Education of First Nations of Canada Essay

It has been observed that gentility on the prototypical Nations have been a problem in the academia because of low academic performance, high attrition, poor retention, weak persistence and umteen more negative feedbacks. It is the purpose of the researcher to investigate on this problem. It is chief(prenominal) that in the education of people the four Rs essential be present and observed. The four Rs are respect, relevance, reciprocity, and responsibility.If the First Nations are seen to have been under-represented in Colleges and Universities, it might be that the four Rs have never been taken into serious consideration in dealing with the First Nations of Canada. This research then intends to review literature and introductory studies to find out around the history of the education of the First Nations of Canada. It shall natter the University of Calgary sites to observe and document through pictures the structure of the academic environment that brought about the educati on of the First nations which has caused a lot of frustrations not only in the education sector but also in the business world.The issue project is relevant as it shall give a first guide information to the researcher and it shall provide the opportunity to draw objective and veritable conclusion as regards to the kind of education the First Nations of Canada have.Reference Alaska ingrained Knowledge Network. (2008). First nations of Canada. Retrieved, June 9, 2009 from http//www. ankn. uaf. edu/IEW/firstnat. html

Democracy †Essay Essay

IntroductionDemocracy, it is generally cogitated, had its roots in antediluvian Athens. We know it spread its stems to nigh of Europe and later to parts of Asia by mid 19th century , mostly in the form of parliamentary body politic. But in the context of this paper,we argon non interested in the histrocity of the idea or concept of state, but in the idea itself. That is to label we want to analyze the meaning of commonwealth and its different forms, study its talent (so to say), ponder over its limitations and comp ar it to other forms of government. Whether land was conceived of in Athens, Sparta or India is not a topic of interest in this paper (although in that discover may be references to historical events in the evolution of the idea when pertinent). What does democracy mean?Democracy comes from the greek curb of the batch. But as I searched for a definition of democracy in the course of seek for this paper, a consistent defintion of it appeared to elude me. So we must examine well-nigh of these definitions and try to find a core to the idea of democracy, if there exists one. ring of different ideas and quotes are out thr on internet put almost 4-5 of them here and discuss if them from a current or historical perspective..ive indite level one for u The right to dissent without repercussions to ones personal well-being is the core value of Democracy * Nathan SharanskyDiscuss quotes such as this to evaluate how these ideas are implemented in practice.. All this should shorten up just about 500 words..The only core value seems to be quite a little draw in to elect their governement..how much of the peoples rights are respected after(prenominal) that greatly varies.. Forms of democracyRepresentative..constitutes parliamentary and liberal(most democracies arethese)ConstitutionalDirectsocialistTotalitarian..discuss all thseabout 300 words..A critique of democacyAn fantasyThere was no stone-pelting, nothing.There was no curfew They f ired indiscriminately. (http//www.independent.co.uk/news/ origination/asia/kashmir-burns-again-as-india-responds-to-dissent-with-violence-2045905.html). The preceding(prenominal) was said by Abdul Rashid, a Kashmiri youth whose friend was gunned down by Indian army officials for holding a peaceful, unprovocative, anti-government rally in the summer of 2010. But this was not an anomoly in the process of democracy in India. Kashmir still remains the most militarized zone in the world with about a half a million troops on active duty (for the sake of comparison, the United States had about 165,000 troops in Iraq at its peak)(i read these figures on cia.gov..i fathert remember the exact link ). How is that a government for the people is killing its own citizens for holding a nonviolent demonstration? How is such a huge militarization of a responsibility in a democracy justified? Even a canonic understanding of the ideas of freedom and liberty that democracy entails shows how abhorre nt these actions are.But these things happen, not just in India, but in other developed counties desire the United States (Japanese americans in 1942), where the rights of their citizens are violated just when they would want to model them. So one must ask, are democracies really for the people? A study of history of goverment brutality in countries like India and the United States seem to declare otherwise. The almost forceful takeaway of land by the Indian goverment in eastern India from farmers (actions which directly led to the Naxalite-Maoist insurgency, something the current prime parson of India called the single biggest internal security challenge ever faced by our verdant.( http//www.ploughshares.ca/libraries/ACRText/ACR-IndiaAP.html)), seem to suggest otherwise. The locking up of Japanese Americans in captivity camps in 1942 by Franklin Roosevelt and the Unites States government seem to suggest otherwise.The indiscriminate gibe ofunarmed, nonviolent Kashmiri youths (some as young as 9 long time old)shouting azadiazadi(freedomfreedom) by Indian security officials seem to suggest otherwise. One gets the idea. So maybe people like Vilfredo Pareto and Gaetano Mosca are lay after all. The masses are forever and a day characterized by apathy and division, the powers to be by drive and unity (Femia, Joseph V. Against the Masses, Oxford 2001). Maybe all democracy does is shift the power scale, from domination by a despotic drawing card to manipulation by a democratic government. Maybe the people dont really have much of a say after all. Maybe its just an illusion.Majority ruleMajority always gets its way..discuss gay rights..civil rights in us..womens rights historically..religious parties like shiv sena in Mumbai..rising intolerance of secularism in india..majority rule can get tyrannical and the minority issues ignored when people get to decide resolutions to minority issues.The irrational voterThe best argument against democracy is a five minute conversation with the average voter. Winston ChurchillTalk about how the common man is largely ignorant about serious issues and because can vote against his/her interests..u can greatly discuss the recent midterms in us to come across this pointbasically ur sayin if we must solve sparing issues we talk to economist..if we must solve environmental issues we talk to climate scientists..if we are talking abt what to teach in science class we take the consensus of scientist not what the common people of the state think (talk abt teaching creationism in schools..a toilet of states in us have majority of it people wanting creationism be taught as science even though almost no scientist believe it to be science)not everything should be up for a vote..economicallyUr a better person to write abt thisIdealisticShow how its surd to apply democratic principles in practicecorrupt officials..apathetic citizens..uprisings etc.. InstableFrequent elections make the government instableshitload of examples on the internet abt this.. Best we have?It has been said that democracy is the worst form of government except all the others that have been tried.- Winston Churchill equal democracy to other forms of governments like dictatorships, communist states, anarchist, socialist,etc..define and discuss each with respect to western liberal democracy..ive done some of it for anarchist Anarchist Anarchists are those who advocate the absence of the state, arguing that common sense would allow people to come together in agreement to form a practicable society allowing for the participants to freely develop their own sense of morality, ethics or principled behaviour. (from wikipedia).One such current society is Somalia, and it would not be hyperbole to suggest they are not doing very well. The lack of a state and police have led to nationwide lawlessness, violence and spiralled the landed estate into utter chaos. I think Somalia really characterizes the severe consequences of not having a state and is not a direction one would want their country to go in. Giving people all the power has resulted in the most powerful and the most brutal of them to take power and the rest of people losing all freedom(ironically).

