Capital Market Theory Rsm 332 – Week 2

CAPITAL MARKET THEORY RSM 332 – Week 2 Week 1 – Introduction – Financial Accounting (Review) Week 2 – Financial Markets and Net Present Value Week 3 – Present Value Concepts Week 4 – Bond Valuation and Term Structure Theory Week 5 – Valuation of Stocks Week 6 – Risk and Return – Problem Set #1 Due Week 7* – Midterm (Tuesday*) Week 8 – Portfolio Theory Week 9 – Capital Asset Pricing Model Week 10 – Arbitrage Pricing Theory Week 11 – Operation and Efficiency of Capital Markets Week 12 – Course Review – Problem Set #2 Due Contact: otto. [email  protected] utoronto. ca CAPITAL MARKET THEORY RSM 332 – Week 2AGENDA 1. 2. 3. 4. 5. Announcements Financial Markets and Net Present Value Survey Results Optional Material (e. g. Cases, Practical Knowledge, News, etc. ) Suggestions/Practice for Exam(s) Contact: otto. [email  protected] utoronto. ca Extended Office Hours Friday , October 19th (11:00am-3:00pm) †¢ Room 6 – TZ6 (Tanz Neuroscience Bldg – 6 Queen’s Park Crescent West) TBD – Saturday, October 20th †¢ Depends if there is enough demand Thursday, October 25th (5:00pm-7:00pm and 7:00pm-9:00pm) †¢ During regular timeslot †¢ Cover optional material (e. g. cases, practical knowledge, etc. ) Contact: otto. [email  protected] utoronto. ca Exams Midterm (Tuesday, October 23rd – 8:00pm-10:00pm): †¢ EX 100 (Examination Facility – 255 McCaul Street) †¢ 2 Hours Final (TBA): †¢ 2 Hours Preparation: †¢ Problem Sets 1 & 2 †¢ Crib Sheet (Start Early and 1-Sided) †¢ Calculator (Silent) Contact: otto. [email  protected] utoronto. ca Tutorials †¢ Starting – September 19/20/21 †¢ Wednesday (6:00pm-8:00pm) †¢ TZ6 (Tanz Neuroscience Bldg – 6 Queen’s Park Crescent West) †¢ Thursday (11:00am-1:00pm) †¢ RW 110 (Ramsay Wright Laborat ories – 25 Harbord Street) †¢ Friday (5:00pm-7:00pm) †¢ RW 110 (Ramsay Wright Laboratories – 25 Harbord Street) Review: †¢ Midterms and Finals (2008-2011) Xiaofei Zhao (xiaofei. [email  protected] utoronto. ca) †¢ http://332ta. raykan. com †¢ Contact: otto. [email  protected] utoronto. ca Outside of Lecture Office Hours (Drop-In): †¢ Wednesdays: 4:00pm-6:00pm †¢ 105 St. George Street – Rotman (North Building) Room 413 or 417 Office Hours (Other Days/Times): †¢ Extended Hours †¢ By Appointment Contact: otto. [email  protected] utoronto. ca Corporate Finance: What is Going On? 3) Firm’s Financial (5) Investors (4) (Financial Institutions, (1) Individuals, Other Firms) (1) (2) (3) (4) (5) Cash raised from investors by selling financial assets Cash invested in real assets (some are intangible) Cash generated by operations Cash reinvested in the firm (retained earnings) Cash repaid to investors (interest, divi dends, etc. ) Operations (2) Decision Maker Reference: Alex MacKay Financial Markets: What is Going On? Firms (Users of Capital) Initial Public Offering (IPO) Secondary Offerings (SEO) Borrowing (Loans, Bonds)Dividends, $ Repurchases, Interest Payments $ Market Mechanisms or Market Makers (Stock Exchanges, Banks, Investment Funds, †¦) $ $ Firms Issue Stock Certificates and Bonds $ $$$ Invested in Stocks and Bonds Investors (Providers of Capital) Investment Banks help firms make transactions Brokers/Dealers help investors make transactions Reference: Alex MacKay Financial Theory and Corporate Policy Chapter 1 (Copeland, Weston and Shastri) Course Reserve FINANCIAL MARKETS AND NET PRESENT VALUE Consumption Plan and Investment RuleConsider 1 period problems Assumptions: †¢ No uncertainty †¢ One period (two dates), consumptions occur on date 0 and date 1 †¢ A consumer is endowed with initial wealth (Y0) on date 0, and will receive income (Y1) on date 1 †¢ Simple interest rate (r) Date 0 Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca Date 1 Consumption Plan and Investment Rule 4 CASES †¢ Case I: †¢ Case II: No Capital Market, No Production Opportunities With Capital Market, No Production Opportunities †¢ Case III: No Capital Market, With Production Opportunities †¢ Case IV: With Capital Market, With Production OpportunitiesReference: Raymond Kan Contact: otto. [email  protected] utoronto. ca Consumption and Investment without Capital Markets C1 U2 U1 U0 C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment without Capital Markets C1 Slope of the Tangent (-ve) = (Marginal Rate of Substitution) (MRS) MRS = ? C1 ? C0 U1 U(C0, C1) MRS = ? U / ? C0 ?U / ? C1 C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Poli cy) 4 th Edition 2004 Consumption and Investment without Capital MarketsC1 Production/Investment Opportunity Set C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment without Capital Markets C1 Rate at which a dollar of consumption today (C0) is transformed by productive investment into a dollar of consumption (C1) tomorrow. C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment without Capital Markets C1 C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment without Capital Markets C1 Marginal Rate of Transformation (MRT) MRT = ? C1 ? C0 C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment without Capital Markets C1 U1 C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment without Capital Markets C1 Y1 U1 Resource Bundle: (Y0, Y1) Y0Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th C0 Edition 2004 Consumption and Investment without Capital Markets C1 Increase investment until MRT = MRS U1 C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment without Capital Markets C1 U2 U1 C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment without Capital MarketsC1 MRT = MRS U2 U1 C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment without Capital Markets C1 U2 U1 (Increase Investment) Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th C0 Edition 2004 Consumption and Investment with Capital Markets C1 Slope = -(1+r) Borrowing and Lending opportunities (Capital Market Line) (at market interest rate r) C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets C1 Interest plus Principal (Invest/Lending) Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th C0 Edition 2004 Consumption and Investment with Capital Markets C1 Interest plus Princip al (Borrowed Amount – Principal) Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th C0 Edition 2004 Consumption and Investment with Capital Markets C1 U1 C0Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets C1 Y1 U1 Endowment: (Y0, Y1) Y0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th C0 Edition 2004 Consumption and Investment with Capital Markets C1 (Invest) Y1 U1 Y0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th C0 Edition 2004 Consumption and Investment with Capital Markets C1Market rate of return > Subjective Time Preference (1+r) > (1+rtime preference) Y1 U1 Y0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th C0 Edition 2004 Consumption and Investment with Capital Markets C1 U1 (Consume Less) Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th C0 Edition 2004 Consumption and Investment with Capital Markets C1 U1 (Invest) Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th C0Edition 2004 Consumption and Investment with Capital Markets C1 U2 Y1 U1 Y0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th C0 Edition 2004 Consumption and Investment with Capital Markets C1 Market Interest Rate = Subjective Time Preference U2 Y1 U1 Y0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th C0 Edition 2004 Consumption and Investment with Capital Markets (With Production Set) C1 U1 C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] toronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets (With Production Set) C1 C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets (With Production Set) C1 C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets (With Production Set) C1 C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets (With Production Set) C1 C0 Reference: Copeland, W eston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets (With Production Set) C1 U3 = (production and capital market) U2 = (with production alone) U1 = (initial endowment) C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption Plan and Investment RuleConsider 1 period problems Assumptions: †¢ No uncertainty †¢ One period (two dates), consumptions occur on date 0 and date 1 †¢ A consumer is endowed with initial wealth (Y0) on date 0, and will receive income (Y1) on date 1 †¢ Simple interest rate (r) Date 0 Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca Date 1 Consumption Plan and Investment Rule 4 CASES †¢ Case I: †¢ Case II: No Capital Market, No Production Opportunities With Capital Market, No Production Opportuni ties †¢ Case III: No Capital Market, With Production Opportunities †¢ Case IV: With Capital Market, With Production Opportunities Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca Consumption Plan and Investment Rule CASE I – No Capital Market, No Production Opportunities †¢ Consumer can consume Y0 on date 0, and Y1 on date 1 Date 0 Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca Date 1 Consumption Plan and Investment Rule CASE II – With Capital Market, No Production Opportunities The set of consumption plans is broadened 1. 