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ECON 304 Lecture Notes - Australian Securities Exchange, Canada Savings Bond, Investment Banking

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indigoelk490
21 Apr 2013
School
University of Waterloo
Department
Economics
Course
ECON 304
Professor
Jean- Paul Lam

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Document Summary

Financial assets and financial markets - an introduction. Monetary economics is concerned with the e ects of monetary/ nancial institutions and policy actions on important economic variables such as in ation, output, interest rates, unemployment, commodity prices, etc. The study of monetary economics as a special eld is important as money, although one of many commodities, plays a special role in the economy. Nancial crisis has shown that disruptions in the nancial markets can lead to costly recessions and extreme hardships. It has also shown that governments and particularly central banks have an important role and even a duty to intervene when such catastrophic events occur. In this lecture, before discussing in details the role and importance of money, we present a brief overview of the nancial system. Throughout the course we will present in more details certain aspects of the nancial system.

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Related Questions

part 1

1. Why are bond markets important?

2. Why are stock markets important?

3. Why are banks important?

4. What aspects of the economy are affected by the money supply?

5. What are the four phases of a business cycle? How does money supply affect business

cycles?

6. What is the relationship between money supply growth and inflation?

7. What is monetary policy? What is fiscal policy?

8. What is the foreign exchange market?

9. How does an appreciation of a currency affect the economy?

10. How does a depreciation of a currency affect an economy?

part 2

1. What are the two components of a financial system? What is direct finance? Indirect

finance?

2. What is the role of financial markets?

3. Explain the following classifications of financial markets

a. Debt and. equity markets

b. Primary and secondary markets

c. Exchanges and over-the-counter markets

d. Money and capital markets

4. List and briefly explain each money market instrument.

5. List the capital market instruments.

6. Explain why financial intermediaries play an important role in the economy (address the

following: transactions costs, risk sharing, information costs, and economies of scope).

7. What is asymmetric information? What are the two problems that arise when there is

asymmetric information in the financial system?

8. Explain the adverse selection and moral hazard problems that are a result of asymmetric

information.

9. What are the different types of financial intermediaries in the U.S. economy?

10. Which financial intermediaries are classified as depository institutions (or banks)?

11. What are the two main reasons why the government regulates the financial system?

12. What are the different types of financial regulations implemented by the government in

the U.S.?


A-Scope Statement: Water is essential to support life. Health specialists recommend that everyone should drink at least eight 8-ounce glasses of water a day. Our project goal is to create a water bottle that actively communicates through Bluetooth with any electronic device, including tablets and smartwatches, to remind the user to drink water and stay hydrated. As time passes, the bottle will send a notification to the paired electronic device when it is time for a drink. Based on personal data that is inputted into the user's account through the water bottle's app, the water bottle will remind the user of the amount of water he or she should intake for the day and evenly spread that amount throughout the course of the day. Because water is so important to people's health, this water bottle can be marketed to anyone: students, travelers, athletes, working professionals, and seniors to name a few.

B-Activity List:

1. Product Design

1.1 Conceptualization

1.2 Design

1.3 Prototype

1.4 Research & Development

1.5 Final Product

2. Production

2.1 Locate manufacturing plant

2.2 Determine shipping method

2.3 Total production costs

2.4 Find retailers to sell the product

2.5 Produce product

3. Marketer:

3.1 Find advertising distribution

3.2 Create an advertising campaign

3.3 Measure sales affected by an advertising campaign

3.4 Feedback

Base on the information above, write down this form:

A) Check product design techniques from the lecture slides (see below), and explain which one applies to your group project. Describe your product or service design in detail. Design graphic samples are provided under File/HomeworkSamples.

1) Robust design

2) Modular design

3) Computer-aided design (CAD)

4) Computer-aided manufacturing (CAM)

5) Virtual reality technology

6) Value analysis

7) Sustainability and Life Cycle Assessment (LCA)

Plus, cost reduction vs value engineering

Plus, product defining method, e.g., OBM

Minicase: How much is Manchester United's brand worth?

In recent years, the valuation of sports teams has become an increasingly important financial topic. Part of the reason is the astronomical salaries that sports stars command. Additionally, some stars become celebrities outside of the arena also, with lucrative sponsorships, extravagant lifestyles, and an icon of the rich and famous David Beckham, the British soccer player is one prominent example. As a personal brand, Beckham was valued by Forbes at $20 million in 2013 (http://www.forbes.com/pictures/mlm45jemm/4-david-beckham/). Beckham came up with Manchester United, often cited as the world's most valuable soccer club. The Red Devils, as they are called, were bought by the Glazer family from the United States in a leveraged buyout in 2005. To cash in on its brand value and pay down debt, the new owners decided to go public in 2012. The IPO on the New York stock exchange offered shares at $14 apiece, making the capitalized value of the club about $2.3 billion. The shares did poorly at first but soared in 2013. By end of January, the share price stood at just under $17, with Manchester United's stock outperforming the S&P 500. The increase in its stock price pushed up Manchester United's value (equity plus debt) to $3.3 billion, the highest value of any team in the world. But in the ensuing Champions League tournament, Manchester did not perform all that well, and the club was overtaken by competitors. One was Real Madrid, a perennial foe. The Spanish team posted greater returns in its annual report for 2012-2013, with the highest returns of any team in sports ($650 million during the 2011-2012 season), and revenues up 62% over the last 3 years. Signing superstars Cristiano Ronaldo and, more recently, Gareth Bale has led to increasing income from advertising and sponsorships as well as attendance and television. The club has an equipment supply deal with Adidas worth $42 million a year. It has signed a new sponsorship deal with Emirates Airlines to put its name on the team's shirts, a contract worth $39 million annually for 5 years. As a result, the value of Real Madrid increased to $3.4 billion, narrowly beating out Manchester United. Real Madrid did better than Manchester United in the Champions League but was still beaten in the semifinals. In the final, two German teams met. Bayern Munich, a 10-time finalist, defeated Borussia Dortmund by a score of 2-1. As a result, the winning German club vaulted to first place in the soccer team brand ratings, as published by BrandFinance, a brand equity rating firm headquartered in London that covers brand equity sports ratings. BrandFinance calculates the value of the brand equity in terms of an equivalent royalty rate: if a team would license its name to a third party, how much would it be able to charge. This allows the company to focus only on brand equity, expressed in terms of dollar value. The brand equity rankings after the 2013 Champions League final from BrandFinance show the top three teams as follows:

1. Bayern Munich - Brand value: $868 million
2. Manchester United - Brand value: $845 million
3. Real Madrid - Brand value: $627 million.

The estimated value of Bayern Munich using the enterprise value (equity and debt) calculation used for the Manchester United and Real Madrid above is about $1.3-1.5 billion. That is, the enterprise values of the three teams as of late summer 2013 are as follows:

1. Real Madrid - Team value: $3.4 billion
2. Manchester United - Team value: $3.3 billion
3. Bayern Munich - Team value: $1.3-1.5 billion

In fact, Bayern Munich is also beaten by one arch-rival, Barcelona, at $2.6 billion, and is virtually tied by London's Arsenal.

Questions:
1. Why is there a difference between the stock market valuation of a sports team and its brand value?
2. If brand equity represents allegiance to a brand, what would you say determines the brand equity of a soccer team (or any sports team)?
3. What factors would you say determine the value of a soccer team (or any sports team)?
4. Use the difference between your answers in Questions 2 and 3 to explain why Bayern Munich could lead in brand equity but still not be the most valuable team.