Leadership & Ethics- Research Paper Essay

IntroductionWith the collapse of major corporations uniform Enron, Tyco International, WorldCom and the like, in corporate corruption and misman mount upment has been in the forefront of some of the major issues that corporate organizations feel to overcome and man mature. With this research paper, my aim is to review and present triad scholarly journals that extravagantlylight the imp issue that leading heap play on the honourable cognitive operation of an organization. Firstly, in the pagan & Leadership Predictors of Corporate kindly Responsibility Values of Top management A solid ground line of demarcation of 15 Countries, the breeding subjects, that with the spread of globalization, it has become imperative to understand managerial determine that guide their actions.The authors suggest that the three main dimensions of managerial repute that atomic number 18 relevant to the subject area of CSR are shareholder/owner determine where the aim is to maximize pr ofits, stakeholder dealings which refers to estimable and unequivocal relations towards employees, consumer conventions and the like and thirdly, community of interests/ verbalize welfare which is establish on the principle of unrestricted debt instrument. In a more(prenominal) in-depth synopsis the test seeks the correlation of social culture factors much(prenominal)(prenominal) as institutional collectivism, in-group collectivism and originator aloofness on the above three managerial value that impacts managerial finale devising. Furthermore, the paper proposes that resourceary lead and law enhances corporate social responsibility (CSR) determine on moral and good grounds.Secondly, The Association Between estimable Leadership & Employee Outcomes The Malayan incident lead help understand the value in exculpateing employee commitment and trust through effective ethical leaders skills. This article studies the impact of ethical lead on the employee popc omes in areas such as organisational commitment and trust. A micro study was make on the verdant of Malaysia which has see a tenfold increase in corporate crime over the last 15 years. From the study 1 gathers that the main reason for such an exp 1ntial increase in such crimes is due to fact of the failures on part of corporate leaders to act ethically in their ending making process.Lastly, with Leadership Styles & the Moral quality of internecine Auditors I ordain examine how an employees self entertain and management leading guides their ethical ratiocination making. This study plays close vigilance to virtuoso set of an organizations workers the Internal Auditing professionals, in assign to understand the how their choice in making ethical decisions are native to various factors , one of them being leaders. The primary viewpoint of this study indicated that an die harders decision making is enhanced by the leaders who play along a ensample effect oriented lead ers style and when they satisfy clear benchmarking, fair performance assessment and growth opportunity. In conclusion, this squeeze out be held true for any employee within an organization.HypothesisAccording to the existence study, there were three main hypotheses that the researches proposed. The first hypothesis dischargeing was carve up in ii parts wherein, they proposed that societies stressing institutional collectivist set will have a positive family relationship with stakeholders relations and community/state welfare CSR values while societies stressing in-group collectivist values will only have a positive relationship with shareholder relations CSR values (Waldman et al).The second theory states that cultures that have a high bureau distance tend to have low CSR values (Waldman et al). Lastly, visionary leadership and ace on part of CEOs, adds variance to the prediction of following (stakeholders) CSR values that go beyond the effects of societal hea so values ( Waldman et al).With the Leadership and Employee Outcome The Malaysian Case, the two main hypotheses of the study were establish on the notion that there was a significant relationship among ethical leadership pay and employees organizational commitment and, that ethical leadership behaviour was positively associated with employees trust in leaders (Ponnu, Tennakoon). This study aimed to examine the empirical significance of ethical leadership on employee attitudinal outcomes.The main hypothesis of the Leadership Styles & the Moral Choice of Internal Auditors study was to understand the motivational factors that influence home(a) auditors when faced with ethical dilemmas pertaining to spilt loyalty, anticipation gaps and conflict of interest (Woodbine , Liu). The authors proposed that the dependent and independent variables such as individual(prenominal) needs strengths, leadership styles, the interaction amidst needs strength and leadership styles and situational factors imp act an inhering auditors moral choices when faced with an ethical issue (Woodbine , Liu). sampleIn the GLOBE research paper the selected firms were picked from diverse sectors such manufacturing, randomness systems and tourism, further government run and educational institutions were excluded from the sample. Each firm had an clean of 500 employees with six or more respondents from each firm. The final digest was based on the responses of 561 firms from over 15 countries from various regions and a meat of 4656 individuals completed the survey. The respondents comprised of CEOs and several of their subordinates i.e. top executives.The leadership (two variables- vision and integrity) and societal cultural dimensions (three variables institutional collectivism, in-group collectivism and power distance) were preventiond inventment reliability and confirmatory factor analyses. Cronbacks alpha for the above measures ranged from 0.70 to 0.90 for a five factor simulation. A two f actor model was likewise enforced however it was not considered to be a good tolerable of fit. Control Variables such per capita gross domestic product, firms performance, bonny of age of respondents, second-rate education and average gender, were used to enhance precision of the model (Waldman et al).Mean, standard deviations and correlations amongst the variables were interpreted and a hierarchical regression analysis was used to footrace the three main hypotheses. All survey items were standardized by body politic using Z scores, so as to control potential differences in items scores and rating processes between countries (Waldman et al). Lastly various information accretion strategies were put in to play in order to avoid champion source bias issues.The Malaysian cross sectional caseful study was based on the primary data collected from 172 intermediate managerial employees from a wide variety of industries within the corporate sector in Klang Valley, Malaysia. The s ample include 77 males and 97 females, age range from 20 to 53 and with 84% of the respondents holding bachelors or post graduate degrees. The data was collected through self administered questionnaires and convenience taste was used in drawing samples ((Ponnu, Tennakoon). SPSS Version 14.0 was used to analyze the data and test the studies hypothesis. correlation coefficient matrix and reliability analysis was done all variables to determine relationships among constructs and in the end in order to allow for correlation amongst factors, exploratory factor analysis using principle components with oblique rotations was conducted (Ponnu, Tennakoon).With the Internal Auditors case study, the sample universe of discourse description comprised of full time internal auditing troubles with respondents that had at least one year experience with their respective organizations. The study was conducted in Australia and comprised of mailed out questionnaires. The resume sample coat was 128 . The demographics were as follows 84 males and 44 females, average male age 44 years and average female age of 36 years. Out of the 128 respondents, 48 of them were audit managers of equivalent. Organizations involved in the sampling were government departments, private sector and accounting firms.Statistical methods that were employed included correlation analysis for the dependent variables using a two tail test and significant relationship amongst the three variables was found to exist and Q-Q plots and detrended average plots were used to legitimateate normality and reliability. For the independent variables such as leadership styles, growth needs and the like principal component analysis was used. Reverser criterion and regression analysis using stepwise method was used to explore relationships between the variables and in certain instances to test validity of model.Major Results & FindingsFrom the two GLOBE tables listed below the hypothesis that in-group collectivist va lues results in positive shareholder/owner is unconfirmed. The statistical analysis has confirmed and back up the authors device in that institutional collectivism positively predicts stakeholder CSR values, with a positive coefficient of 0.13 (P 0.01) power distance is negatively predictive of stakeholder CSR values, with a coefficient of -0.20 and that the leadership variables of vision and integrity enhanced CSR values, with coefficients of 0.23 and 0.13 respectively and variance of 9% (P 0.01) (Waldman et al).With GLOBE table 2, total variance amongst the three main managerial values are shareholder/owner dimension equals 22%, stakeholder values is 45% and community/state welfare is 28% with a 5% significance train. Hence the model silk hat suits stakeholder CSR values.The main findings with the GLOBE study are as follows1.The authors dimensional of managerial values with the dimensions of shareholder/owners, stakeholders and community/state welfare values were appropr iately construed. 2.The research indicates that manager from wealthier countries are more inclined to esteem shareholder/owners values and less in all likelihood to consider the welfare of the state or community at large. In comparison, managers from poorer countries feel a abundant personal responsibility towards society. 3.Managers from institutional collectivist societies tend to have great value for the three managerial values while there has been no significant relationship between the two variables for in-group collectivism.4.In societal cultures that have great power distance, managers tend to devalue CSR values, thus leading to a more manipulative use of power with little consideration given to stakeholders such as employees, customers, environmentalist. This could pose a definite attempt for multinational firms in todays global economy. 5.Organization variables such as CEO leadership in terms of vision and integrity are very likely to account for variance in manageria l attitudes and decision making.One of the major recommendations of the GLOBE study is the need for multinational firms to pay close economic aid to cultural and leadership factors that have a critical impact on management CSR values. For example CSR values and policies of a multinational firm could be firm and this may be due to the home countrys high institutional collectivism and low power distance however managers in a subsidiary country may have weaker stakeholder CSR values as a result of weak institutional collectivism and high power distance (Waldman et al). The resulting scenario could lead to conflicting policies and business practices that can have an adverse effect on multinational firms. This further reiterates the authors proposal that in cases such as this, its the firms leadership values of integrity and vision that help managers look beyond the economic and cultural limitations.In the Malaysian case as mentioned earlier, correlation analysis was preformed to test s trength and linear relationship amongst the variables. With the first hypothesis there was a medium positive correlation between ethical leadership behaviour and organizational commitment. The Malaysian Table 1 below shows correlations r = .46 and p .0 5 and, co-efficient of distribution is 21% of the variance, which can be explained.Hence with the keep empirical data the research shows that high levels of perceived ethical leadership behaviour are associated with higher levels of employees organizational commitment (Ponnu, Tennakoon).As for the second hypothesis, there was a strong positive correlation between ethical leadership behaviour and employee trust. The Malaysian Table 2 below shows correlations r = .634 and p .0 5 and, co-efficient of distribution is 40% of the variance, which can be explained.Hence with the above results supporting hypothesis 2, it can be safely concluded that high levels of perceived ethical leadership associated with higher levels of employees trust in leaders (Ponnu, Tennakoon). Some of the main antecedents to the Malaysian case findings are as follows 1.If leaders make ethics a arse of all business practices they gain internal organizational fellowship and employees tend to value a more social exchange with the organization instead than an economic exchange.Employees reciprocate these sentiments through organizational sortal commitment and are willing to exert considerable effort in terms of job dedication and job commitment, on behalf of the organization (Ponnu, Tennakoon). 2.When an organizational leader priortizes the groups interest first, who does not wish to seek personal gain at the expense of others, who respects the rights of others and treats them fairly tends to harness employees trust. 3.When leaders pass employees and involve them in decision making processes they not only serve employee well being and growth but increases their trust in them as well.With the Internal Auditors case the major findings of the study support Path final stage and ERG theories (Woodbine, Liu). As per the table below, internal auditors are motivated to make ethical decisions based on their personal growth needs. Leadership styles play a significant role as well especially Standard achievement oriented approach that encourages individual performance and achievement (Woodbine, Liu). Lastly gender, age and experienced was an important predictor, as female respondents that were younger and less experienced showed less motivation towards making moral ethical choices.ConclusionThe GLOBE study has been extremely informative and clearly structured to provide an in-depth judgment of how societal cultural factors and leadership guide managerial values when it comes to decision making within an organization.Some of the key limitations to the study were that the analyses were limited to 15 countries and the surveyed firms did not represent a wide range of industries (Waldman et al). Actual CSR performance was not meas ured and lastly, due to multiple levels of data to be collected, redundant insight could not be gained. The study indicates that even though leadership integrity is a significant and unique predictor of managerial CSR values, it dust to be an under researched variable. This may be due to the fact that leadership integrity is associated with more tangible organizational outcomes such as reductions of business of costs.However, the authors nevertheless believe that it a significant factor that enhances managerial decision making and is worth future examination and research. My personal opinion would overly include a more directed research towards in-group collectivism in order to find a relationship between individualistic societies and greatness of CSR values towards society at large. The study concluded that, organizations that have strong corporate social responsibility values gain the trust of twain internal and external stakeholder which in turn solidifies the foundations f or an ethical culture. It also states that neo charismatic leadership that is guided by the principles of visionary leadership and integrity have a strong impact on an organizations ethical performance.The Association Between Ethical Leadership & Employee Outcomes The Malaysian Case study showed me a direct link between leadership ethical behavior on employee commitment and trust. It empirically proved that unethical leadership can adversely impact employee outcomes that in turn affect organizationalperformance. I noted related some factors such supervision, leadership honesty, trustworthiness, impartiality and care, have an impact on employee intelligence and outcomes. The key limitations of the Malaysian study as noted by the researchers due to time and budget constraints, was that, at rest sampling may not be representative of the entire universe of discourse due to insufficient representation of the entire corporate sector of the country and could be subject to self-select ion bias secondly the study could not measure if distance with top/senior management has an effect on employee perception of ethical leadership. Hence lower level employees who have very tokenish contact with upper level management may rely more on information based on public opinion then direct leadership experience (Ponnu , Tennakoon).Both authors found that their study although valid and reliable, needed to be border in terms of sample size and area of study in order to fully understand and shew the greatness of ethical leadership. It was also suggested that since the research focused on well-made direct relationships (Ponnu, Tennakoon) it would be recommended to gather relevant data from lower level employees within the organizational hierarchy. Finally they suggested further research on the relationship between employee psychological empowerment and authenticity of ethical leader behavior (Ponnu, Tennakoon).As per my personal suggestion further research can be geared toward s relating individual organizational commitment and performance. In conclusion to the Malaysian study, the authors state that corporate crime is still rising as a large number of top executives do not see the importance of ethical leadership values in their business operations. Corporate leaders should set an example of strong ethical and moral values in order to earn loyalty and trust of all major internal and external stakeholders. Organizations that have strong ethical leaders and principles are held in high esteem and enable the organization to employ and retain the best human capital available in the market.The case study on the internal audit profession, provided for a keen micro analysis on the personal motivations that guide employees to make moral decisions especially in professions that control a high level of ethical decision making. The limitations of this study as mentioned by the authors included variable identification and measurement, sample size and the use of a fa r too simple three vignette based model (Woodbine, Liu). Further research in to gender differences and issues that affect ones ethical and moral decision making ability. Lastly a broader analysis that analysis the organization as whole as foreign to a particular profession would help enhance understanding of the internal motivations that guide moral decisions when faced with ethical dilemmas.The authors also recommend a new variable for research i.e. employee religious affiliation as a possible predictor to moral choices. Even though the authors conclude that codes of conduct and governance systems provide for an internal control mechanism, whistle blowing channels and develop cultures of honesty and accountability, the study strongly suggests that employees moral choices are still subject to their motivation needs. Finally, employees motivation to making moral decisions can be difficult to predict however they can be support with proper leadership (Woodbine , Liu).All three schol arly articles empirically supported the main objective of this study, which was to reiterate the sound business principle that, ethical leadership lead to the responsible management of business processes and decision making that will in turn help an organization manage its risk of failure as a result of unethical business practices.whole kit and boodle CitedPonnu, Cyril H., Tennakoon , Girindra. The Association Between Ethical Leadership & Employee Outcomes The Malaysian Case. Electronic diary of byplay Ethics & Organizational Studies 141 (2009). Web. Sept 19th, 2010.Walman, De Luque, Washburn et al. Cultural & Leadership Predictors of Corporate Social Responsibility Values of Top Management A GLOBE Study of 15 Countries. Journal of International Business Studies 376 (2006). Palgrave Macmillan Journals. Web. Sept 19th, 2010.Woodbine, Gordon F., Liu, Joanne. Leadership Styles & The Moral Choice ofInternal Auditors. Electronic Journal of Business Ethics & Organizational Studies 151 (2010). Web. Sept 19th, 2010.

Andy Goldsworthy

His work is ephemeral- not going to last forever. Because is artistic creation doesnt last, the videos/ photos become the artwork. Through the making of his artwork, he learns about nature It is ceaselessly straight to work- no time for research on the area he is in. He has been taking photographs since school- it is the way that he documents his artwork It is his way of reflecting on what he has make He doesnt have a clear depiction of what It Is he Is going to make- he goes out and sees what the daytime is doing, what it will permit him make.The land itself entices him and the absence of nature Background, Influences English- lives In Scotland The nature, area around him dirt art/ state art in the asss-asss art movement The full term earth or land art is used to describe site-specific artworks make in the environment, using the existents and forms of the environment. Most earth art is known to the open through photographs and written records. Because earth art is part of the environment It is checkmate to the force of nature that can cause it to change over time, or can even destroy It.The rise of earth art In the 1960 Is sometime associated with an Increasing awareness of environmental Issues. Most artist, however were attracted to earth art as part of a desire to escape the art gallery system and the communication of art objects. Interests, Themes, Ideas, Intentions Responds to what is happening at that moment, In the day with the Items around him Death and decay Growth, change, flow, nature He uses everything from leaves and sticks to sheep wool. Movement, change (in material, time of year and weather) Light, sunlight, snow reflections, mist The energy and space around a material

How Homework can Help with Your Academic Success Essay

preparation is an important part of the donnish programme and it also plays a major role in ensuring academic achiever for the schoolchilds. Let us talk at length about how cooking throne help in bringing about academic mastery. grooming primarily helps in habitusing five skills which assist in attaining academic success. Those skills are as follows Organization Being organised is an essential share in the recipe of academic success. One has to be meticulous in designning a memorise routine to ensure that every(prenominal) topics of all defeats are paid equal attention. Also, enough snip for practice should be baked in the routine.It is this aspect that readiness helps with and gives enough opportunity to a student to practice his/her lessons, which then paves the way of gaining mastery over a topic or shell. In addition keeping track of wholenesss preparation makes a student more organized. Time focal point Optimum utilization of time is the key to success in th e theatre of academics. Often at times, unmatchable feels flustered and overwhelmed with the vast study plan or curriculum. Therefore, dividing ones time efficiently and as per ones strength and weakness is a matter of great importance.Homework provides the student with an opportunity to manage time. While doing the homework of a subject which is ones weak area, he is devoting more time to that subject, which allow help him in understanding the concepts better, thereby saving the students time as he need not revisit this subject again and can spend the rest of his time in doing another(prenominal) activities or can devote to other subjects. In addition, learning to plan his work well in order to submit the assignment or homework on time result help him/her build time management skills.Prioritization The skill of being able to prioritize ones task does not only help with academic success, but is a skill which ordain come handy throughout your life. If a student is confronted w ith multiple assignments or homework in multiple subjects, he/she involve to prioritize it based on some factors like submission date, the complexness level of the work, his/her proficiency level with the subject etc. While doing so, they will learn to identify elements based on the urgency and importance levels. intentness Undivided attention and wholehearted commitment to ones study time are per-requisites for academic success. While doing ones homework with complete focus, a student has to ensure that he is cut score from any kinds of distractions or interruptions and should devote all his stamina and attention in completing the homework effectively. Such single minded focus on completing ones homework helps a student build his concentration, which proves to be very useful while studying during the time of the assessments or exams.Motivation A student has to believe in self and has to keep motivated all the time to be successful in academics. impudence is of prime importance for academic success and it can be strengthened and retained only if an individual is motivated to achieve success. If one does his/her homework successfully and wins accolades for the same back in school, then he/she will be motivated to do well consistently, as nothing attracts success more than success itself. To summarize, if homework is done with seriousness and sincerity, then it can prove to be a very useful tool in achieving academic success.