2. Consumer can save from Y0, invests in financial assets, and consumes more on date 1 Borrow against Y1, consume more on date 0, pay back loan with interest on date 1 from Y1, and consume less on date 1 Date 0 Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca Date 1 Consumption Plan and Investment Rule CASE II – With Capital Market, No Production Opportunitie s †¢ Denote C0 and C1 as date 0 and date 1 consumption respectively †¢ Constraint on them is: C1 = (Y0 – C0) (1+r) + Y1 Consumption Budget Line (Constraint) C0 + C1 = Y0 + Y1 1+ r 1+ r Y Date 0 Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca Date 1 In general, the consumer will be better off with capital markets Consumption Plan and Investment Rule CASE II – With Capital Market, No Production Opportunities Present Value †¢ For any cash flow, C0, C1, define its present value as: PV = C0 + C1 + r †¢ Budget constraint can be restated as: †¢ The present value of consumption equals the present value of income Date 0 Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca Date 1 Consumption Plan and Investment Rule CASE II – With Capital Market, No Production Opportunities Example: †¢ Assume an investor has a wealth of $1. 5M on date 0, and will have an income of $0. 55M on date 1 †¢ The intere st rate is 10%. †¢ The present value of total income is: $2M = $1. 5M + $0. 55M (1+ 0. 10) Date 0 Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca Date 1 Consumption Plan and Investment RuleCASE III – No Capital Market, With Production Opportunities Physical Investment †¢ Suppose the consumer is also an entrepreneur who identifies a physical investment opportunity †¢ Initial investment requires $0. 5M on date 0 †¢ Return of $0. 85M on date 1 †¢ Should this consumer/investor take this project? †¢ Without a capital market, it depends on her/his utility function Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca Consumption Plan and Investment Rule CASE IV – With Capital Market, With Production Opportunities †¢ By investing $0. 5M in a financial asset, receive $0. 55M in return (i. . 10% return) †¢ By investing $0. 5M in a physical asset, receive $0. 85M in return (i. e. 70% return) †¢ Consumer/Investor should take this project †¢ Interest rate is also called the opportunity cost of capital †¢ i. e. Return foregone by investing in a project rather than in comparable investment alternatives Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca Consumption Plan and Investment Rule CASE IV – With Capital Market, With Production Opportunities Net Present Value (NPV) †¢ Is the project’s net contribution to wealth (i. e. present value minus initial investment) NPV = C0 + C1 1+ r In the above example, the NPV of the project is: NPV = -$0. 5M + $0. 85M = $0. 2727M (1 + 0. 10) Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca Consumption Plan and Investment Rule CASE IV – With Capital Market, With Production Opportunities NPV Rule †¢ States that: †¢ If a project has a positive NPV, we should accept it †¢ If a project has a negative NPV, we should reject it Equivalent Rules †¢ NPV Rule – Accept positive NPV projects †¢ Rate-of-Return Rule – Invest in projects which offer a rate higher than the cost of capital Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca A Separation Theorem You are at a Honda (HMC) shareholders’ meeting †¢ Three shareholders are quite vocal about what the company should do Shareholder #1 – Old Lady †¢ Wants money right now †¢ Wants HMC to invest in sports cars which will yield a quick profit Shareholder #2 – Representative of a Little Boy’s Trust Fund †¢ Wants money a long way in the future †¢ Wants HMC to invest in building electric cars Shareholder #3 – Young Professional †¢ Wants money at some specified time in future (i. e. 10 years) †¢ Wants HMC to build smaller cars because of an expected oil crisis Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca A Separation TheoremWhat do you think Honda manag ers should do? Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca A Separation Theorem What do you think Honda managers should do? MAXIMIZE VALUE Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca A Separation Theorem In general, each shareholder may want: †¢ Maximum wealth †¢ Ability to transfer wealth across time into consumption †¢ Choose risk characteristics of consumption plan Each shareholder, however, can: †¢ Achieve own consumption plan through investments in financial assets †¢ Achieve risk characteristics of plan by investing in more or less risky securitiesEQUITY (CAPITAL GAINS, DIVIDENDS) Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca A Separation Theorem In general, each shareholder may want: †¢ Maximum wealth †¢ Ability to transfer wealth across time into consumption †¢ Choose risk characteristics of consumption plan Each shareholder, however, can: †¢ Achieve own consumption plan through investments in financial assets †¢ Achieve risk characteristics of plan by investing in more or less risky securities EQUITY (CAPITAL GAINS, DIVIDENDS) DEBT (INTEREST) TAX AGENCY COSTS Reference: Raymond Kan Contact: otto. [email  protected] utoronto. ca A Separation Theorem In general, each shareholder may want: †¢ Maximum wealth †¢ Ability to transfer wealth across time into consumption †¢ Choose risk characteristics of consumption plan Each shareholder, however, can: WHAT TYPE OF INCOME DO YOU PREFER? †¢ Achieve own consumption plan through investments in financial assets †¢ Achieve risk characteristics of plan by investing in more or less risky securities EQUITY (CAPITAL GAINS, DIVIDENDS) DEBT (INTEREST) TAX AGENCY COSTS Reference: Raymond Kan Contact: otto. [email  protected] utoronto. caConsumption and Investment with Capital Markets (With Production Set) C1 U3 = (production and capital market) U2 = (with producti on alone) U1 = (initial endowment) C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets (With Production Set) C1 C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets (With Production Set) C1 Choose the optimal production decision by taking on projects until the marginal rate of return on investment equals the objective market rate) C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets (With Production Set) C1 (Choose the optimal consumption pattern by borrowing or lending along the capital market line to equate your subjective time preference with the market rate of return) C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] toronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets (With Production Set) C1 (Production/Investment Decision) (Consumption Decision) C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets (With Production Set) C1 (Production/Investment Decision) (Consumption Decision) (Fisher Separation Theorem) C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004Consumption and Investment with Capital Markets (With Production Set) C1 (Fisher Separation Theorem) Given perfect and complete capital markets, the production decision is governed solely by an objective market criterion (represented by maximizing attained wealth ) without regard to individuals’ subjective preferences that enter into consumption decisions C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets (With Production Set) C1 (Production/Investment Decision) (Consumption Decision) Fisher Separation Theorem) C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets (With Production Set) C1 (Production/Investment Decision) (Consumption Decision) (Fisher Separation Theorem) MRS = MRT = 1+r C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Consumption and Investment with Capital Markets (With Production Set) C1 ALL INDIVIDUALS USE THE SAME TIME VALUE OF MONEY (i. e. ame market interest rate) IN MAKING THEIR PRODUCTION/INVESTMENT DECISIONS (Fisher Separation Theorem) MRS = MRT = 1+r C0 Reference: Copeland, Weston, Shastri (Financial Theory Contact: otto. [email  protected] utoronto. ca and Corporate Policy) 4 th Edition 2004 Example Ronald, a finance student, has $400 cash-on-hand and has $1,100 in trust from his grandmother. Ronald will receive the trust funds next year. (Market interest rate is 10% or trust funds worth $1,000 today). Ronald has 2 mutually exclusive investment opportunities (i. e. AAA and BBB rated investments). Contact: otto. [email  protected] utoronto. caReference: Don Brean Example Ronald, a finance student, has $400 cash-on-hand and has $1,100 in trust from his grandmother. Ronald will receive the trust funds next year. (Market interest rate is 10% or trust funds worth $1,000 today). Ronald has 2 mutually exclusive investment opportunities (i. e. AAA and BBB rated investments). 1. 2. 3. Which investment should Ronal d invest in, AAA or BBB? How much should he invest? If Ronald makes investment describe his cash flows? (i. e. Consumption spending divided equally in present value terms) Contact: otto. [email  protected] utoronto. ca Reference: Don Brean ExampleRonald, a finance student, has $400 cash-on-hand and has $1,100 in trust from his grandmother. Ronald will receive the trust funds next year. (Market interest rate is 10% or trust funds worth $1,000 today). Ronald has 2 mutually exclusive investment opportunities (i. e. AAA and BBB rated investments). 1. Which investment should Ronald invest in, AAA or BBB? Contact: otto. [email  protected] utoronto. ca Reference: Don Brean Example Ronald, a finance student, has $400 cash-on-hand and has $1,100 in trust from his grandmother. Ronald will receive the trust funds next year. (Market interest rate is 10% or trust funds worth $1,000 today).Ronald has 2 mutually exclusive investment opportunities (i. e. AAA and BBB rated investments). 1. Which investment should Ronald invest in, AAA or BBB? Contact: otto. [email  protected] utoronto. ca Reference: Don Brean Example Ronald, a finance student, has $400 cash-on-hand and has $1,100 in trust from his grandmother. Ronald will receive the trust funds next year. (Market interest rate is 10% or trust funds worth $1,000 today). Ronald has 2 mutually exclusive investment opportunities (i. e. AAA and BBB rated investments). 