exercise1_solutions - Suggested Solutions to Exercises #1...

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Suggested Solutions to Exercises #1 Chap 1-2 Fin 367 Spring 2008 Professor Bing Han Solution to #1 on P23 a. Cash is a financial asset because it is the liability of the federal government. b. No. The cash does not directly add to the productive capacity of the economy. c. Yes. d. Society as a whole is worse off, since taxpayers, as a group will make up for the liability. Solution to #4 on P23 Ultimately, it is true that real assets do determine the material well being of an economy. Nevertheless, individuals can benefit when financial engineering creates new products that allow them to manage their portfolios of financial assets more efficiently. Because bundling and unbundling creates financial products with new properties and sensitivities to various sources of risk, it allows investors to hedge particular sources of risk more efficiently, and enables better risk sharing 3, P55 #1 choose d.
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5, P55 #6 Note: Corporation may exclude 70% of the dividends received from owning preferred shares of domestic corporations in the computation
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This note was uploaded on 05/10/2008 for the course FIN 367 taught by Professor Han during the Spring '08 term at University of Texas.

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exercise1_solutions - Suggested Solutions to Exercises #1...

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