Finance major BUS 453 midterm. Finish it in 2 hours!

(1) HSBC had an amazing top tier commercial and consumer banking franchise. Why and how did they try to build a similar investment banking franchise and yet fail? (15 Points)

(2) Why did Bank One enter into an interest rate swap? Why was it unfairly criticized? (15 points)

(3) What makes Investment Banking riskier than Commercial Banking? (5 points)

(4) How did WorldCom get it so wrong? How did the analysts miss the signs? (15 points)

(5) How have Mutual Funds fit into the evolution of financial markets? How would someone like you go about choosing the right Mutual Funds? (15 Points)

(6) Who are all the players in the Subprime Fiasco and how are they each in their own way to blame? (15 points)

Bonus: What are the inputs on your calculator if you want to figure out the all in costs of an underwriting from the borrower’s perspective of the following bond? (5 Points)

10 year maturity; 5% annual coupon; 3% upfront fee; $1,000 face value

N =

PV =

FV =

I =


(one of the above inputs is what you are calculating – so just write “calc” next to it.)

(3 points)