1. Which investment should Ronald invest in, AAA or BBB? 2. How much should he invest? Contact: otto. [email  protected] toronto. ca Reference: Don Brean Example Ronald, a finance student, has $400 cash-on-hand and has $1,100 in trust from his grandmother. Ronald will receive the trust funds next year. (Market interest rate is 10% or trust funds worth $1,000 today). Ronald has 2 mutually exclusive investment opportunities (i. e. AAA and BBB rated investments). 3. If Ronald makes investment describe his cash flows? (i. e. Consumption spending divided equally i n present value terms) Contact: otto. [email  protected] utoronto. ca Reference: Don Brean Example Ronald, a finance student, has $400 cash-on-hand and has $1,100 in trust from his grandmother.Ronald will receive the trust funds next year. (Market interest rate is 10% or trust funds worth $1,000 today). Ronald has 2 mutually exclusive investment opportunities (i. e. AAA and BBB rated investments). 3. If Ronald makes investment describe his cash flows? (i. e. Consumption spending divided equally in present value terms) PV of Wealth = PV of Consumption PV (C0) = PV (C1) (i. e. C0 = C1 / (1+r) ) NPVBBB Ronald’s PV of Wealth = $400 + $1,000 + $87. 27 = $1,487. 27 $1,487. 27 = C0 + C1 / (1+r) = C0 + [C0 (1+r)] / (1+r) C0 = $743. 64 and C1 = $818 Contact: otto. [email  protected] utoronto. ca Reference: Don Brean ExampleRonald, a finance student, has $400 cash-on-hand and has $1,100 in trust from his grandmother. Ronald will receive the trust funds next year. (Market interest r ate is 10% or trust funds worth $1,000 today). Ronald has 2 mutually exclusive investment opportunities (i. e. AAA and BBB rated investments). 3. If Ronald makes investment describe his cash flows? (i. e. Consumption spending divided equally in present value terms) C0 = $743. 64 Investment in BBB Cash Flow Requirement (CF0) = ($743. 64 + $300) = $1,043. 64 Borrowing Requirement = CF0 – $400 = $643. 64 Contact: otto. [email  protected] utoronto. ca Reference: Don Brean ExampleRonald, a finance student, has $400 cash-on-hand and has $1,100 in trust from his grandmother. Ronald will receive the trust funds next year. (Market interest rate is 10% or trust funds worth $1,000 today). Ronald has 2 mutually exclusive investment opportunities (i. e. AAA and BBB rated investments). 3. If Ronald makes investment describe his cash flows? (i. e. Consumption spending divided equally in present value terms) C1 = $818 Return from BBB Cash Inflow (next year) = $1,100 + $426 = $1,526 Cash Ou tflow (next year) = $818 + $643. 64 + $64. 36 = $1,526 Loan Repayment Interest on Loan @ 10% Contact: otto. [email  protected] utoronto. a Reference: Don Brean Example Ronald, a finance student, has $400 cash-on-hand and has $1,100 in trust from his grandmother. Ronald will receive the trust funds next year. (Market interest rate is 10% or trust funds worth $1,000 today). Ronald has 2 mutually exclusive investment opportunities (i. e. AAA and BBB rated investments). CONCLUDING THOUGHT Ronald’s optimal investment decision (i. e. $300 in BBB) is independent or separate from his decision as to how he inter-temporally allocates his consumption (i. e. C0 and C1) The independence of those two decisions is referred to as the Fisher Separation Theorem. Contact: otto. [email  protected] utoronto. ca Reference: Don Brean â€Å"GET TO KNOW YOU† SURVEY (Name: Optional) Question #1: †¢ What has occurred in your other courses that you were happy about and would like to be i ncorporated into this course ? †¢ What has occurred in your other courses that you were NOT happy about? Question #2: †¢ Anything specific you would like to learn? What are your learning goals in this course? †¢ Any specific requests from the instructor, TAs, program, other support staff, etc? Question #3: †¢ Are you thinking of pursuing further education in Finance, if not then what do you have in mind? And/or†¦ What job(s) are you interested in?Question #4: †¢ Tell me more about yourself (e. g. goals, program concentration, 2nd or 3rd year, etc†¦ ) Question #5: †¢ Any other comments, requests, suggestions, etc? TAKE ~3 MINUTES INDIVIDUALLY TO FILL OUT SURVEY TAKE ~ 5 MINUTES TO TALK TO 5 CLASSMATES WHOM YOU HAVEN’T MET YET (write down initials) SURVEY RESULTS (SUMMARY) †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ Real world experiences, practica l (real-world) examples, cases†¦ Relevant news (where to find news), Current issues in the market Relate course material to real world Exam tips/techniques Applications and excel models used in the real world Interactive class, games, videos†¦Extended office hours (availability) to address questions Humour Practice questions and solutions; Past exams and solutions Capital markets (high-level overview) Typical jobs in finance, Leading finance organizations Additional tutorial time Stock picking, portfolio allocation/analysis, investment tools/strategies, trading tips Learning topics that can be applied in real life Relate designations/roles to course material and applications Better understanding of financial instruments (e. g. Mortgages, bonds, etc†¦ ) View of finance from other functional areas (e. g. Marketing) 13 Popular Case Studies (Failures) 1. 2. 3. 4. 5. . Barings (Bank) – Operational Risk (Trading Activities – From arbitrageur to speculator) Nat ional Australia Bank – Operational and Market Risks (Currency Trading) Bankgesellschaft Berlin (Bank) – Credit and Operational Risks (Loans to Property Developers) Taisei Fire and Marine Insurance Co – Insurance & Governance Risks (Uninsured exposure – Lack of understanding) Washington Mutual (Bank) – Credit, Regulatory and Governance Risks; Stress and Scenario Testing (Low lending standards and bad quality acquisitions) Fannie Mae and Freddie Mac – Credit, Market, Operational, Regulatory Governance and Moral Risk; Politicians vs.Financial Risk Management (Sub-prime loans) Long-Term Capital Management – LTCM (Hedge Fund) – Market & Model Risks (Short liquid vs. Long Illiquid Investments (e. g.Bonds) – Russia Defaulted) Bankers Trust (Bank) – Operational Risk (Misled clients on derivatives sold to them) Orange County – Market and Interest Rate Risks (Wrong way bet on interest rates – Borrowing Short a nd Investing Long – Interest Rates Increased) Northern Rock (UK Bank) – Portfolio, Capital Funding, Operational and Reputational Risks; Stress and Scenario Testing (Sub-prime mortgages – Bank Run) Metallgesellschaft AG (Energy Group) – Market Risks (Cash Flow Issues from Written Forwards) Worldcom (Telecom) – Operational Risks (Accounting Fraud – Massive cquisitions & Debt) China Aviation Oil (Singapore) – Market and Governance Risks (Misreported oil futures trading losses, Un-hedged open short positions, Oil Prices Increased) Source: PRMIA 7. 8. 9. 10. 11. 12. 13. SURVEY AND BREAK 13 POPULAR CASE STUDIES Midterm 2011 – Q3 Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Part A – Assume that there is no capital market, which investment, A or B, will Jack choose? Justify your answer with calculations (6 marks) Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Part A  œ Assume that there is no capital market, which investment, A or B, will Jack choose?Justify your answer with calculations (6 marks) †¢ If Jack does not invest, his utility is zero †¢ If Jack makes investment A (Utility is ? ) †¢ If Jack makes investment B (Utility is ? ) †¢ Y0 = $500 and Y1 = $0 †¢ Savings = Investment = Y – C Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Part A – Assume that there is no capital market, which investment, A or B, will Jack choose? Justify your answer with calculations (6 marks) †¢ Investment A †¢ UA = (500-244)1/4 (400)1/2 = 80 Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Contact: otto. [email  protected] utoronto. caPart A – Assume that there is no capital market, which investment, A or B, will Jack choose? Justify your answer with calculations (6 marks) †¢ Investment B †¢ UB (I) = (500-I)1/4 (50(I)1/2)1/2 †¢ UB (I) = (5 0)1/2 [(500-I)I]1/4 †¢ Find I* by differentiating UB (I) wrt I (set to zero) †¢ dUB(I) = (50)1/2 (1/4) [(500-I)I]-3/4 (500-2I) dI I* = 250 Derivatives (Review) Reference: Martin J. Osborne http://www. economics. utoronto. ca/osborne/MathTutorial/CLCF. HTM Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Part A – Assume that there is no capital market, which investment, A or B, will Jack choose?Justify your answer with calculations (6 marks) †¢ Investment B †¢ UB (250) = (50)1/2 [(500-I)I]1/4 †¢ UB (250) = 111. 80 †¢ UB > UA Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Part A – Assume that there is no capital market, which investment, A or B, will Jack choose? Justify your answer with calculations (6 marks) †¢ Note: Two methods to calculate I* †¢ 1st method (take derivative of Utility Function) †¢ What’s the 2nd method? Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Alternatively – Investment B Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3Part B – Which investment, A or B will Jack choose? What is his utilitymaximizing investment I* and the optimal consumption plan? (6 marks) (Assume a perfect capital market for borrowing and lending exists and the market interest rate is 20%) Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Part B – Which investment, A or B will Jack choose? What is his utilitymaximizing investment I* and the optimal consumption plan? (6 marks) †¢ Jack will choose the investment with the highest NPV †¢ Calculate NPVA and NPVB Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3Part B – Which investment, A or B will Jack choose? What is his utilitymaximizing investment I* and the optimal consumption plan? (6 marks) †¢ NPVA = -$244 + ($400)/(1+0. 