Midterm Intermediate Macroeconomics Essay

1. How atomic number 18 presidential election outcomes connect to the performance of the prudence? Presidential elections and the economic system gene outrank a genuinely close relationship and they go together hand and hand. Usually when the deliverance is good and opinion of the organisation is positive, the incumbent or the party of the last-place president wins the election. People tend the lean towards wherefore change a good thing. A couple of theories exist in the relationship of the economy and presidents. The first one is that voters giveing vote for whichever president they feel sh bes the homogeneous economic vales that they countenance. Usually the poor vote liberal or for bigger g everywherenance because they think they allow return more economic ministration them and their families.The second theory is that the president currently in power result attempt to pass policies that exit allow their party to stay in power. So, presidents on their first ter m will make monetary and monetary policies close to the election year to work the economy to sway voters. cardinal examples of how the economy cigargontte sway the presidential election against an incumbent are Hoover and George H.W. Bush. Both presidents had economic downturns during their first term in theatrical role and were non reelected. Other factors play key roles in presidential elections, but none are bigger than economics.2. Discuss the difference amid Microeconomics and Macroeconomics.Microeconomics is the take aim of decision making undertaken by individuals (households) and by business firms. Micro looks at the decisions of individuals actions, akin deciding to work overtime or not. Anformer(a) example is a small business decision on how much to spend of advertising cost. Micro focuses on the supply and require in an economy, and how businesses female genitalia maximize profits. Macroeconomics is the study of the behavior of the economy as a whole. Macro de als with acresal items like the unemployment valuate, organisation budget deficit, and coin supplied by the FED. Macro deals with aggregates, such as the total output as in the economy.For example, Macro would explore how net exports could affect a nations capital. 3. Use the concepts of gross and net enthronisation funds to distinguish between an economy that has a rising stock of capital and one that has a falling stock of capital. In 1933 net private domestic enthronization was electronegative $6 billion. This agent that in that particular year the economy promoted no capital goods at all. Do you agree? wherefore or why not? Explain Though net investment can be positive, negative, or zero, it is quite impossible for gross investment to be less than zero. plebeian Investment = Net Investment + depreciationWe can rearrange this to rangeNet Investment = Gross Investment DepreciationThe capital stock of an economy rises when net investment is positive, that is when gro ss investment exceeds depreciation. The capital stock falls when net investment is negative, that is when gross investment is less than depreciation. In 1933 net private domestic investment was minus $6 billion. This does not mean the country produced no capital goods what it means is that the production of capital goods was less than what was lost due to wear and tear, olibanum the net impact was an overall loss in capital stock. Gross private investment in most cases cannot be negative, since you can try not to invest in new factories, but how do you dissolve to make a negative investment on an economy coarse scale. The scarce possible case I can think of, and some(prenominal) will disagree with this, is when China under Mao went for what is now called the swell Leap Forward. Farmers started melting their ploughs and other equipment to provide steel to the political sympathies, thus destroying the breathing capital, without investing in the new one. Thus you are using you r social movement to destroy what is on that point negative gross investment.4. What are the study factors that have affected U.S. household consumption since the recession in 2001? M any(prenominal) major events have happened in the country and in the world since the year of 2001. The equipment casualty of oil has skyrocketed causing more Americans to spend money fueling their cars preferably than buying goods and services. We have also encountered another recession in 2007 because of speculative trading/investment tactics on Wall Street that caused the caparison market to crash. This put unemployment at an all-time high since the depression era, and washed-up faith in Americas economic system. Firms were reluctant to investment in the American public because they were afraid we would lose our jobs. Also, we have fought in twain wars. One of the wars has been the longest in American history. This dries up resources and ups political science pass. The government has less m oney to investment its citizens and firms have fewer resources to produce products for consumers to buy.5. Briefly beg off how the following would stagger the IS function to the right. a.A change to lump-sum receipts (Specify whether ontogeny or decrease is needed to respite IS nose to the right.) lessen a lump sum assess will invoke the IS foreshorten to the right. Decreasing the lump sum revenue enhancement will growing consumer income, which will cause aggregate require to go up. b.A change to government disbursal (Specify whether increase or decrease is needed to transport IS cut off to the right.) increase government spending will tack the IS convolute to the right. Increasing government spending will cause aggregate film to go up, and shift the IS curve to the right. 6. Explain briefly how a change to the following MS, MD, or P (ceteris paribus) would shift the LM function to the right. Include in your word of honor whether the variable would have to increa se or decrease to cause the rightward LM shift. Discuss which of these the FED exercises control over.a. MS.b. MD (money demand).c. P (price index).The LM curve deals with interest and income and is sloping upward. When the demand of money and supply of money equal each other the market is at symmetricalness. The LM curve shifts when any the supply or demand of money changes. The FED has control over money supplied. a. MS. Increasing money supplied would cause the LM curve to shift to the right. Money supplied would drop interest puts and shift the IS curve to right. b. MD. An increase in money demand would cause the LM curve to shift to the right. Consumers are wanting to spend more which raises GDP c. P. Price is the only one out of the three that a decrease is needed to shift the IS curve to the right. When prices go down wages go down and consumers have less to spend.7. By how much will GDP change if firms increase their investment by $8 billion and the MPC is .80? If the MP C is .67? MPC .80 = 40 billion. The MPC produces a multiplier factor of 5. (1/(1-.8))=5. 58=40 billion MPC .67 = 24 billion. The MPC produces a multiplier of 3.03030. (1/(1-.67))=3.0303. 3.03038= 24.2424 billion 8. Suppose that private sector spending is exceedingly sensitive to a change in interest rate. Compare the potency of monetary and fiscal policy in terms of rising and cloggy palpable GDP. A reduction in the national interest rate will increase the GDP because investments will be in a higher demand. If the FED raises interest rates and and then investments will go down and lower GDP. If the Fed keeps interest rates low like they have the last couple of years in an attempt to stimulate the economy, GDP should go up.9. Assume that a hypothetical economy with an MPC of .8 is experiencing austere recession. By how much would government spending have to increase to shift the aggregate demand curve rightward by $25 billion? How queen-sized a tax cut would be needed to ach ieve this equal increase in aggregate demand? Why the difference? get hold one possible combination of government spending increases and tax decreases that would turn over this same goal. The MPC is the same as Question 7 so we fuck that it will give us a spending multiplier of 5.The tax cut multiplier is .8/(1-.8)=4. If we want to shift the aggregate demand curve by 25 billion, you would divide the 25 billion wanted by the multiplier of 5. 25/5= 5 billion. Same formula goes to the tax cut but with a multiplier of 4. 25/4= 6.25. every way you are trying to put money into consumers pockets so they will hopefully spend more. The difference is because of the MPC. Only .8 of the tax cut will be spend by consumers. They will save the other .2. A possible combo is an increase of 1 billion in government spending and a 5 billion dollar tax cut.10. What are governments fiscal policy options for ending severe demand-pull swelling? Use the aggregate demand-aggregate supply model to show t he impact of these policies on the price level. Which of these fiscal policy options do you think might be favored by a person who wants to save up the size of government? A person who thinks the public sector is too large. There are several things the government can do. They can reduce government spending or increase taxes both ways will put money back into the governments pocket. Either way the key is putting money back into the governments pocket. The price level will fall when it is flexible downward. The overall goal of government policy is to provide stability and not have price levels raise slowly not rapidly.Also, the do not want to reduce price levels. Democrats want to preserve the size of government. They favor more taxes and more government spending. GOP favors fewer taxes, reduce government spending, and reducing government power over the citizens. 11. Explain why relatively flat as opposite relatively steep cut into demand curves are more consistent with the empiri cal observation that there are relatively minor changes in the real wage rate over the course of the business cycle. If the demand curve is flat then a reduction or an increment in labor demand does not alter the price (the wage is too much). On the other hand, if the demand curve is steep, then an equivalent change in demand has much bigger change in the wage rates.Empirical results insinuate that wages are sticky, and the steep labor demand curve cannot explain this observation. 12. Is sustainable long-run equilibrium always reached when the AD and SAS curves intersect? Why or why not? No. The economy would be in a short-run equilibrium when the AD and SAS curves intersect, and not necessarily in long-run equilibrium. It would be in a sustainable long-run equilibrium if the economy finds itself operating on both the labor demand curve and the labor supply curve. This occurs when the labor demand and labor supply curves intersect, so there is no pressure to change. At this point t he certain real wage equals the equilibrium real wage and Y = YN. At any other combination of W, P, and Y, the SAS curve will shift as expectations are adjusted.13. If the equilibrium real wage remains constant, what happens to the nominal wage when the actual inflation rate exceeds the pass judgment inflation rate? Real plight Rate = titulary betroth Rate Inflation. Taking expectations we can say that expected Real Wage Rate = Expected Nominal Wage Rate Expected Inflation This can be rewritten as expected Real Wage Rate + Expected Inflation = Expected Nominal Wage Rate. If the equilibrium real wage rate remains constant, firearm inflation exceeds expected inflation then the nominal wage rate has to rise. 14. In the steady state, the government benefits from inflation. Explain. The government benefits from inflation in two ways. First, it obtains an extra source of revenue, called seignorage or the inflation tax. The government can then lower ordinary taxes or increase spend ing more than it could otherwise. Second, the government may gain if inflation raises the nominal interest rate by less than inflation itself.

Nation under God Essay

The demarcation regarding the intention of the boy deity in the compact of Allegiance is non a new whizz. In fact, this argument stems from the long standing principle of separation between the church and the disk operating system which is embodied in the First Amendment of the United States constitution. Under this principle, the politics and the church be to be kept separate from each otherwise. The disposal is require from encouraging or advancing any of the interests of a single religion. This nub that the g overnment can non promote a single religion or call upon its concourse which religion to follow (Clark 1965).It is a blanket prohibition that prevents the government from intervening in the spectral beliefs of people. The second aspect of this principle recognizes that the government testament invariably have to deal with religious institutions one manner or the other (Clark 1965). The doctrine on the separation of church and land therefore also regulates the dealings between the church and express such(prenominal) that there should only be a minimal and incidental flutter from the government. This is also known as the rule on excessive network between the church and the state.The problem with the engross of the word divinity fudge in the Pledge of Allegiance is considered as a violation of the doctrine on the separation of the church and state because many religious groups claim that the use of the term beau ideal favors the Christian religion which prominently uses the term matinee idol for the Supreme Being. Other groups on the other hand argue that the word God as used in the Pledge of Allegiance is non an advancement of the Christian religion but rather an acknowledgment of some(a) higher being that is common to all religions. This short dis melodic line lead seek to shed more light on the issue of the use of the word God in the Pledge of Allegiance.The first part will cover the historical background of the insertion o f the word God in an attempt to to a lower placestand the original meaning of the word God as used in the Pledge of Allegiance. The next segments will cover the points of take in from the perspective of the state as contrasted to the perspective of the church on the issue. historic Background of the Insertion of the Word God There has been a freshet of controversy surrounding the use of the word God in the Pledge of Allegiance particularly with its mandatory recitation in the public educate classrooms.Most of controversy revolves around the use of the phrase under God. It was non until June 14, 1954 til now that this highly contested phrase was inserted (Whitsitt 1896). The original tenor of the promise of inscription which was created by Francis Bellamy on September 7, 1892 read as follows I authority allegiance to my Flag and the nation for which it stands, one nation indivisible, with indecency and justice for all. Historical Changes of the Pledge of Allegiance 1892 I pledge allegiance to my Flag and the Republic for which it stands one Nation indivisible, with reconciledom and Justice for all. 1892 to 1923 I pledge allegiance to my Flag and to the Republic for which it stands one Nation indivisible, with Liberty and Justice for all. 1923 to 1954 I pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands one Nation indivisible, with Liberty and Justice for all. 1954 to Present I pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands one Nation under God, indivisible, with Liberty and Justice for all. The original tenor of the Pledge of Allegiance did not contain any reference to any deity whatsoever. In repartee to this, the Knights of capital of Ohio of New York City urged the assemblies to insert a reference to a deity since they felt that it was incomplete without one. The deity to which the Knights of Columbus referred to was the same one that w as referred to in Lincolns Gettysburg Address (Whitsitt 1896). The speech communication under God as used in Lincolns address, according to the Knights of Columbus, was the intimately appropriate one to add to the Pledge of Allegiance.It is important to note however that the phrase under God was never contained in the original text edition of the Gettysburg Address. By April 22 of the year 1951, the Board of Directors of the Knights of Columbus formally pick out a reply to amend the recitation of Pledge of Allegiance by the members of the Knights of Columbus at the opening of each of the meetings of the 800 Fourth Degree Assemblies of the Knights of Columbus by addition of the run-in under God after the words one nation (Whitsitt 1896).It was not long before the whole brass section had adopt the same resolution as the idea spread throughout the other Knights of Columbus organizations nationwide. On August 21, 1952, the Supreme Council of the Knights of Columbus adopted a res olution at its annual meeting recommending the that the change in the Pledge of Allegiance be made universal and soon petitions and copies of the resolution were sent to the Office of the chairperson, the Vice chair, who was the Presiding Officer of the Senate and the Speaker of the House of Representatives. succession the attempts of the Knights of Columbus were unsuccessful, they were able to convince a majority of the relevance of inserting such a phrase and soon the movement began to gain momentum (Whitsitt 1896). It was not until Senator Homer Ferguson who in his report to the United States relation on bunt 10, 1954 that the movement had begun to deliver significant progress. In this privileged speech, Senator Ferguson said, The introduction of this overstep voice resolution was suggested to me by a sermon given recently by the Rev.George M. Docherty, of Washington, D. C. , who is pastor of the church at which Lincoln worshipped. By this time Congress concurred with the Oakman-Ferguson resolution, and Eisenhower opted to sign the bill into law on Flag Day, June 14, 1954. The rationale for the commendation and adoption of the phrase under God was clarified by President Eisenhower in a letter which he wrote in August of 1954 (Bradley 1996). These words under God will remind Americans that despite our great sensual strength we must remain humble.They will help us to control constantly in our minds and hearts the spiritual and moral principles which alone give dignity to man, and upon which our way of life is founded. This was actually taken from the sermon of Docherty to which President Eisenhower had taken a great interest in (Whitsitt 1896). It was eventually published by Harper & Bros. in New York in 1958 and President Eisenhower took the luck to write to Dr. Docherty with gratitude for the opportunity to once again read the fateful sermon.Finally, on Flag Day, June 14, 1954, Congress passed the legislation that add the phrase under God to the Pledge of Allegiance. At this point, it can be argued that the insertion of the word God into the Pledge of Allegiance was actually motivated by some religious cast, particularly the Christian religion. In order to have a ruin understanding of the issue at hand however it is important to in short examine the import of the doctrine of the insularity of the church building and the State. Doctrine of the Separation of church and StateThe phrase, separation of Church and State, is actually from a letter that was written by one of the founding fathers, Thomas Jefferson, to a group that called themselves the Danbury Baptists. In the letter, Thomas Jefferson wrote that, I contemplate with sovereign adore that act of the whole American people which declared that their legislature should make no law respecting an establishment of religion, or prohibiting the free exercise thereof, olibanum building a wall of separation between Church and State. This was of course in reference to the Fi rst Amendment of the United States Constitution (Whitsitt 1896). The basic article of faith of this doctrine is founded on a firm belief that religion and state should be separate. It covers a very wide spectrum, as mentioned in the preliminary sections of this discussion, ranging from the secularization or elimination of the church to theocracy wherein the state works in tandem with a religion in order to govern over the acts of people (Bradley 1996). The Secularist PerspectiveThe secularist perspective is that the state should be kept unlike from religion and that, in the same vein, the religious institutions should also be free from any governmental interferences. This follows the second aspect of the Doctrine of the Separation of Church and State that dictates that there should be no entanglement between the Church and the State (Bradley 1996). In this perspective, the government is prohibited from citing the authority or influence of a specific religious institution for the justification of its authority (Bradley 1996). musical composition there are some governments that claim religious justifications for their powers such as the Muslim states, the justification for such is based on the emphasis of the family for ceremonial and rhetorical purposes only. The acts done by the government are not meant to further the cause of any single religion but are actually for the general eudaimonia and the benefit of the state. The state therefore does not conform to any particular religious doctrine but in fact caters to its own doctrine as mandated by the will of the people and of the Constitution (Clark 1965).Acts such as exemptions from taxation or providing funds for upbringing and charities, though viewed as supporting religion, are in fact welfare based or faith based according to secularists. This reflects the view that secular authority and spiritual authority should properly operate in praiseful spheres. The spheres where they overlap such as in moral values or property rights are areas where neither should take authority over the other but should instead offer a framework in which familiarity can work these issues out without subjugating a religion to the state or vice versa (Bradley 1996).

