quality costs in a fast-food operation or in the operation of your college or university. Classify the costs into the four major categories described in the chapter.