20) = $89. 33 Contact: otto. [email  p rotected] utoronto. ca Midterm 2011 – Q3 Contact: otto. [email  protected] utoronto. ca Part B – Which investment, A or B will Jack choose? What is his utilitymaximizing investment I* and the optimal consumption plan? (6 marks) †¢ To solve for NPVB †¢ Need to find optimal investment (I*) †¢ set MRT = -(1+r) = -1. 20 I* = $434. 03 †¢ MRT = – dF/dI = -25/(I1/2) = -1. 20 †¢ F = 50 ($434. 31/2) = $1041. 67 †¢ NPVB = -$434. 03 + ($1041. 67/1. 20) = $434. 03 Midterm 2011 – Q3 Part B – Which investment, A or B will Jack choose? What is his utilitymaximizing investment I* and the optimal consumption plan? (6 marks) †¢ To solve for optimal consumption plan (i. e. C0*and C1*) Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Part B – Which investment, A or B will Jack choose? What is his utilitymaximizing investment I* and the optimal consumption plan? (6 marks) †¢ To solve for optimal consumption plan (i. e. C0*and C1*) †¢ Total Wealth = $500 + $434. 03 = $934. 3 (set equal to C0 + C1/(1+r)) †¢ PV Wealth = PV Consumption †¢ C1 = 1120. 84 – 1. 2C0 Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Contact: otto. [email  protected] utoronto. ca Part B – Which investment, A or B will Jack choose? What is his utilitymaximizing investment I* and the optimal consumption plan? (6 marks) †¢ To solve for optimal consumption plan (i. e. C0*and C1*) †¢ Total Wealth = $500 + $434. 03 = $934. 03 (set equal to C0 + C1/(1+r)) †¢ U(C0, C1) = C01/4 (1120. 84 – 1. 2C0 )1/2 †¢ dU/dC0 = (1/4)C0-3/4 (1120. 84 – 1. 2C0)1/2 – 1. 2 x (1/2)C01/4(1120. 4 – 1. 2C0)-1/2 †¢ Setting it equal to zero: 1120. 84 – 1. 2C0 = 2. 4C0 C0* = $311. 34 †¢ C1* = 1120. 84 – 1. 2C0 = $747. 22 Midterm 2011 – Q3 Part B – Which investment, A or B will Jack choose? What is his utilitymaximizing investment I* and the optimal consumption plan? (6 marks) (Assume a perfect capital market for borrowing and lending exists and the market interest rate is 20%) †¢ Alternatively: To solve for optimal consumption plan (i. e. C0*and C1*) Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Part B – Which investment, A or B will Jack choose?What is his utilitymaximizing investment I* and the optimal consumption plan? (6 marks) †¢ Alternatively: To solve for optimal consumption plan (i. e. C0*and C1*) †¢ MRS = – (1+r), which leads to †¢ – (C1/2C0) = 1. 2 C1 = 2. 4 C0 †¢ Budget constraint: C0 + C1 / (1+r) = Total Wealth = $934. 03 C1 = 1120. 84 – 1. 2C0 C0* = $311. 34 C1* = $747. 22 Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Part C – Jack can hire a worker to supervise one investment for him. As a result, he can now invest in both production opportunities if he wants.If he hires a worker, he has to pay wages in equal instalments (i. e. Same wage today and next period). What maximum wage per period would Jack be willing to pay? (4 marks) Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Part C – Jack can hire a worker to supervise one investment for him. As a result, he can now invest in both production opportunities if he wants. If he hires a worker, he has to pay wages in equal instalments (i. e. Same wage today and next period). What maximum wage per period would Jack be willing to pay? (4 marks) †¢ NPVA = $89. 33 = W + (W/1. 20) †¢ W = $48. 3 (i. e. Maximum wage per period) Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Part D – Jill earns an income of $250 today and $250 next period but has no access to any production opportunities. She can, however spend some money today to purchase investment opportunity B. Her utility function is: U(C0, C1) = C0 + 2C1 + min(C0, C1) What is the highest price that Jill is willing to pay? (4 marks) Contact: otto. [email  protected] utoronto. ca Midterm 2011 – Q3 Part D – Jill earns an income of $250 today and $250 next period but has no access to any production opportunities.She can, however spend some money today to purchase investment opportunity B. Her utility function is: U(C0, C1) = C0 + 2C1 + min(C0, C1) What is the highest price that Jill is willing to pay? (4 marks) †¢ With a perfect capital market, the Fisher Separation Theorem applies †¢ So the maximum amount she will pay is $434. 03 (i. e. NPVB) Contact: otto. [email  protected] utoronto. ca FINANCIAL MARKETS AND NET PRESENT VALUE (TO SUCCEED – PRACTICE, PRACTICE, PRACTICE) Week 3 – Quick Review (Self-Evaluation) of Week 2 â€Å"GET TO KNOW YOU† SURVEY (Name: Optional)Question #1: †¢ What has occurred in your other courses that you were happy about and would like to be incorporated int o this course ? †¢ What has occurred in your other courses that you were NOT happy about? Question #2: †¢ Anything specific you would like to learn? What are your learning goals in this course? †¢ Any specific requests from the instructor, TAs, program, other support staff, etc? Question #3: †¢ Are you thinking of pursuing further education in Finance, if not then what do you have in mind? And/or†¦ What job(s) are you interested in? Question #4: †¢ Tell me more about yourself (e. . goals, program concentration, 2nd or 3rd year, etc†¦ ) Question #5: †¢ Any other comments, requests, suggestions, etc? TAKE ~3 MINUTES INDIVIDUALLY TO FILL OUT SURVEY TAKE ~ 5 MINUTES TO TALK TO 5 CLASSMATES WHOM YOU HAVEN’T MET YET (write down initials) SURVEY RESULTS (SUMMARY) †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ Real world experiences, practical (real-world) examples, cases†¦ Relevant news (where to find news), Current issues in the market Relate course material to real world Exam tips/techniques Applications and excel models used in the real world Interactive class, games, videos†¦Extended office hours (availability) to address questions Humour Practice questions and solutions; Past exams and solutions Capital markets (high-level overview) Typical jobs in finance, Leading finance organizations Additional tutorial time Stock picking, portfolio allocation/analysis, investment tools/strategies, trading tips Learning topics that can be applied in real life Relate designations/roles to course material and applications Better understanding of financial instruments (e. g. Mortgages, bonds, etc†¦ ) View of finance from other functional areas (e. g. Marketing) http://www. explorefinancialservices. om/Options http://www. explorefinancialservices. com/ Financial Markets: What is Going On? Firms (Users of Capital) Initial Public Off ering (IPO) Secondary Offerings (SEO) Borrowing (Loans, Bonds) Dividends, $ Repurchases, Interest Payments $ Market Mechanisms or Market Makers (Stock Exchanges, Banks, Investment Funds, †¦) $ $ Firms Issue Stock Certificates and Bonds $ $$$ Invested in Stocks and Bonds Investors (Providers of Capital) Investment Banks help firms make transactions Brokers/Dealers help investors make transactions Reference: Alex MacKay 113 Hedge Fund Strategies Dedicated ShortSource: AIMA Canada Further Reading Hedge Funds – Emerging Market Strategy †¢ Emerging Markets (American Depository Receipts – ADRs vs. Foreign Securities) http://www. sec. gov/pdf/ininvest. pdf (Page 12) (SAP) Hedge Fund – Quants †¢ Jim Simons (Renaissance Technologies) – Commodities/Futures – (Rapid Fire Trading) – (computer and system specialists, researchers and traders) (computational linguists–speech recognition/investing) †¢ http://chinese-school. netfir ms. com/abacus-hedge-funds-Jim-Simons. html †¢ †¢ Kenneth Griffin (Citadel Investment Group) – Convertible Bonds –> Long-Short †¢ http://money. cnn. om/2008/12/08/news/companies/citadel_vickers. boyd. fortune/index. htm The Quants (Scott Patterson – Wall Street Journal Reporter) †¢ †¢ http://www. businessweek. com/magazine/content/10_09/b4168070829612. htm http://online. wsj. com/article/SB10001424052748704509704575019032416477138. html Steven Palmer (AlphaNorth Asset Management Inc) (Microcap – Tech) †¢ http://www. theglobeandmail. com/globe-investor/funds-and-etfs/funds/top-hedge-fund-manager-turns-to-techmicro-caps/article1884049/ House Dems propose taxing equity trades to fund new federal programs †¢ †¢ †¢ Financial transaction tax on all stock (0. 5%), bond (0. %) and derivatives (0. 005%) trades Protects financial markets from speculation Make high-frequency trading â€Å"unprofitable† http://thehi ll. com/blogs/floor-action/house/249893-house-dems-propose-taxing-equity-trades-to-fund-new-federal-programs Harsh HFT curbs could sneak into MiFID †¢ †¢ †¢ †¢ Introduction of minimum resting times between trades Could force HFT firms out of the market, widening spreads and making trading more costly Meetings held with the European Parliament’s Economic and Monetary Affairs Committee (ECON) MiFID (Markets in Financial Instruments Directive) – European Union Law http://www. hetradenews. com/news/Regions/Europe/Harsh_HFT_curbs_could_sneak_into_MiFID_II. aspx CAPITAL MARKET THEORY RSM 332 – Week 2 Week 1 – Introduction – Financial Accounting (Review) Week 2 – Financial Markets and Net Present Value Week 3 – Present Value Concepts Week 4 – Bond Valuation and Term Structure Theory Week 5 – Valuation of Stocks Week 6 – Risk and Return – Problem Set #1 Due Week 7* – Midterm (Tuesday*) We ek 8 – Portfolio Theory Week 9 – Capital Asset Pricing Model Week 10 – Arbitrage Pricing Theory Week 11 – Operation and Efficiency of Capital Markets Week 12 – Course Review – Problem Set #2 DueContact: otto. [email  protected] utoronto. ca THANK YOU SEE YOU NEXT WEEK! OFFICE HOURS WEDNESDAYS – 4:00PM-6:00PM ROOM 413 OR 417 105 ST. GEORGE STREET ROTMAN (NORTH BUILDING)