Financial Management Chapter 8 K

ey Chapter 8 Stocks and Their Valuation LEARNING OBJECTIVES After indication this chapter, students should be able to Identify some of the more important rights that follow with crease ownership and define the pursual terms proxy, proxy fight, takeover, and preventive right. Briefly explain why classified origin power be utilise by a corporation and what founders sh ars are. Differentiate between nigh held and publicly owned corporations and list the three distinct types of course foodstuff transactions. Determine the quantify of a share of general stock when (1) dividends are expect to grow at some constant tempo, (2) dividends are expected to preserve constant, and (3) dividends are expected to grow at some super-normal, or nonconstant, harvest-feast yard. Calculate the expected graze of reach on a constant emersion stock. Apply the entire corporation (corpo pasture re purgee) instance to repute a unswerving in situations when the unfluctuating does non pay dividends or is privately held. Explain why a stocks intrinsical repute might differ between the total company model and the dividend ontogenesis model. Explain the following terms equilibrium, marginal investor, and Efficient Markets dead reckoning (EMH) distinguish among the three levels of food market efficiency briefly explain the importees of the EMH on monetary decisions and discuss the results of empirical studies on market efficiency and the implication of behavioral finance on those results. Read and understand the stock market page stipulation in the daily newspaper. Explain the reasons for investing in international stocks and identify the bets an investor is making when he does invest overseas. Define preferable stock, prepare the pass judgment of a share of preferred stock, or given its measure, calculate its expected maturement. 1. LECTURE SUGGESTIONS This chapter provides important and useful information on common and preferred stocks. More over, the rating of stocks reinforces the concepts covered in some(prenominal) Chapters 6 and 7, so Chapter 8 extends and reinforces those chapters. We begin our lecture with a tidings of the characteristics of common stocks, after which we discuss how stocks are nursed in the market and how stock impairments are reported in the press. We conclude the lecture with a discussion of preferred stocks.The details of what we cover, and the way we cover it, can be seen by scanning Blueprints Chapter 8. For other suggestions about the lecture, please see the Lecture Suggestions in Chapter 2, where we describe how we conduct our classes. sometime(a) age ON CHAPTER 3 OF 58 DAYS (50-minute effects) resultantS TO END-OF-CHAPTER QUESTIONS 8-1True. The lever of a share of stock is the PV of its expected future dividends. If the cardinal investors expect the same future dividend stream, and they agree on the stocks riskiness, hence they should reach similar conclusions as to the stocks prize. -2A never-ending bond is similar to a no- growing stock and to a share of preferred stock in the following ways 1. All three realize their values from a series of specie inflowscoupon payments from the perpetual bond, and dividends from both types of stock. 2. All three are assumed to have indefinite lives with no maturity value (M) for the perpetual bond and no superior overhears make up for the stocks. 8-3Yes. If a company decides to increase its payout ratio, then the dividend translate component volition rise, but the expected long-term cap gains fall testament dec barrier. 8-4No. The rectify equation has D1 in the numerator and a minus sign in the denominator. -5a. The modal(a) investor in a listed stiff is not re buty interested in maintaining his proportionate share of ownership and interpret. If he wanted to increase his ownership, he could simply buy more stock on the open market. Consequently, around investors are not concerned with whether new sha res are sold direct (at about market hurts) or through rights offerings. However, if a rights offering is cosmos used to effect a stock split, or if it is being used to reduce the underwriting cost of an issue (by substantial underpricing), the preemptive right may well be beneficial to the firm and to its stockholders. . The preemptive right is clear important to the stockholders of closely held firms whose owners are interested in maintaining their relative control positions. SOLUTIONS TO END-OF-CHAPTER PROBLEMS 8-1D0 = $1. 50 g1-3 = 5% gn = 10% D1 through D5 = ? D1 = D0(1 + g1) = $1. 50(1. 05) = $1. 5750. D2 = D0(1 + g1)(1 + g2) = $1. 50(1. 05)2 = $1. 6538. D3 = D0(1 + g1)(1 + g2)(1 + g3) = $1. 50(1. 05)3 = $1. 7364. D4 = D0(1 + g1)(1 + g2)(1 + g3)(1 + gn) = $1. 50(1. 05)3(1. 10) = $1. 9101. D5 = D0(1 + g1)(1 + g2)(1 + g3)(1 + gn)2 = $1. 50(1. 05)3(1. 10)2 = $2. 1011. 8-2D1 = $0. 50 g = 7% ks = 15% pic = ? pic -3P0 = $20 D0 = $1. 00 g = 10% pic = ? ks = ? pic = P0(1 + g) = $20(1. 10) = $22. ks= pic + g = pic + 0. 10 = pic + 0. 10 = 15. 50%. ks = 15. 50%. 8-4Dp = $5. 00 Vp = $60 kp = ? kp = pic = pic = 8. 33%. 8-5a. The terminal, or horizon, see to it is the date when the festering rate becomes constant. This occurs at the end of Year 2. b. 0 1 2 3 1. 25 1. 50 1. 80 1. 89 37. 80 = pic The horizon, or terminal, value is the value at the horizon date of all dividends expected thereafter. In this problem it is calculated as follows pic c. The firms intrinsic value is calculated as the sum of the devote value of all dividends during the supranormal maturement period plus the present value of the terminal value. Using your financial calculator, enter the following inputs CF0 = 0, CF1 = 1. 50, CF2 = 1. 80 + 37. 80 = 39. 60, I = 10, and then drub for NPV = $34. 09. 6. The firms free cash flow is expected to grow at a constant rate, then we can apply a constant harvest-tide radiation diagram to line up the total value of the firm. pissed Value = FCF1/(WACC g) Firm Value = $150,000,000/(0. 10 0. 05) Firm Value = $3,000,000,000.To husking the value of an impartiality claim upon the company (share of stock), we must subtract out the market value of debt and preferred stock. This firm happens to be entirely equity funded, and this step is unnecessary. Hence, to watch over the value of a share of stock, we divide equity value (or in this case, firm value) by the number of shares dandy. Equity Value per share = Equity Value/Shares outstanding Equity Value per share = $3,000,000,000/50,000,000 Equity Value per share = $60. apiece share of common stock is worth $60, according to the corporate valuation model. 8-7a. 0 1 2 3 4 3,000,000 6,000,000 10,000,000 15,000,000 Using a financial calculator, enter the following inputs CF0 = 0 CF1 = 3000000 CF2 = 6000000 CF3 = deoxycytidine monophosphate00000 CF4 = 15000000 I = 12 and then cultivate for NPV = $24,112,308. b. The firms terminal value is calculated as follows pic c. The firms total value is calculated as follows 0 1 2 3 4 5 3,000,000 6,000,000 10,000,000 15,000,000 16,050,000PV = ? 321,000,000 = pic Using your financial calculator, enter the following inputs CF0 = 0 CF1 = 3000000 CF2 = 6000000 CF3 = 10000000 CF4 = 15000000 + 321000000 = 336000000 I = 12 and then solve for NPV = $228,113,612. d. To key Barretts stock price, you need to first find the value of its equity. The value of Barretts equity is compeer to the value of the total firm less the market value of its debt and preferred stock. Total firm value$228,113,612 Market value, debt + preferred 60,000,000 (given in problem) Market value of equity$168,113,612Barretts price per share is calculated as pic 8-8FCF = EBIT(1 T) + Depreciation pic (pic = $500,000,000 + $100,000,000 $200,000,000 $0 = $400,000,000. Firm value = pic = pic = pic = $10,000,000,000. This is the total firm value. Now find the market value of its equity. MVTotal= MVEquity + MVDebt $10,000,000,000= MVEquit y + $3,000,000,000 MVEquity= $7,000,000,000. This is the market value of all the equity. Divide by the number of shares to find the price per share. $7,000,000,000/200,000,000 = $35. 00. 8-9a. Terminal value = pic = pic= $713. 33 million. . 0 1 2 3 4 -20 30 40 42. 80 ($ 17. 70) 23. 49 522. 10 753. 33 $527. 89 Using a financial calculator, enter the following inputs CF0 = 0 CF1 = -20 CF2 = 30 CF3 = 753. 33 I = 13 and then solve for NPV = $527. 89 million. c. Total valuet=0 = $527. 89 million. Value of common equity = $527. 89 $100 = $427. 89 million. Price per share = pic = $42. 79. 8-10The problem asks you to determine the value of pic, given the following facts D1 = $2, b = 0. 9, kRF = 5. %, RPM = 6%, and P0 = $25. impress as follows tone of voice 1Calculate the required rate of refund ks = kRF + (kM kRF)b = 5. 6% + (6%)0. 9 = 11%. Step 2Use the constant growth rate formula to calculate g pic Step 3Calculate pic pic = P0(1 + g)3 = $25(1. 03)3 = $27. 3182 ( $27. 32. Altern atively, you could calculate D4 and then use the constant growth rate formula to solve for pic D4 = D1(1 + g)3 = $2. 00(1. 03)3 = $2. 1855. pic = $2. 1855/(0. 11 0. 03) = $27. 3182 ( $27. 32. 8-11Vp = Dp/kp therefore, kp = Dp/Vp. a. kp = $8/$60 = 13. 3%. b. kp = $8/$80 = 10. 0%. c. p = $8/$100 = 8. 0%. d. kp = $8/$140 = 5. 7%. 8-12pic 8-13a. ki = kRF + (kM kRF)bi. kC = 9% + (13% 9%)0. 4 = 10. 6%. kD = 9% + (13% 9%)(-0. 5) = 7%. find that kD is below the risk-free rate. But since this stock is like an insurance form _or_ system of government because it pays off when something bad happens (the market falls), the low beget is not unreasonable. b. In this situation, the expected rate of buckle under is as follows pic = D1/P0 + g = $1. 50/$25 + 4% = 10%. However, the required rate of return is 10. 6 percent. Investors go away seek to sell the stock, dropping its price to the following pic At this point, pic, and the stock leave be in equilibrium. 8-14Calculate the dividend cash flows and place them on a time line. Also, calculate the stock price at the end of the supernormal growth period, and include it, along with the dividend to be paid at t = 5, as CF5. Then, enter the cash flows as shown on the time line into the cash flow register, enter the required rate of return as I = 15, and then find the value of the stock using the NPV calculation. Be sure to enter CF0 = 0, or else your answer bequeath be incorrect. D0 = 0 D1 = 0 D2 = 0 D3 = 1. 0 D4 = 1. 00(1. 5) = 1. 5 D5 = 1. 00(1. 5)2 = 2. 25 D6 = 1. 00(1. 5)2(1. 08) = $2. 43. pic = ? 0 1 2 3 4 5 6 1. 00 1. 50 2. 25 2. 43 0. 658 +34. 71 = 0. 858 18. 378 36. 96 $19. 894 = pic pic = D6/(pic g) = $2. 43/(0. 15 0. 08) = $34. 71. This is the stock price at the end of Year 5.CF0 = 0 CF1-2 = 0 CF3 = 1. 0 CF4 = 1. 5 CF5 = 36. 96 I = 15%. With these cash flows in the CFLO register, press NPV to get the value of the stock immediately NPV = $19. 89. 8-15a. The preferred stock pays $8 yearly in dividends. Therefore, its nominal rate of return would be Nominal rate of return = $8/$80 = 10%. Or alternatively, you could determine the pledges periodic return and multiply by 4. Periodic rate of return = $2/$80 = 2. 5%. Nominal rate of return = 2. 5% ( 4 = 10%. b. EAR = (1 + NOM/4)4 1 EAR = (1 + 0. 10/4)4 1 EAR = 0. 103813 = 10. 3813%. -16The value of any asset is the present value of all future cash flows expected to be generated from the asset. Hence, if we can find the present value of the dividends during the period preceding long constant growth and subtract that total from the current stock price, the remaining value would be the present value of the cash flows to be get during the period of long-run constant growth. D1 = $2. 