3 Categories of Organisms

Week 2: Week Two – Class Discussion Class Discussion Graded Activity: Class Discussion (25 points) Instructional Objectives for this activity: Identify the three ecosystem trophic categories of organisms. In Chapter 5, the different trophic categories in an ecosystem are discussed and the importance of each of the trophic categories is described in detail. For this week's class discussion, please review the materials assigned in chapter 5, and answer all the prompts below.What are the three ecosystem trophic categories? Give 2 examples of each trophic category that can be found in your town, city or county. What trophic category do you think is the most important in the ecosystem and why? What is biodiversity? Is it important? Relate biodiversity to the trophic categories. What would happen to the rest of the trophic categories if one them was wiped out?The minimum expectation for class discussions is to respond directly to each part of the discussion prompt and to respond to at least two other posts, either by a student or instructor, by the end of the week: Submit one main post responding directly to each part of the discussion prompt. This should be a substantive response to the topic(s) in your own words, referencing what you have discovered in your required reading and other learning activities.You may use resources in addition to your textbook that support your post(s); however, you must mention the source(s) that you used in your post(s). Reply to at least two posts. Responses can be made to students or to your instructor. Responses to other individuals' posts should: Expand on their ideas Discuss the differences between your thoughts and theirs Explain why you agree or disagree. For citation guidelines, please refer to the table in the APA Style section of the syllabus.

Thomas Hardy’s Jude the Obscure

The novel Jude the Obscure, by Thomas Hardy, was first published unabridged in 1896. It narrates the doomed existence of the protagonist, Jude, from the moment he is still a boy at Marygreen and is inspired by a rural schoolmaster to think of a university education, to the moment in which he dies, alone and unattended. It tells the story of a man whose dreams and ambitions are gradually destroyed, and end up being shattered. Jude lives an enternal cyclical movement, in which he never gets any closer to whaever he is looking for, due to forces which seem to be operating against him all the time.In this essay, I will conduct an analysis of these social forces, in order to show that Hardy did create a realistic depiction of ninteenth century British society. According to Brooks [1], a realistic depiction is similar to the vision we have if go up a high tower and remove the housetops of the houses, to show what is really happening in the rooms exposed. It is a duty of the realistic write r, to dismantle appearances and not to reproduce the facade, and â€Å"to give us not only the world viewed, as well as the world comprehended . Hardy shows us that Jude is making choices at a certain level, referring to his personal life, but there are social and economic forces which operate on him so he does not take decisions, once these circumstances limit his choices. Early on in the novel, we see Jude struggling against the circumstances. The village of Marygreen is set in opposition to the university town of Christminster. The young Jude sees Christminster as an enlightened place of learning, relating it to his dreams of higher education and his vague notions of academic success.Yet while Jude lives quite close to Christminster and knows a man who is going to live there, the city is always only a distant vision in his mind. It is nearly within his reach but at the same time unattainable. This physical distance is a metaphor for the abstract distance between the impoverished Jude and the privileged Christminster students. For the first time in the novel we see Jude heading towards a destination, and being unable to reach it. At the start of the novel, Jude is portrayed as a determined and innocent young man who aspires to things greater than his background allows.He resists succumbing to the discouragement of those around him and does not fear the gap he is creating between himself and the other people of his village. He is seen as eccentric and perhaps impertinent, and his aspirations are dismissed as unrealistic. These circumstances might have led him to marry Arabella. All through his young adult life, he avoids going to Christminster. He appears to be afraid of the failure he might encounter there. In Arabella, he sees something attainable and instantly gratifying, as opposed to the university life, of which he fears he may never become a part.In this way Jude tries to avoid disappointment, but finds that he cannot live within the confines of an un happy marriage. The freedom he receives after Arabella leaves is only partially liberating: It lets him be independent in a physical sense, but because he is still married, it forbids him to achieve legitimate romantic happiness with someone else. Jude is attracted to Christminster because of Sue, who he seeks with a strange devotion, despite his aunt's warning that he should stay away from he.Taken together with her warning that marriages in their family never end well and with the fact that they are cousins, Jude's haste to find and fall in love with Sue creates a sense of foreboding about his fate. He finds that the Christminster colleges are not welcoming toward self-educated men, and when he accepts that he may not be able to study at the university after all, he starts drinking. â€Å" He began to see that the town life was a book of humanity infinitely more palpitating, varied, and compendious than the gown life.These struggling men and women before him were the reality of C hristminster, though they knew little of Christ or Minster. That was one of the humours of things. The floating population of students and teachers, who did know both in a way, were not Christminster in a local sense at all. † The narrator tells us how big the distance between his aspirations and his relaity is, since Jude works so hard that he can no longer dedicate himself to his studies at night: â€Å"So fatigued was he sometimes after his day's work that he could not aintain the critical attention necessary for thorough application. He felt that he wanted a coach – a friend at his elbow to tell him in a moment what sometimes would occupy him a weary month in extracting from unanticipative, clumsy books. † The episode in the pub, in which he recites Latin to a group of workmen and undergraduates, shows the contrast between Jude's intellect and his appearance. Christminster will not accept him because he belongs to the working class, yet he is intelligent and well-read through independent study, he is advised to remain in his own sphere.The realization that his learning will help him only to perform in pubs sits heavily with Jude, as we can tell from his reaction at the pub: â€Å"`You pack of fools! ‘ he cried. `Which one of you knows whether I have said it or no? It might have been the Ratcatcher's Daughter in double Dutch for all that your besotted heads can tell! See what I have brought myself to – the crew I have come among! ‘† He looks for consolation with Sue and shows her what he considers to be his worst side†: â€Å"†¦ `I am so wicked, Sue – my heart is nearly broken, and I could not bear my life as it was!So I have been drinking, and blaspheming, or next door to it, and saying holy things in disreputable quarters – repeating in idle bravado words which ought never to be uttered but reverently! Oh, do anything with me, Sue – kill me – I don't care! Only don't hat e me and despise me like all the rest of the world! ‘† Jude is comforted only by the idea of becoming a clergyman. Once again, he does have the ability to make a decision, but he only chooses to become a clergyman because his choices were limited by the conventions and prejudices of society.The moral implications of the friendship and romance between Jude and Sue emerge as an important issue. Jude's doomed existence is also shaped by other people's indecision. Sue shows herself to be both radical in her intellectual views and conservative in her social practices. She leaves the Training College because she discovers that its rules are intolerably strict, and she cannot conform to the rules of her establishment in Melchester either. She comes to see Jude as a protector, and reveals to be quite an impulsive character, and not to care much about Jude's intense feelings for her and the implications of her actions: Suddenly, however, quite a passionate letter arrived from Sue . She was quite lonely and miserable, she told him. She hated the place she was in; it was worse than the ecclesiastical designer's; worse than anywhere. She felt utterly friendless; could he come immediately? – though when he did come she would only be able to see him at limited times, the rules of the establishment she found herself in being strict to a degree. It was Mr. Phillotson who had advised her to come there, and she wished she had never listened to him. † †¦ Phillotson's suit was not exactly prospering, evidently; and Jude felt unreasonably glad. He packed up his things and went to Melchester with a lighter heart than he had known for months. † When they meet, the narrator describes her as unhappy and changed, but not anxious and desperate as she was when she wrote the letter, since Jude is the only one overcome by emotion: â€Å"Though she had been here such a short while, she was not as he had seen her last. All her bounding manner was gone; her curves of motion had become subdued lines. The screens and subtleties of convention had likewise disappeared.Yet neither was she quite the woman who had written the letter that summoned him. That had plainly been dashed off in an impulse which second thoughts had somewhat regretted; thoughts that were possibly of his recent self-disgrace. Jude was quite overcome with emotion. † â€Å"†¦ she had altogether the air of a woman clipped and pruned by severe discipline, an under-brightness shining through from the depths which that discipline had not yet been able to reach. † Sue makes it clear that she doesn't see Jude as a lover, and is annoyed by the fact that he is love with her.She goes back and forth in her protests, sometimes wanting to enter into a romantic relationship with Jude and sometimes believing it to be misguided. When he confesses that he is married, she accuses him of dishonesty, but there is a hint of disappointment in her tone because his marriage o nly adds a further obstruction to their possible romance. She marries Phillotson in this state of anger and frustration, and Jude feels that he cannot and should not dissuade her. By doing so, Sue hopes to protect her reputation and achieve the traditional lifestyle of a married woman.After Jude spends the night with Arabella, Sue tries to push him away again, then invites him to her home soon after. Sue does not know what she wants, but is slowly realizing that she finds Phillotson repulsive. She does not admit to loving Jude, but still turns to him to be her protector. She recognizes her own intellect and her potential for a satisfying career in teaching, and marries Phillotson partly out of a desire for a pleasant work environment. She resists a romantic relationship with Jude, but falls in love with him despite her misgivings.However, when it comes time to marry, she does not wish to enter into a legal contract in which she would again be confined and their financial difficultie s push them into a wandering life. The uncertainty surrounding their status foreshadows difficulties to come, as there is a sense of illegitimacy lingering in their relationship. Society dispproves of it, and the children and Sue's pregnancy only add to that. The tragic conclusion of the novel arises as the inevitable result of the difficulties faced by the two cousins.When Father Time kills himself and the other children, Sue is the one who cannot handle it and start regarding their relationship as sinful and the death of the children as punishment. She thinks the child of a legitimate union had punished the ones of an illegitimate one, as the result of her transgressions against the institution of marriage. She marries Philoston again in an act of hopelessness, almost masochistic behaviour, once she feels repulse for him and knows she will never love him. This action may be seen as an attempt to conform, but it is also a selfish act. Sue could have left Jude and lived on er own, k ept struggling against conventions as a divorced woman.She finds a solution which is, at the same time emotionally torturing and financially comortable for her, while Jude remains lonely and poor, having had both his academic and his romantic aspirations destroyed. Jude then enters a state of self mutilation and acceptance of the suffering. He goes back to Arabella, who once again represents the last and worse of his options, and an act of desistance. After Jude gets sick she imediatelly starts looking for another possible husband, and slowly reveals, throughout the novel, to be quite an animalistic character.She personifies the danger of a bad marriage, and is heartless to the point of being unable to sacrifice a boat race to be with him while he is dying or even to take care of his body after he dies. The Jude we see in the last chapter is a handicapped vesion of the young, ambitious one from the beginning of the novel. He is depicted as a man who is exhausted after having spent h is life fighting against a strong opponent, represented by nineteenth century British society. It ended up mutilating him and left him with nothing, longing for his death.The lack of conflicts' resolution and the sense of vagueness in Arabella's suggestion about Sue's miserable future reveal the modernity of the novel. Accroding to Schweik, Hardy successfully images life as first impulsive passion and confidence leading to disappointments, collapse of hopes, and death. [2] With its open ending, Jude the Obscure turns out to be a novel in which the relationship between form and content becomes the form itself.Bibliography: Brooks, Peter. Realist Vision. New Haven and London, Yale University Press, 2005. Hardy, Thomas. Jude The Obscure. Penguin Popular Classics, England,1994. Schweik, Robert C. â€Å"The Modernity of Hardy in Jude the Obscure†. In: A Spacious Vision: Essays on Hardy. Newmill, The Patten Press, 1994, p. 49-64. Stern, J. P. â€Å"On Realismâ€Å". In: Concepts of Literature. Routledge ; Kegan Paul, 1973. Watt, Ian. â€Å" Realism and the Novelâ€Å". In: Essays in Criticism II, p. 376-396, 1952. ———————– [1] Brooks, Peter. Realist Vision. New Haven and London, Yale University Press, 2005. [2] Schweik, Robert C. â€Å"The Modernity of Hardy in Jude the Obscure†. In: A Spacious Vision: Essays on Hardy. Newmill, The Patten Press, 1994, p. 49-64.