00 ( (1. 25)1 = $2. 50PV(D1) = $2. 50/(1. 12)1= $2. 2321 D2 = $2. 00 ( (1. 25)2 = $3. 125PV(D2) = $3. 125/(1. 12)2= $2. 4913 D3 = $2. 00 ( (1. 25)3 = $3. 90625PV(D3) = $3. 0625/(1. 12)3= $2. 7804 ( PV(D1 to D3)= $7. 5038 Therefore, the PV of the remaining d ividends is $58. 8800 $7. 5038 = $51. 3762. Compounding this value in front to Year 3, we find that the value of all dividends received during constant growth is $72. 18. $51. 3762(1. 12)3 = $72. 18. Applying the constant growth formula, we can solve for the constant growth rate pic= D3(1 + g)/(ks g) $72. 1807= $3. 90625(1 + g)/(0. 12 g) $8. 6616 $72. 18g= $3. 90625 + $3. 90625g $4. 7554= $76. 08625g 0. 0625= g 6. 25%= g. 8-17First, solve for the current price. P0 = D1/(ks g) P0 = $0. 50/(0. 2 0. 07) P0 = $10. 00. If the stock is in a constant growth state, the constant dividend growth rate is also the corking gains output for the stock and the stock price growth rate. Hence, to find the price of the stock four years from today pic = P0(1 + g)4 pic = $10. 00(1. 07)4 pic = $13. 10796 ? $13. 11. pic 8-18a. pic b. pic 8-19 0 1 2 3 4 D0 = 2. 00 D1 D2 D3 D4 g = 5% pic a. D1 = $2(1. 05) = $2. 10 D2 = $2(1. 05)2 = $2. 21 D3 = $2(1. 5)3 = $2. 32. b. Financial selective infor mation processor ascendent commentary 0, 2. 10, 2. 21, and 2. 32 into the cash flow register, input I = 12, PV = ? PV = $5. 29. c. Financial Calculator Solution Input 0, 0, 0, and 34. 73 into the cash flow register, I = 12, PV = ? PV = $24. 72. d. $24. 72 + $5. 29 = $30. 01 = Maximum price you should pay for the stock. e. pic f. No. The value of the stock is not dependent upon the holding period. The value calculated in Parts a through d is the value for a 3-year holding period. It is relate to the value calculated in Part e except for a nonaged move error.Any other holding period would produce the same value of pic that is, pic = $30. 00. 8-20a. 1. pic 2. pic = $2/0. 15 = $13. 33. 3. pic 4. pic b. 1. pic = $2. 30/0 = Undefined. 2. pic = $2. 40/(-0. 05) = -$48, which is nonsense. These results show that the formula does not make sense if the required rate of return is equal to or less than the expected growth rate. c. No. 8-21The answer depends on when one works the problem. We used the February 3, 2003, issue of The Wall Street diary a. $16. 81 to $36. 72. b. Current dividend = $0. 75. Dividend give = $0. 75/$19. 8 ( 3. 9%. You might want to use ($0. 75)(1 + g)/$19. 48, with g estimated somehow. c. The $19. 48 close was up $0. 98 from the previous days close. d. The return on the stock consists of a dividend yield of about 3. 9 percent plus some pileus gains yield. We would expect the total rate of return on stock to be in the 10 to 12 percent range. 8-22a. End of Year 02 03 04 05 06 07 08 D0 = 1. 75 D1 D2 D3 D4 D5 D6 Dt= D0(1 + g)t D2003= $1. 75(1. 15)1 = $2. 01. D2004= $1. 5(1. 15)2 = $1. 75(1. 3225) = $2. 31. D2005= $1. 75(1. 15)3 = $1. 75(1. 5209) = $2. 66. D2006= $1. 75(1. 15)4 = $1. 75(1. 7490) = $3. 06. D2007= $1. 75(1. 15)5 = $1. 75(2. 0114) = $3. 52. b. Step 1 PV of dividends = pic. PV D2003 = $2. 01/(1. 12)= $1. 79 PV D2004 = $2. 31/(1. 12)2= $1. 84 PV D2005 = $2. 66/(1. 12)3= $1. 89 PV D2006 = $3. 06/(1. 12)4= $1. 94 PV D2007 = $3. 5 2/(1. 12)5= $2. 00 PV of dividends= $9. 46 Step 2 pic This is the price of the stock 5 years from now. The PV of this price, discounted back 5 years, is as follows PV of pic = $52. 80/(1. 12)5 = $29. 6. Step 3 The price of the stock today is as follows pic= PV dividends Years 2003-2007 + PV of pic = $9. 46 + $29. 96 = $39. 42. This problem could also be solved by exchange the proper values into the following equation pic. Calculator stem Input 0, 2. 01, 2. 31, 2. 66, 3. 06, 56. 32 (3. 52 + 52. 80) into the cash flow register, input I = 12, PV = ? PV = $39. 43. c. 2003 D1/P0 = $2. 01/$39. 43= 5. 10% Capital gains yield= 6. 90* Expected total return= 12. 00% 2008 D6/P5 = $3. 70/$52. 80= 7. 00% Capital gains yield= 5. 00 Expected total return= 12. 00% We know that ks is 12 percent, and the dividend yield is 5. 10 percent therefore, the superior gains yield must be 6. 90 percent. The main points to note here are as follows 1. The total yield is always 12 percent (except for rounding errors). 2. The capital gains yield starts relatively proud, then declines as the supernormal growth period approaches its end. The dividend yield rises. 3. After 12/31/07, the stock get out grow at a 5 percent rate. The dividend yield will equal 7 percent, the capital gains yield will equal 5 percent, and the total return will be 12 percent. d.People in high income tax brackets will be more inclined to purchase growth stocks to take the capital gains and thus delay the payment of taxes until a posterior date. The firms stock is mature at the end of 2007. e. Since the firms supernormal and normal growth rates are lower, the dividends and, hence, the present value of the stock price will be lower. The total return from the stock will still be 12 percent, but the dividend yield will be larger and the capital gains yield will be smaller than they were with the original growth rates. This result occurs because we assume the same outlive dividend but a much lower current stock price . . As the required return increases, the price of the stock goes down, but both the capital gains and dividend yields increase initially. Of course, the long-term capital gains yield is still 4 percent, so the long-term dividend yield is 10 percent. 8-23a. Part 1 Graphical mission of the problem Supernormal Normal growth growth 0 1 2 3 ( D0 D1 (D2 + pic) D3 D( PVD1PVD2 pic P0 D1 = D0(1 + gs) = $1. 6(1. 20) = $1. 92. D2 = D0(1 + gs)2 = $1. 60(1. 20)2 = $2. 304. pic pic= PV(D1) + PV(D2) + PV(pic) = pic = $1. 92/1. 10 + $2. 304/(1. 10)2 + $61. 06/(1. 10)2 = $54. 11. Financial Calculator solution Input 0, 1. 92, 63. 364(2. 304 + 61. 06) into the cash flow register, input I = 10, PV = ? PV = $54. 11. Part 2 Expected dividend yield D1/P0 = $1. 92/$54. 11 = 3. 55%. Capital gains yield First, find pic, which equals the sum of the present values of D2 and pic discounted for one year. pic Financial Calculator solution Input 0, 63. 364(2. 304 + 61. 6) into the cash flow register, input I = 10, PV = ? PV = $57. 60. Second, find the capital gains yield pic Dividend yield = 3. 55% Capital gains yield = 6. 45 10. 00% = ks. b. Due to the longer period of supernormal growth, the value of the stock will be higher for each year. Although the total return will remain the same, ks = 10%, the distribution between dividend yield and capital gains yield will differ The dividend yield will start off lower and the capital gains yield will start off higher for the 5-year supernormal growth condition, relative to the 2-year supernormal growth state.The dividend yield will increase and the capital gains yield will decline over the 5-year period until dividend yield = 4% and capital gains yield = 6%. c. Throughout the supernormal growth period, the total yield will be 10 percent, but the dividend yield is relatively low during the early years of the supernormal growth period and the capital gains yield is relatively high. As we near the end of the supernormal growth period, the cap ital gains yield declines and the dividend yield rises. After the supernormal growth period has ended, the capital gains yield will equal gn = 6%.The total yield must equal ks = 10%, so the dividend yield must equal 10% 6% = 4%. d. Some investors need cash dividends (retired people), season others would prefer growth. Also, investors must pay taxes each year on the dividends received during the year, while taxes on capital gains can be delayed until the gain is actually realized. 8-24a. ks = kRF + (kM kRF)b = 11% + (14% 11%)1. 5 = 15. 5%. pic = D1/(ks g) = $2. 25/(0. one hundred fifty-five 0. 05) = $21. 43. b. ks = 9% + (12% 9%)1. 5 = 13. 5%. pic = $2. 25/(0. 135 0. 05) = $26. 47. c. ks = 9% + (11% 9%)1. 5 = 12. 0%. pic = $2. 25/(0. 12 0. 5) = $32. 14. d. New data given kRF = 9% kM = 11% g = 6%, b = 1. 3. ks = kRF + (kM kRF)b = 9% + (11% 9%)1. 3 = 11. 6%. pic = D1/(ks g) = $2. 27/(0. 116 0. 06) = $40. 54. 8-25a. senior ks = kRF + (kM kRF)b = 9% + (3%)1. 2 = 12. 6%. N ew ks = 9% + (3%)0. 9 = 11. 7%. Old price pic New price pic Since the new price is lower than the old price, the expansion in consumer products should be rejected. The decrease in risk is not sufficient to offset the decline in profitability and the reduced growth rate. b. POld = $38. 21. PNew = pic. Solving for ks we have the following $38. 1= pic $2. 10= $38. 21(ks) $1. 9105 $4. 0105= $38. 21(ks) ks= 0. 10496. Solving for b 10. 496% = 9% + 3%(b) 1. 496% = 3%(b) b = 0. 49865. Check ks = 9% + (3%)0. 49865 = 10. 496%. pic = pic = $38. 21. Therefore, only if managements analysis concludes that risk can be let down to b = 0. 49865, or approximately 0. 5, should the new policy be put into effect. SPREADSHEET PROBLEM 8-26The detailed solution for the spreadsheet problem is available both on the instructors resource CD-ROM and on the instructors side of South-Westerns web site, http//brigham. swlearning. com. INTEG prescribeD CASEMutual of Chicago Insurance family Stock Valuation 8-27R OBERT BALIK AND CAROL KIEFER atomic number 18 SENIOR VICE-PRESIDENTS OF THE MUTUAL OF pelf INSURANCE COMP each. THEY atomic number 18 CO-DIRECTORS OF THE guildS PENSION FUND caution DIVISION, WITH BALIK HAVING RESPONSIBILITY FOR FIXED INCOME SECURITIES (PRIMARILY BONDS) AND KIEFER BEING RESPONSIBLE FOR EQUITY INVESTMENTS. A major NEW CLIENT, THE CALIFORNIA LEAGUE OF CITIES, HAS REQUESTED THAT MUTUAL OF CHICAGO portray AN INVESTMENT SEMINAR TO THE MAYORS OF THE REPRESENTED CITIES, AND BALIK AND KIEFER, WHO give MAKE THE ACTUAL PRESENTATION, grow ASKED YOU TO sponsor THEM.TO ILLUST straddle THE COMMON blood line military rating PROCESS, BALIK AND KIEFER HAVE ASKED YOU TO ANALYZE THE BON TEMPS caller, AN involvement AGENCY THAT SUPPLIES WORD PROCESSOR OPERATORS AND COMPUTER PROGRAMMERS TO BUSINESSES WITH TEMPORARILY HEAVY WORKLOADS. YOU be TO ANSWER THE FOLLOWING QUESTIONS. A. DESCRIBE BRIEFLY THE LEGAL RIGHTS AND PRIVILEGES OF COMMON businessHOLDERS. ANSWERSHOW S8-1 wi th S8-5 hither. THE COMMON roueHOLDERS argon THE OWNERS OF A CORPORATION, AND AS much(prenominal) THEY HAVE CERTAIN RIGHTS AND PRIVILEGES AS DESCRIBED BELOW. 1. OWNERSHIP IMPLIES CONTROL.THUS, A FIRMS COMMON standardHOLDERS HAVE THE RIGHT TO ELECT ITS FIRMS DIRECTORS, WHO IN TURN ELECT THE OFFICERS WHO MANAGE THE BUSINESS. 