Injury prediction and prevention screening in sport Essay

Injury prediction and prevention screening in sport - Essay Example It will also critique papers and identify the best screening practice covering a wide range of sports and screening tools used for both elite athletes and recreational sports. This review will assess various databases including, EMBASE, PubMed, Cochrane Collaboration, MEDLINE, CINAHL, and Google Scholar in order to establish various studies relevant to this subject matter. The literature shall be narrowed down to the following inclusion criteria: studies on injury prediction and prevention screening, studies on athletes, servicemen, and other active individuals, studies published from January 2003 to January 2013, and studies published in the English language. The credibility of the authors and the publication will be assessed, including the validity and the reliability of the studies. In the paper by Myer, et.al., (2011), the authors set out to apply sensitive laboratory tools in order to establish predictive tools which impact on increased knee-abduction movement (KAM) during landing. The study covered a sufficient population of respondents evaluating two groups of athletes—female basketball and soccer players. The study however chose to cover a single-county public school district, limiting the general applicability of the results. The respondents were asked to participate in testing athropometrics, maturation, flexibility, and strength and landing biomechanics. The study revealed that an increased knee abduction angle, quadriceps recruitment, tibia length, and BMI with lower knee flexion represent 80% of the variance in the KAM in instances of drop vertical jump. In effect, females who manifest increased KAM would be more responsive and would likely manage better after neuromuscular training. Such findings help in identifying those who have a higher ris k for injury assisting also in their neuromuscular training in the prevention of related risks.

Islamic Studies Essay Example | Topics and Well Written Essays - 2000 words

Islamic Studies - Essay Example I t is consisted of everything that the prophet has spoken of, his decisions on important matters, his opinions and his answers to the queries and doubts raised by his followers and believers. The Hadiths literature which consists of the narrations of the life of the prophet also has played major role in the shaping of Islamic faith. The fact that the Hadith were recorded after the death of the prophet make many to doubt the authenticity and the validity of the Hadith. There are people who consider the Hadith merely as a history book having not much of religious significance. The essay attempts to unearth the understanding of Hadith in Islam religion, and it tries to bring out the differences in the understanding and the practice of Hadith soon after the death of Prophet Mohammed with a special reference to the changed political scenario after the Prophets death. The Hadith assumed greater significance after the death of Mohammed as the believers could no longer ask their questions or clear their doubts from the prophet. So wherever they did not have a specific guideline in the Quran, they sought for it in the Hadith. The hadiths very often acted as the guiding principle for the Muslim way of life along with the Koran. One should not forget the fact that the Hadith was transmitted by the companions of the prophet (his contemporaries and witnesses to his teaching) to the next generation through oral tradition in the initial stages. Therefore, many attempts have been undertaken by the scholars to assess the reliability and authenticity of Hadith. The Hadith was judged based on their content, the degree in which they did not contradict the Quran and the extend to which they resonated divine wisdom. Thus, they were categorized into authentic, good or weak. Hadith were collected and confirmed or proved to be authentic by many scholars; however on e cannot negate the influence of personal bias or prejudices in the process. There was also the risk of interpreting the personal responses of the prophet as having general implications to the Islamic teachings. In the eighth century there was a considerable division in the Islamic thought due to the diversity of thought that the Hadith were not reliable and authentic. This division of thought prompted Muhammad ibh Idris al-Shafi to make a common methodology for all schools of Islamic faith by the end of 9th century. He identified four sources of Islamic law- the Quran, the sunnas or the tradition of the prophet, reasoning by analogies and unanimous agreement. The Muslim community strongly believed that Allah has sent His prophets and messengers to keep them united with Him and Mohammed for them is the last of the prophets. Mohammed proved himself to be a strong religious leader for the Muslims and after his time the Islam community really lacked strong spiritual leaders even though they did have some powerful rulers in the caliphs who succeeded Mohammed. After the death of Mohammed, there weren't any undisputable leaders for the Muslims and one comes across a series of struggle for power and control over the Muslim community and it is interesting to note how this struggle affected the Muslim belief and their way of life. It is these struggles that led to the formation of Sunnism and Shiism, and the underlying reason for most of the conflicts and struggles within Islam can be attributed to these struggles. The original version of the Hadiths suffered various setbacks at the hands of

The brand has become the critical source of competitive advantage for Essay

The brand has become the critical source of competitive advantage for many hospitality organisations. Critically evaluate the importance of Human Resource Stra - Essay Example However, to create time for hospitality management to focus on the customer experience, means executives must free themselves from running the less-value added parts of the core business. This is often becoming difficult to achieve because of the volume of issues hospitality companies deal with today: The total guest experience is often more than a particular lodging or food service organization. For instance, customers may want to find other points of interest near their current lodging or dining location. By definition, a brand is a promise made by a company to its customers. This promise is a bundle of goods that includes the product, its related services and intangible elements such image. Essentially, the brand promise reassures the customers in the purchasing process: they know what it is they are buying and they know what they will get. In the hotel business, this notion is very important. When traveling, a customer will seek to eliminate as many unknowns from the process as possible. In planning the trip, the choice of the hotel becomes a key decision. Knowing beforehand where you are going and what you will be experiencing once you are there, substantially reduces stress. Therefore, a well recognized and defined brand stands to gain a substantial share of the traveler market compared to a local, unknown brand. Furthermore, the known brand can sustain a competitive advantage having attracted the traveler the first time around. If the brand met the customers expectation, there is little incentive to change the next time. So the notion of the hotel brand plays an important role in attracting customers and retaining loyalty. Branding begins with principles. And the brand experience is shaped by every action of every associate. Take the lead and help determine the guiding values that inform and shape every decision which impacts those associate actions.( Rick Hendrie, 2005) Though the hospitality industry maintains the brand,

Industry overview of Yahoo company Essay Example | Topics and Well Written Essays - 750 words

Industry overview of Yahoo company - Essay Example By means of contrast and comparison, the main competition for Yahoo, Google, Microsoft, and Apple fall into two distinct groups with regards to their own value proposition. As can be expected, Google mirrors Yahoo with regards to the way in which it offers services in an attempt to garner a further level of customers. As such, Google has the value proposition of having Gmail, YouTube, Picasa, Google News and a litany of other associated services. However, both Microsoft and Apple approach the market from a somewhat different standpoint (Reingold, 2013). For example, for Microsoft and Apple, the services that are related are more oftentimes related to actual hardware that works seamlessly with the online services that they already offer; i.e. iTunes or the ability to sync hardware with that information that is being viewed online . This somewhat differentiated focus allows Yahoo to have a distinct advantage with regards to the fact that it is ultimately most closely competing with Goo gle in terms of the market that has already been defined. From an analysis and review of Porter’s five forces, with respect to Yahoo Inc., it can be determined that the threat of new entrants is not something that Yahoo should be particularly concerned with. Due to the fact that the market is already heavily stratified, the danger of new entrants is something that Yahoo need not be overly concerned by. Similarly, the threat of substitutes products is something that Yahoo must perennially be on guard against. Due to the fact that the Yahoo business model has been largely successful, although arguably not nearly as successful as Google, the threat of substitutes products that could take away their stake in the market is something that Yahoo is faced with on a daily basis. Likewise, the bargaining power of the consumer is naturally a pertinent concern due to the fact that any changes within the baseline of the

Medical microbiology Assignment Example | Topics and Well Written Essays - 750 words