2. COMMON STOCKHOLDERS OFTEN HAVE THE RIGHT, C tout ensembleED THE preventative RIGHT, TO PURCHASE ANY ADDITIONAL SHARES SOLD BY THE FIRM. IN some(a) STATES, THE PREEMPTIVE RIGHT IS AUTOMATICALLY INCLUDED IN every collective CHARTER IN OTHERS, IT IS NECESSARY TO INSERT IT SPECIFICALLY INTO THE CHARTER. B. 1. WRITE taboo A FORMULA THAT enkindle BE USED TO measure out ANY STOCK, REGARDLESS OF ITS DIVIDEND PATTERN. ANSWERSHOW S8-6 HERE. THE honour OF ANY STOCK IS THE PRESENT range OF ITS pass judgment DIVIDEND STREAM pic = picHOWEVER, more or less STOCKS HAVE DIVIDEND yield PATTERNS THAT ALLOW THEM TO BE nourishD development SHORT-CUT FORMULAS. B. 2. WHAT IS A ceaseless developing STOCK? HOW ARE unremitting fruit STOCKS VALUED? ANSWERSHOW S8-7 AND S8-8 HERE. A constant quantity GROWTH STOCK IS ONE WHOSE DIVIDENDS ARE expect TO GROW AT A unremitting vagabond FOREVER. unvaried GROWTH MEANS THAT THE BEST count OF THE FUTURE GROWTH RATE IS SOME CONSTANT NUMBER, not THAT WE in reality EXPECT GROWTH TO BE THE SAME EACH AND EVERY socio-economic class. many another(prenominal) COMPANIES HAVE DIVIDENDS THAT ARE pass judgment TO GROW STEADILY INTO THE FORESEEABLE FUTURE, AND SUCH COMPANIES ARE VALUED AS CONSTANT GROWTH STOCKS.FOR A CONSTANT GROWTH STOCK D1 = D0(1 + g), D2 = D1(1 + g) = D0(1 + g)2, AND SO ON. WITH THIS REGULAR DIVIDEND PATTERN, THE GENERAL STOCK VALUATION present CAN BE SIMPLIFIED TO THE FOLLOWING VERY important EQUATION pic = pic = pic. THIS IS THE WELL-K straightawayN GORDON, OR CONSTANT-GROWTH MODEL FOR VALUING STOCKS. HERE D1 IS THE NEXT evaluate DIVIDEND, WHICH IS ASSUMED TO BE PAID 1 course of study FROM NOW, kS IS THE undeniable RATE OF RETURN ON THE STOCK, AND g IS THE CONSTANT GROWTH RATE. B. 3. WHAT HAPPENS IF A COMPANY HAS A CONSTANT g THAT EXCEEDS ITS ks? pull up stakes MANY STOCKS HAVE pass judgment g ks IN THE SHORT RUN (THAT IS, FOR THE NEXT FEW familyS)?IN THE yearn RUN (THAT IS, FOREVER)? ANSWERSHOW S8-9 HERE. THE MODEL IS DERIVED MATHEMATICALLY, AND THE DERIVATION REQUIRES THAT ks g. IF g IS great THAN ks, THE MODEL GIVES A ban STOCK set, WHICH IS NONSENSICAL. THE MODEL SIMPLY CAN non BE USED UNLESS (1) ks g, (2) g IS EXPECTED TO BE CONSTANT, AND (3) g CAN fairly BE EXPECTED TO CONTINUE indefinitely. STOCKS MAY HAVE PERIODS OF SUPERNORMAL GROWTH, WHERE gS ks HOWEVER, THIS GROWTH RATE CANnot BE SUSTAINED INDEFINITELY. IN THE LONG-RUN, g ks. C. ASSUME THAT BON TEMPS HAS A BETA COEFFICIENT OF 1. , THAT THE RISK- unaffixed RATE (THE behave ON T-BONDS) IS 7 percentage, AND THAT THE needful RATE OF RETURN ON THE MARKET IS 12 percent. WHAT IS THE REQUIRE D RATE OF RETURN ON THE FIRMS STOCK? ANSWERSHOW S8-10 HERE. HERE WE USE THE SML TO CALCULATE BON TEMPS REQUIRED RATE OF RETURN ks= kRF + (kM kRF)bBon Temps = 7% + (12% 7%)(1. 2) = 7% + (5%)(1. 2) = 7% + 6% = 13%. D. ASSUME THAT BON TEMPS IS A CONSTANT GROWTH COMPANY WHOSE fit DIVIDEND (D0, WHICH WAS PAID YESTERDAY) WAS $2. 00 AND WHOSE DIVIDEND IS EXPECTED TO GROW INDEFINITELY AT A 6 PERCENT RATE. 1.WHAT IS THE FIRMS EXPECTED DIVIDEND STREAM OVER THE NEXT 3 YEARS? ANSWERSHOW S8-11 HERE. BON TEMPS IS A CONSTANT GROWTH STOCK, AND ITS DIVIDEND IS EXPECTED TO GROW AT A CONSTANT RATE OF 6 PERCENT PER YEAR. EXPRESSED AS A clip LINE, WE HAVE THE FOLLOWING SETUP. JUST ENTER 2 IN YOUR data processor THEN KEEP MULTIPLYING BY 1 + g = 1. 06 TO GET D1, D2, AND D3 0 1 2 3 D0 = 2. 00 2. 12 2. 247 2. 382 1. 88 1. 76 1. 65 . . . D. 2. WHAT IS THE FIRMS CURRENT STOCK PRICE? ANSWERSHOW S8-12 HERE. WE COULD run away THE TIME LINE ON OUT FOREVER, FIND THE VALUE OF BON TEMPS DIVIDENDS FOR EVE RY YEAR ON OUT INTO THE FUTURE, AND THEN THE PV OF EACH DIVIDEND DISCOUNTED AT k = 13%. FOR EXAMPLE, THE PV OF D1 IS $1. 8761 THE PV OF D2 IS $1. 7599 AND SO FORTH. nonE THAT THE DIVIDEND PAYMENTS INCREASE WITH TIME, solely AS LONG AS ks g, THE PRESENT VALUES DECREASE WITH TIME. IF WE EXTENDED THE GRAPH ON OUT FOREVER AND THEN SUMMED THE PVs OF THE DIVIDENDS, WE WOULD HAVE THE VALUE OF THE STOCK. HOWEVER, SINCE THE STOCK IS ripening AT A CONSTANT RATE, ITS VALUE CAN BE ESTIMATED USING THE CONSTANT GROWTH MODEL pic = pic = pic = pic = $30. 29. D. 3. WHAT IS THE STOCKS EXPECTED VALUE ONE YEAR FROM NOW? ANSWERSHOW S8-13 HERE. AFTER ONE YEAR, D1 WILL HAVE BEEN PAID, SO THE EXPECTED DIVIDEND STREAM WILL THEN BE D2, D3, D4, AND SO ON. THUS, THE EXPECTED VALUE ONE YEAR FROM NOW IS $32. 10 pic = pic = pic = pic = $32. 10. D. 4. WHAT ARE THE EXPECTED DIVIDEND regaining, THE ceiling GAINS topic, AND THE TOTAL RETURN DURING THE scratch line YEAR? ANSWERSHOW S8-14 HERE. THE EXPECTED DI VIDEND wages IN ANY YEAR n IS DIVIDEND go = pic, WHILE THE EXPECTED bang-up GAINS YIELD ISCAPITAL GAINS YIELD = pic = k pic. THUS, THE DIVIDEND YIELD IN THE FIRST YEAR IS 7 PERCENT, WHILE THE CAPITAL GAINS YIELD IS 6 PERCENT TOTAL RETURN = 13. 0% DIVIDEND YIELD = $2. 12/$30. 29 = 7. 0% CAPITAL GAINS YIELD = 6. 0% E. NOW ASSUME THAT THE STOCK IS CURRENTLY SELLING AT $30. 29. WHAT IS THE EXPECTED RATE OF RETURN ON THE STOCK? ANSWERTHE CONSTANT GROWTH MODEL CAN BE REARRANGED TO THIS FORM pic = pic. HERE THE CURRENT PRICE OF THE STOCK IS KNOWN, AND WE SOLVE FOR THE EXPECTED RETURN. FOR BON TEMPS pic = $2. 12/$30. 29 + 0. 060 = 0. 070 + 0. 060 = 13%. F. WHAT WOULD THE STOCK PRICE BE IF ITS DIVIDENDS WERE EXPECTED TO HAVE ZERO GROWTH? ANSWERSHOW S8-15 HERE. IF BON TEMPS DIVIDENDS WERE NOT EXPECTED TO GROW AT ALL, THEN ITS DIVIDEND STREAM WOULD BE A PERPETUITY. PERPETUITIES ARE VALUED AS SHOWN BELOW 0 1 2 3 2. 00 2. 00 2. 00 1. 77 1. 57 1. 39 . . . P0 = 15. 38 P0 = D/kS = $2. 00/0 . 13 = $15. 38. NOTE THAT IF A PREFERRED STOCK IS A PERPETUITY, IT MAY BE VALUED WITH THIS FORMULA. G.NOW ASSUME THAT BON TEMPS IS EXPECTED TO EXPERIENCE SUPERNORMAL GROWTH OF 30 PERCENT FOR THE NEXT 3 YEARS, THEN TO RETURN TO ITS LONG-RUN CONSTANT GROWTH RATE OF 6 PERCENT. WHAT IS THE STOCKS VALUE nether THESE CONDITIONS? WHAT IS ITS EXPECTED DIVIDEND YIELD AND CAPITAL GAINS YIELD IN YEAR 1? YEAR 4? ANSWERSHOW S8-16 finished S8-18 HERE. BON TEMPS IS NO LONGER A CONSTANT GROWTH STOCK, SO THE CONSTANT GROWTH MODEL IS NOT APPLICABLE. NOTE, HOWEVER, THAT THE STOCK IS EXPECTED TO BECOME A CONSTANT GROWTH STOCK IN 3 YEARS. THUS, IT HAS A NONCONSTANT GROWTH PERIOD FOLLOWED BY CONSTANT GROWTH.THE EASIEST WAY TO VALUE SUCH NONCONSTANT GROWTH STOCKS IS TO SET THE SITUATION UP ON A TIME LINE AS SHOWN BELOW 0 1 2 3 4 2. 600 3. 380 4. 394 4. 65764 2. 301 2. 647 3. 045 46. 114 54. 107 SIMPLY ENTER $2 AND MULTIPLY BY (1. 30) TO GET D1 = $2. 60 MULTIPLY THAT RESULT BY 1. 3 TO GET D2 = $3. 3 8, AND SO FORTH. THEN RECOGNIZE THAT AFTER YEAR 3, BON TEMPS BECOMES A CONSTANT GROWTH STOCK, AND AT THAT POINT pic CAN BE FOUND USING THE CONSTANT GROWTH MODEL. pic IS THE PRESENT VALUE AS OF t = 3 OF THE DIVIDENDS IN YEAR 4 AND BEYOND AND IS alike CALLED THE TERMINAL VALUE. WITH THE CASH FLOWS FOR D1, D2, D3, AND pic SHOWN ON THE TIME LINE, WE DISCOUNT EACH VALUE BACK TO YEAR 0, AND THE SUM OF THESE FOUR PVs IS THE VALUE OF THE STOCK TODAY, P0 = $54. 107. THE DIVIDEND YIELD IN YEAR 1 IS 4. 80 PERCENT, AND THE CAPITAL GAINS YIELD IS 8. 2 PERCENT DIVIDEND YIELD = pic = 0. 0480 = 4. 8%. CAPITAL GAINS YIELD = 13. 00% 4. 8% = 8. 2%. DURING THE NONCONSTANT GROWTH PERIOD, THE DIVIDEND YIELDS AND CAPITAL GAINS YIELDS ARE NOT CONSTANT, AND THE CAPITAL GAINS YIELD DOES NOT EQUAL g.HOWEVER, AFTER YEAR 3, THE STOCK BECOMES A CONSTANT GROWTH STOCK, WITH g = CAPITAL GAINS YIELD = 6. 0% AND DIVIDEND YIELD = 13. 0% 6. 0% = 7. 0%. H. SUPPOSE BON TEMPS IS EXPECTED TO EXPERIENCE ZERO GROWTH DURIN G THE FIRST 3 YEARS AND THEN TO RESUME ITS STEADY-STATE GROWTH OF 6 PERCENT IN THE FOURTH YEAR. WHAT IS THE STOCKS VALUE NOW? WHAT IS ITS EXPECTED DIVIDEND YIELD AND ITS CAPITAL GAINS YIELD IN YEAR 1? YEAR 4? ANSWERSHOW S8-19 AND S8-20 HERE. NOW WE HAVE THIS SITUATION 0 1 2 3 4 2. 00 2. 0 2. 00 2. 00 2. 12 1. 77 1. 57 1. 39 20. 99 25. 72 = pic DURING YEAR 1 DIVIDEND YIELD = pic = 0. 0778 = 7. 78%. CAPITAL GAINS YIELD = 13. 00% 7. 78% = 5. 22%. AGAIN, IN YEAR 4 BON TEMPS BECOMES A CONSTANT GROWTH STOCK HENCE g = CAPITAL GAINS YIELD = 6. 0% AND DIVIDEND YIELD = 7. 0%. I. FINALLY, ASSUME THAT BON TEMPS EARNINGS AND DIVIDENDS ARE EXPECTED TO DECLINE BY A CONSTANT 6 PERCENT PER YEAR, THAT IS, g = -6%. WHY WOULD ANYONE BE WILLING TO BUY SUCH A STOCK, AND AT WHAT PRICE SHOULD IT SELL? WHAT WOULD BE THE DIVIDEND YIELD AND CAPITAL GAINS YIELD IN EACH YEAR?ANSWERSHOW S8-21 AND S8-22 HERE. THE COMPANY IS EARNING SOMETHING AND PAYING SOME DIVIDENDS, SO IT CLEARLY HAS A VALUE GREATER THA N ZERO. THAT VALUE CAN BE FOUND WITH THE CONSTANT GROWTH FORMULA, BUT WHERE g IS NEGATIVE pic = pic = pic = pic = pic = $9. 89. SINCE IT IS A CONSTANT GROWTH STOCK g = CAPITAL GAINS YIELD = -6. 0%, HENCE DIVIDEND YIELD = 13. 0% (-6. 0%) = 19. 0%. AS A CHECK DIVIDEND YIELD = pic = 0. 190 = 19. 0%. THE DIVIDEND AND CAPITAL GAINS YIELDS ARE CONSTANT OVER TIME, BUT A HIGH (19. 0 PERCENT) DIVIDEND YIELD IS NEEDED TO OFFSET THE NEGATIVE CAPITAL GAINS YIELD.J. BON TEMPS EMBARKS ON AN AGGRESSIVE blowup THAT REQUIRES ADDITIONAL CAPITAL. MANAGEMENT DECIDES TO FINANCE THE EXPANSION BY BORROWING $40 MILLION AND BY HALTING DIVIDEND PAYMENTS TO INCREASE RETAINED EARNINGS. THE intercommunicate FREE CASH FLOWS FOR THE NEXT THREE YEARS ARE -$5 MILLION, $10 MILLION, AND $20 MILLION. AFTER THE THIRD YEAR, FREE CASH FLOW IS PROJECTED TO GROW AT A CONSTANT 6 PERCENT. THE OVERALL appeal OF CAPITAL IS 10 PERCENT. WHAT IS BON TEMPS TOTAL VALUE? IF IT HAS 10 MILLION SHARES OF STOCK AND $40 MILLION TOTAL DEBT, WHAT IS THE PRICE PER SHARE? ANSWERSHOW S8-23 THROUGH S8-28 HERE. 0 1 2 3 4 -5 10 20 21. 20 $ -4. 545 8. 264 15. 026 398. 197 $416. 942 = TOTAL VALUE VALUE OF EQUITY = TOTAL VALUE DEBT = $416. 94 $40 = $376. 94 MILLION. PRICE PER SHARE = $376. 94/10 = $37. 69. K. WHAT DOES MARKET rest MEAN? ANSWERSHOW S8-29 AND S8-30 HERE. equaliser MEANS STABLE, NO TENDENCY TO CHANGE. MARKET proportion MEANS THAT PRICES ARE STABLEAT ITS CURRENT PRICE, THERE IS NO GENERAL TENDENCY FOR PEOPLE TO demand TO BUY OR TO SELL A SECURITY THAT IS IN EQUILIBRIUM.ALSO, WHEN EQUILIBRIUM EXISTS, THE EXPECTED RATE OF RETURN WILL BE EQUAL TO THE REQUIRED RATE OF RETURN pic = D1/P0 + g = k = kRF + (kM kRF)b. L. IF EQUILIBRIUM DOES NOT EXIST, HOW WILL IT BE ESTABLISHED? ANSWERSHOW S8-31 AND S8-32 HERE. SECURITIES WILL BE BOUGHT AND SOLD UNTIL THE EQUILIBRIUM PRICE IS ESTABLISHED. M. WHAT IS THE EFFICIENT MARKETS HYPOTHESIS, WHAT ARE ITS THREE FORMS, AND WHAT ARE ITS IMPLICATIONS? ANSWERSHOW S8-3 3 THROUGH S8-37 HERE. THE EMH IN GENERAL IS THE HYPOTHESIS THAT SECURITIES ARE NORMALLY IN EQUILIBRIUM AND ARE PRICED FAIRLY, MAKING IT IMPOSSIBLE TO BEAT THE MARKET. WEAK-FORM EFFICIENCY SAYS THAT INVESTORS CANNOT PROFIT FROM feeling AT PAST MOVEMENTS IN STOCK PRICESTHE FACT THAT STOCKS WENT DOWN FOR THE LAST FEW DAYS IS NO REASON TO THINK THAT THEY WILL GO UP (OR DOWN) IN THE FUTURE. THIS FORM HAS BEEN PROVEN PRETTY WELL BY EMPIRICAL TESTS, EVEN THOUGH PEOPLE STILL EMPLOY skilful ANALYSIS. SEMISTRONG-FORM EFFICIENCY SAYS THAT ALL PUBLICLY AVAILABLE tuition IS REFLECTED IN STOCK PRICES, HENCE THAT IT WONT DO MUCH GOOD TO condense OVER ANNUAL REPORTS TRYING TO FIND UNDERVALUED STOCKS.THIS ONE IS (WE THINK) LARGELY TRUE, BUT SUPERIOR ANALYSTS CAN STILL OBTAIN AND PROCESS NEW INFORMATION FAST ENOUGH TO GAIN A SMALL ADVANTAGE. STRONG-FORM EFFICIENCY SAYS THAT ALL INFORMATION, EVEN INSIDE INFORMATION, IS EMBEDDED IN STOCK PRICES. THIS FORM DOES NOT HOLDINSIDERS KNOW MORE, AND COUL D TAKE ADVANTAGE OF THAT INFORMATION TO MAKE insane PROFITS IN THE MARKETS. TRADING ON THE BASIS OF INSIDER INFORMATION IS ILLEGAL. N. PHYFE COMPANY RECENTLY ISSUED PREFERRED STOCK. IT PAYS AN ANNUAL DIVIDEND OF $5, AND THE ISSUE PRICE WAS $50 PER SHARE. WHAT IS THE EXPECTED RETURN TO AN INVESTOR ON THIS PREFERRED STOCK?ANSWERSHOW S8-38 AND S8-39 HERE. pic= pic = pic = 10%. ks = 15% gn = 6% ( 1/(1. 15)3 ( 1/(1. 13)3 ( 1/(1. 13)2 ( 1/1. 13 gs = 50% gn = 8% pic ks = 12% gs = 15% gn = 5% WACC = 10% pic = 30. 29 = pic g = 0% g = 0% g = 0% gn = 6% ks = 13% pic = $66. 54 = pic gs = 30% gs = 30% gs = 30% gn = 6% ks = 13% g = 0% ks = 13% g = 6% ks = 13% ks = 10% gs = 20% gs = 20% gn = 5% WACC = 12% WACC = 12% gn = 7% pic WACC = 13% gn = 7% 530 = pic ( 1/(1. 15)4 ( 1/(1. 15)5 ks = 12% ( 1/1. 13 ( 1/(1. 13)2 ( 1/(1. 13)3 ( 1/(1. 13)2 ( 1/(1. 13)2 ( 1/1. 13 ( 1/(1. 13)2 ( 1/(1. 13)3 ( 1/(1. 13)3 ( 1/1. 13 ( 1/1. 13 (%89

Role of Commercial Banks in Development

manipulation of mer basetile message rims in growth. INTRODUCTION A m aneymaking(prenominal) confide is something with which twain(prenominal) one of us is well k right awayn. However diverse entrusters and economists obligate defined it in a dispa put way correspond to Kent An organization whose principal trading operations atomic number 18 concerned with the accumulation of the temporarily idle funds of the general public for the purpose of go to new(prenominal)s for expenditure. accord to Banking Companies Ordinance 1962 Banking means the birthing for the purpose of instituteing or expend of puts of money from the public re break competent in assume or otherwisewise and withdraw-able by cheque, draft order or otherwise. Various economists have polar views most the federal agency of commercial banks in stinting ontogenesis. Schumpeter says,It is the banking administration which serves as a key agent a eagle-eyed with the entrepreneur in the accomp lish of scotch development. According toProf. Cameronin his Banking and Economic Development, a banking system may concord a collateral contri entirelyion to scotch fruit and development. Evolution of commercial Banks The foundation for building a considerable base of boorish impute structure was laid by the track of the All-India Rural Credit Survey (AIRCS) of 1954. The provision of cultivator reliance in 1951-52 was less(prenominal) than 1% for commercial banks. In the report it was observed that agricultural reference fell short of the right quantity, was not of the right subject, did not fit the right purpose and often failed to go to the right people.With a view to achieve an impetus to commercial banks, particularly, in the sphere of enthronement address, the nationalization of the Imperial Bank of India and its re-designation as the State Bank of India (SBI) was recommended. addition in Outreach 1951-91 From the position prevalent in 1951-52, commercial banks came a long way with a real spread of 32,224 branches in homespun and semi-urban beas comprising 68% of their center outlets as on 31 M emissionh 1991. The corking deposits of much(prenominal) branches at Rs. 7,855 crores as on the same date constituted nearly 35% of their total deposits, while loans outstanding at Rs. 43,797 crore comprised 36% of outstanding acknowledgment. The agricultural advances of the commercial banking system aggregated Rs. 16,687 crore and constituted 14% of total advances in March 1991. The folksy and semi-urban branches of commercial banks covered 17. 6 crore deposit accounts while the do of loan accounts serviced aggregated 3. 7 crore. Growth during 1991-92 to 2003-04 The accomplishment since 1991-92 has seen a fairly rapid expansion of credit to f encounterory farm.Available data advise that the full point of credit to agriculture by commercial banks and RRBs taken in concert gaind to Rs. 60,022 crore in 2003-04. This implies a compounde d annual result rate of 22. 2%. In fact, as compared with commercial banks (including RRBs), the flow of credit from the concerted sphere of influence was much diminisher through this decimal point. The compounded annual appendage rate of credit for agriculture from cooperative institutions was only 13. 7%. Further, the similarity of agriculture credit to total credit came grim beca wont of the rapid growth in non agriculture credit.The Government took some major initiatives during the pointedness to elevate agriculture merchandise and productivity through enhanced credit flow and by way of building agricultural infrastructure, particularly irrigation and connectivity in hobnailed areas. Special Agricultural Credit Plan (SACP) was introduced by RBI for humans area commercial Banks in 1994-95. Credit growth for agriculture and affiliate sectors under this caption reflected a CAGR of 36. 45% during 2001-02 to 2005-06. SACP has since been extended to Private Sector mone ymaking(prenominal) Banks from 2005-06.The SHG Bank Linkage Programme was started as a fender project by NABARD in 1992. It led to the evolution of a clan of RBI approved guidelines to banks to enable SHGs to transact with banks. Initially there was slow progress in the programme up to 1999 as only 32,995 groups were credit linked during the period 1992 to 1999. Since then the programme has been growing rapidly and the additive number of SHGs financed increased from 4. 61 lakhs on 31 March 2002 to 10. 73 lakhs on 31 March 2004 and further to 29. 25 lakh groups as on 31 March 2007.Rural Infrastructure Development Fund (RIDF) was set-up in NABARD by GoI during 1995-96 with an initial corpus of Rs. 2000 crore, to accelerate the 47 completion of on-going projects of rural infrastructure. Banks which did not fulfill the priority sector credit requirement and agriculture credit mandate were required to contribute to this Fund. The fund has been strengthened every year with additional allocations in the Union Budget. A large number of irrigation and rural connectivity projects could get completed under RIDF. RBI carapaced down its contribution to the Rural Credit funds with NABARD to a token meter of Rs. crore per annum since 1993-94. However to enable NABARD to have reasonably strong leverage for accessing grocery funds, the share superior of NABARD was strengthened and increased to Rs. 2000 crore (paid up) from Rs. 100 crore at the metre of its formation in 1982. Contributions to enhanced share capital have set out from GoI and RBI. By prudent funds management, the institution has also built a strong base of reserves and has been using it in its business operations judiciously to intimidate lending rates to rural financial institutions at significantly lower than market costs. Developments Post 2003-04Since 2003-04, there has been a substantial increase in the flow of credit to agriculture through commercial banks. Disbursements have increased from Rs. 52,441 crore in 2003-04 to Rs. 1,16,447 crore in 2005-06, reaching an annual growth of 43% each year. As envisaged in the GoIs strategy for doubling of credit, 95 lakh new farmers have been brought under the institutional congregating and 1,383 agri-clinics opened. Commercial banks have also executeed a major berth in the promotion of the SHG bank linkage movement with more than 11. 88 lakh groups being linked to banks for provision of credit.Reforms in the commercial banking system include removal of procedural and transactional bottlenecks including elimination of Service Area Approach, cut back margins, redefining overdues to coincide with crop cycles, new debt restructuring policies, one sequence settlement and eternal rest measures for farmers indebted to non-institutional sources. Banks play a vital role in the economical development of a country. They accumulate the idle nest egg of the people and educate them available for arrangement. They also relieve oneself new demand deposits in the figure out of granting loans and purchasing investment ecurities. They facilitate swop both inside and out of doors the country by accepting and discounting of bills of exchange. Banks also increase the mobility of capital. They win a variety of facilities for remitting a large choose sense of money from one smirch to other(prenominal) by the transfer of a mere slip of paper. Commercial banks play an valuable and active role in the economic development of a country, if the banking system in a country is effective, economic and train it brings about a rapid growth in the various sectors of the economy. The Functions of Commercial BanksIn the modern world, banks perform such a variety of functions that it is not executable to make an all-inclusive list of their functions and services. However, some basic functions per organise by the banks are discussed infra. 1. AcceptingDeposits The first important function of a bank is to accept deposits fro m those who can save but cannot profitably utilize this saving themselves. wad consider it more rational to deposit their savings in a bank beca subprogram by doing so they, on the one hand, earn occupy, and on the other, avoid the danger of theft.To attract savings from all sorts of individuals, the banks maintain different types of accounts (i) Fixed Deposit look property in these accounts is deposited for better period of meter (say one, two, or five years) and cannot be withdrawn before the termination of that period. The rate of spare-time activity on this account is higher than that on other types of deposits. The longer the period, the higher will be the rate of pastime. Fixed deposits arc also called time deposits or time liabilities. (ii) Current Deposit Account These accounts are generally maintained by the swaprs and businessmen who have to make a number of generatements every day.Money from these accounts can be withdrawn in as many times and in as much add u p as desired by the depositors. Normally, no interest is paid on these accounts rather, the depositors have to wage reliable incidental charges to the bank for the services rendered by it. Current deposits are also called demand deposits or demand liabilities. (iii) parsimony Deposit Account The aim of these accounts is to throw out and mobilise small savings of the public. Certain restrictions are imposed on the depositors regarding the number of withdrawals and the step to be withdrawn in a given period.Cheque facility is provided to the depositors. Rate of interest paid on these deposits is low as compared to that on fixed deposits. (iv) revenant Deposit Account The purpose of these accounts is to encourage regular savings by the public, particularly by the fixed income group. generally money in these accounts is deposited in monthly installments for a fixed period and is repaid to the depositors along with interest on maturity. The rate of interest on these deposits is near ly the same 3s on fixed deposits. (v) Home Safe Account Home safe account is another scheme aiming at promoting saving habits among the people.Under this scheme, a safe is supplied to the depositor to keep it at home and to put his small savings in it. Periodically, the safe is taken to the bank where the measurement of safe is credited to his account. 2. Advancingof loans The second important function of a bank is advancing of loans to the public. After keeping certain cash reserves, the banks lend their deposits to the needy borrowers. Before advancing loans, the banks satisfy themselves about the credits worthness of the borrowers. Various types of loans granted by the banks are discussed below (i) Money at CallSuch loans are very short period loans and can be called back by the bank at a very short notice of say one day to xiv days. These loans are generally made to other banks or financial institutions. (ii) notes Credit It is a type of loan, which is given to the borrower ag ainst his current assets, such as shares, stocks, bonds, etc. Such loans are not based on ain security. The bank opens the account in the name of the borrowers and allows him to withdraw borrowed money from time to time up to a certain limit as contumacious by the value of his current assets.Interest is charged only on the amount actually withdrawn from the account. (iii) Overdraft Sometimes, the bank provides overdraft facilities to its customers though which they are allowed to withdraw more than their deposits. Interest is charged from the customers on the overdrawn amount. (iv) Discounting of Bills of Exchange This is another popular type of lending by the modern banks. through with(predicate) this method, a holder of a bill of exchange can get it discounted by the bank. In a bill of exchange, the debtor accepts the bill drawn upon him by the creditor(i. e,holder of the bill) and agrees to repair the amount mentioned on maturity.After making some marginal deductions (in the form of commission), the bank pays the value of the bill to the holder. When the bill of exchange matures, the bank gets its payment from the party, which had certain the bill. Thus, such a loan is self-liquidating. (v)Term Loans The banks have also started advancing medium-term and semipermanent loans. The maturity period for such loans is more than one year. The amount sanctioned is both paid or credited to the account of the borrower. The interest is charged on the entire amount of the loan and the loan is repaid either on maturity or in installments. . Credit Creation A unique function of the bank is to create credit. In fact, credit humanity is the natural outcome of the process of advancing loan as adopted by the banks. When a bank advances a loan to its customer, it does not lend cash but opens an account in the borrowers name and credits the amount of loan to this account. Thus, whenever a bank grants a loan, it creates an equal amount of bank deposit. Creation of such d eposits is called credit institution which results in a wage increase in the money stock of the economy.Banks have the ability to create credit many times more than their deposits and this ability of multiple credit grounding depends upon the cash-reserve ratio of the banks. 4. Promoting Cheque System Banks also render a very useful medium of exchange in the form of cheques. Through a cheque, the depositor directs the bankers to make payment to the payee. Cheque is the most developed credit instrument in the money market. In the modern business transactions, cheques have become much more convenient method of settling debts than the use of cash. 5. Agency FunctionsBanks also perform certain agency functions for and on behalf of their customers (i) absolution of Funds Banks tending their customers in transferring funds from one place to another through cheques, drafts, etc. (ii) Collection and Payment of Credit Instruments Banks collect and pay various credit instruments kindred cheques, bills of exchange, promissory notes, etc. (iii) Execution of stand Orders Banks break away the standing instructions of their customers for making various periodic payments. They pay subscriptions, rents, insurance premium, etc. on behalf of their customers. (iv) Purchasing and Sale of SecuritiesBanks get down bargain for and sale of various securities like shares, stocks, bonds, debentures etc. on behalf of their customers. Banks neither give any advice to their customers regarding these investments nor levy any charge on them for their service, but scarcely perform the function of a broker. (v) Collection of Dividends on Shares Banks collect dividends, interest on shares and debentures of their customers. (vi) Income Tax Consultancy Banks may also employ income-tax experts lo prepare income-tax returns for their customers and to help them to get refund of income-tax. (vii) Acting as Trustee and ExecutorBanks preserve the wills of their customers and execute them aft er their death. (viii) Acting as Representative and Correspondent Sometimes the banks act as representatives and correspondents of their customers. They get passports, travelers tickets, book vehicles, plots for their customers and receive letters on their behalf. 6. General Utility Function In addition to agency services, the modern banks provide many general utility services as given below (i) Locker Facility Banks provide locker facility to their customers. The customers can keep their valuables and important documents in these lockers for safe custody. ii) Travellers Cheques Banks issue travellers cheques to help their customers lo travel without the fear of theft or loss of money. With this facility, the customers need not take the assay of carrying cash with them during their travels. (iii) Letter of Credit Letters of credit are issued by the banks to their customers certifying their creditworthiness. Letters of credit are very useful in exotic trade. (iv) Collection of Stat istics Banks collect statistics giving important information relating to industry, trade and commerce, money and banking.They also publish journals and bulletins containing research articles on economic and financial matters. (v) Underwriting Securities Banks guarantee the securities issued by the government, public or private bodies. Because of its full faith in banks, the public will not hesitate in buying securities carrying the signatures of a bank. (vi) Gift Cheques Some banks issue cheques of various denominations (say of Rs. 11, 21, 31, 51. 101, etc. ) to be use on auspicious occasions. (vii) Acting as Referee Banks may be referred for seeking information regarding the financial position, business reputation and respectability of their customers. viii) extraneous Exchange Business Banks also deal in the business of contrasted currencies. Again, they may finance foreign trade by discounting foreign bills of exchange. Role of Commercial Banks In Economic Development Of A Coun try Commercial banksplay an important and active role in the economic development of a country. If the banking system in a country is effective, efficient and disciplined, it brings about a rapid growth in the various sectors of the economy. The economic significance of commercial banks is given in brief. (1) Banks promote capital formation.The commercial banks play an important role in rising of the financial resources. They encourage savings by giving various types of incentives to the savers. They expand branches of the banks in rural and urban areas and mobilize savings even at far of places. These savings are then made available to the businesses which make use of them for robust purposes in the country. The banks are, therefore, not only store houses of the countrys wealth, but also provide stream of resources necessary for economic development. (2) Investment in new enterprises.Businessmen normally hesitate to invest their money in unsound enterprises. The commercial banks generally provide short and medium term loans to entrepreneurs to invest in new enterprises and adopt new methods of production. The provision of timely credit increases the productive capacity of the economy. (3) Promotion of trade and industry. With the growth of commercial banking in the 19th and 20th centuries, there is vast expansion in trade and industry. The use of bank draft, cheque, bill of exchange credit cards etc has revolutionized both national and international trade. (4) Development of agriculture.The commercial banks, particularly in development countries, are now providing credit for the development of agriculture and small scale industries in rural areas. The provision of credit to agriculture sector has greatly helped in raising agricultural productivity and income of the farmers. This has led to increased demand for industrial goods and expansion of industry. (5) Balanced development of different regions. The commercial banks play an important role in achieving balanced in different regions of the country. They help in transferring surplus capital from developed regions to the less exploitation regions.The traders, industrialists etc of less developed regions are able to get adequate capital for confrontation their business needs. This, in turn, increases investment, trade and production in the economy. (6) Influencing economy activity. The banks can also find out the economic activity of the country through its influence on (a) availability of credit and (b) the rate of interest. If the commercial banks are able to increase the amount of money in circulation through credit creation or by lowering the rate of interest, it directly affects economic development. A low rate of interest can encourage investment.The credit creation activity can raise aggregate demand which leads to more production in the economy. Which finally increases the growth of the nation. (7) Implementation of monetary policy. The central bank of the country controls and regulates volume of credit through the active cooperation of the banking system in the country. If helps in bringing price stability and promotes economic growth indoors shortest possible period to time. (8) Monetization of the economy. The commercial banks by opening branches in the rural and backward areas are reducing the exchange of goods through barter.The use of money has now greatly increased the volume of production of goods. The non-monetized sector (barter economy) is now being converted into monetized sector with the helpof commercial banks. (9) export promotion cells. In order to increase the exports of the country, the commercial banks have constituted export promotion cells. They provide information about general trade and economic conditions both inside and outside the country to its customers. The banks are, therefore, making positive contribution in the process of economic development.Role of banks in 21st century The commercial banks are now not confined to local banking. They are fast changing into global banking i. e. , understanding the global customer, using a la mode(p) information technology, competing in the open market with high technology system, changing from domestic banking to investment banking etc. The commercial banks are now considered the mettle centre of all economic development in the country. The use of online banking is now on the increase. It has brought revolution in banking industry. CONCLUSIONCommercial banks are considered not merely as dealers in money but also the leaders in economic development. They are not only the store houses of the countrys wealth but also the reservoirs of resources necessary for economic development. They play an important role in the economic development of a country. A well-developed banking system is congenital for the economic development of a country. The Industrial Revolution in europium in the 19th century would not have been possible without a sound system of commercial banking. In case of developing countries like India, the commercial banks are considered to be the backbone of the economy.The Banking Sector has for centuries now formed one of the pillars of economic prosperity. Indeed history provides us with some kickoff information regarding how banks provided finance for imperialist ventures in newly acquired colonies. Over time banks have formed an important part in providing an avenue for both savings and investments. Land, Labor, capital and entrepreneurs are the basic economic resources available to business. However, to make the use of these resources, a business requires finance to purchase of the land, hire labor, pay for capital goods and pay for individuals with specialized skills.The commercial banks provide capital, technical economic aid and other facilities to businessmen according to their need, which leads to development in trade. Commercial banks finance the most important sector of the developing economics i. e. agriculture, short, medium and long-term loans are provided for the purchase of seeds and fertilizer, installation of tube wells, construction of warehouses, purchase of tractor and thresher etc. Commercial banks help in increase the rate of capital formation in a country. Capital formation means increase in number of production units, technology, plant and machinery.They finance the projects responsible for increasing the rate of capital formation. Commercial banks help the traders of two different countries to undertake business. Letter of credit is issued by the importers bank to the exporters to ensure the payment. The banks also arrange foreign exchange. Commercial banks provide the facility of transferring funds from one place to another which leads to the growth of trade. The commercial banks financed the impartation sector. It has reduced unemployment on one hand and increased the transport facility on the other hand. Remote areas are linked to main markets through developed transport system.These are the few ways in which the commercial banks had helped in developing the economy of a country. BIBLIOGRAPHY * Samuelson Norhaus, economics, eighteenth edn, Tata McGraw Hill Publishing Co. Ltd. , 2008 * Xam idea, economics, F K Publication, 2009 * Chitta Ranjan Basu, Commercial Banking in the Planned sparing of India, Mittal Publications, 1991 * N. Gregory Mankiw, Principles of Economics, cengage learning, 2012 * www. preservearticles. com 2 . N. Gregory Mankiw, Principles of Economics, cengage learning, 2012 3 . www. bankingsector. co. in 4 .N. Gregory Mankiw, Principles of Economics, cengage learning, 2012 5 . Xam idea, economics. 6 . N. Gregory Mankiw, Principles of Economics, cengage learning, 2012 7 . www. preservearticles. com 8 . www. ehow. com 9 . Samuelson Norhaus, economics, 18th edn, Tata McGraw Hill Publishing Co. Ltd. , 2008 10 . Chitta Ranjan Basu, Commercial Banking in the Planned Economy of India 11 . Samuelson Norhaus, economics, 18th edn, Tata McGraw Hill Publishing Co. Ltd. , 2008 12 . www. ehow. com 13 . N. Gregory Mankiw, Principles of Economics, cengage learning, 2012 14 . www. preservearticles. com