Medical microbiology - Assignment Example Some of them are insufficient media, bactericidal activity present in blood, amount of blood used for culturing, antibiotics occurrence, blood collection time. Most of bacterial cells of Salmonella serovar Typhi resides intracellulary in the patient’s blood. There is a need of reliable, rapid and sensitive methods for clinical detection of Salmonella serovar Typhi. Serological tests are available but its sensitivity and specificity is very low. The blood culture sensitivity is highest during the first week of illness but it then gradually decreases with advancement of illness. 45- 70% patients of typhoid fever can be identified through blood culturing. It depends upon the blood sample amount, bacteraemic level of Salmonella, culture medium type, length of incubation. Also the Salmonella bacteria presence in patient’s blood is very low, often below detection by blood culturing and even below detection by PCR. Difficulties become more due to limited amount of patient blood sample. Ox bile tryptone soy broth was used for blood culture; it allows blood cell lysis completely, which causes the release of intracellular bacteria. It does not inhibit the growth of Salmonella Typhi. From research it was found out that bacterial growth can be increased if blood culture media contains lyzing agents for blood cells. By performing various tests it was found out that 2.4% ox bile presence in blood culture will lyse blood cells within 1.5 hours so that the bacteria present intracellulary came out. Salmonella bacteria when kept in tryptone soya broth containing 2.4% ox bile for 3 hours will increase the amount of bacteria from 0.75 CFU per milliliter of blood. This level can be easily detectible by using regular PCR method. This blood culture PCR assay processing time is lesser than 8 hours as compared to conventional blood culture which may take 2 -5 days. Salmonella serovars patient’s blood or serum is also bactericidal

Mel Gibson's Brave heart Movie Review Example | Topics and Well Written Essays - 1750 words

Mel Gibson's Brave heart - Movie Review Example Though special effects somewhat gives the sensation but unless and until a good direction and camera are co-operating, everything turns to be a flaw. One simple instance can justify this statement and that is character movement. If a character walks away in a room, camera must be moved or positioned to frame his movements adequately. If it's a scene where one wants to show the whole image of a ship or a building then aerial shot is preferred where track won't serve the purpose. Aerial shots are done with crane or helicopter. A minute mistake during camera can lead into wrong understandings. If there is a shot where person is getting surprised and it is taken as either long or mid shot then the actual feeling of astonishment may not be clear in frames. Camera usages stand a very important tool in one movie making. Braveheart (1995) is a movie which shows an excellent art of direction and camera that gave it to the honor of five Academy Awards in the 68th Academy Awards ceremony, inclu ding the Academy Award for Best Picture and Best Director. It's the camera and only the camera which can take one movie either to Oscar platform or out of its market. Camera operators need good eyesight, artistic ability, and hand-eye coordination. They should be patient, accurate, and detail oriented. Camera operators also should have the ability to hold a camera by hand for extended periods. Braveheart is the partly historical, partly mythological, story of William Wallace, a Scottish common man who fights for his country's freedom from English rule around the end of the 13th century. Braveheart: An Example of Creativity For one film, the starting and ending shots are two important aspects. As "first impression is the last impression", first scene of movie is very important to generate interest into viewers' minds. It tells about the movie basic, means its category whereas ending scene should summarize the whole story into a single scene. If it starts with murder or attempting to murder scene that means movie is more likely of thriller type. Braveheart starts with the natural views: high hills and dense forests; camera was done from helicopter and using crane. If it was not done so then it would be impossible for someone to get the feeling in depth. This is giving a message that it's a movie related to the lifestyle of people during ancient times and warlike nature. Story begins with a little boy William, who grows up and later becomes the central character of the story. In his childhood he lost his father and only brother. The art behind the camera can be explained by few examples. In one situation William was alone and no one was there with him except one little girl. In the shot it was shown by placing the boy alone and crying, before him his father was being buried by someone else and other villagers were leaving the place except one little girl, with her face turning towards William. All these emotions were captured into a single time shot. A good director is one who can express most of the ideas in least amount of time without losing its interest upon the audiences. Instead of doing in a single one if multiple slots were taken, frame might have lost its natural rhythm. After that, boy got a company from his

The Military Art Reseach Paper Research Example | Topics and Well Written Essays - 750 words

The Military Art Reseach - Research Paper Example With the passage of time, technology has grown and revolutionized the world. This revolution has changed the contemporary nature of war as well. Different wars have led to different consequences as its affect on politics, economy and psychology of the masses depends on the nature of war. Total war not only affects the political system of a nation but can also affect the social and economic system. Total war deploys strategies and resources to defeat the enemy in every way possible which may even include the psychology of people. In this paper, we will discuss the transition in the nature of war based on our study of Napoleonic, American Civil and Franco Prussian wars. All three of these wars mark the transition from limited to total war. These wars hold great importance in our history as they have produced dire consequences because of their nature. Napoleonic wars were a series of wars, fought between France and several other European states between 1792 and 1815. These wars are impo rtant in the respect that they earned the title of first total war in western history. Previously Europe had seen limited wars which meant that armies avoided large scale battles, civilians could hope for merciful treatment from the enemy, Enemy officers were considered as honorable adversaries at the time of settlements and the wars followed the codes of aristocratic honor. The French revolution broke this tradition of limited war. It overthrew the country’s aristocracy and waged war under the leadership of Napoleon Bonaparte against several European states. In the Napoleonic wars not only were young men supposed to participate in war but women, children and the aged were also required to channel their energies into war efforts. The statistical results clearly identify the catastrophic casualties of this total war. â€Å"More than one-fifth of all the major battles fought in Europe between 1490 and 1815 took place in the 25 years after 1790. Before 1790 only a handful of ba ttles had involved more than 100,000 combatants; in the 1809 Battle of Wagram, largest in the gunpowder age to date, involved 300,000. Just four years later the Battle of Leipzig drew 500,000, with fully 150,000 of them killed or wounded.† (â€Å"Napoleon's Total War†). France alone counted around one million war deaths. In these series of wars, the whole population was mobilized which meant that every citizen was supposed to participate in the war in one way or the other. The technological aspect of these wars that aided in the transition from limited war was the advent of cheap small arms and mobile cannons due to which the number of citizen soldiers increased. Almost forty six years after the defeat of Napoleon at waterloo, the world witnessed another total war at another geographical area that is America. American Civil war (1861-1865) was another series of conflicts between American Union and American Confederacy. Most of these conflicts took place in the southern states of America. â€Å"The Union lost about 360,000 troops during the Civil War and the Confederacy about 260,000. This is almost as many soldiers as have died in all other American wars combined.† (â€Å"Civil War Guide†). American Civil war became known as the first total war of modern history because it brought various social and financial changes in the system. The civil war initially started as a limited war but it gradually changed into total war. It was a war between the people and not

Answer questions Assignment Example | Topics and Well Written Essays - 250 words - 12

Answer questions - Assignment Example The company should address all avenues of accident that have led to previous tragedies in the mining operations. One of the suitable approaches to pursue is increasing investment in safety at the mining site. It is also crucial to investigate tragedies that befell mines comprehensively. Subsequently, it is important to order for the immediate closure of sites that appear insecure. The company should also ensure effectiveness when adhering to procedures, policies and standards. The other important measure that Massey Energy will be compelled to takes will be to ensure speedy and appropriate response to incidences of tragedy and accidents at the mines. The closure of dangerous sites will serve as an economic stimulus because the organization will concentrate on productive sites and boost their revenue. In addition, focusing on safety system will enhance productivity and allow the organization to improve efficiency and output. It means that fewer accidents will occur and majority of the personnel will be available to

American Literacy in the Age of Information Essay Example for Free

American Literacy in the Age of Information Essay The age of information is demonstrated by the development of technology. The American culture has adopted and adapted to a new practice of transmitting and accepting information. Although the age of information presents an outlet for creative expression and exploration, American literacy is in a transitional period because technology is constantly changing and the unlimited amount of capabilities and influence that technology has upon education and communication are significant and since technology is still in the process of development it raises concerns about privacy acts and ethical issues. While this new era enables the opportunity to send and receive information so quickly and efficiently, the new digital age of information requires being educated and knowledgeable about information technology in order to achieve success. Information technology is a term that may be described in many ways but ultimately, information technology (IT) is considered a general term applied to all computer- based technologies of human communications (Information Technology, 2006). Literacy of this time may be simply defined as â€Å"basic competence in reading and writing† (Literacy, 2006). The World Wide Web offers opportunities of unlimited information that could be accessed from anywhere at any time as long as there is internet connection. The freedom to explore and express has two outcomes- to progress society or decline society. Technology has major influences in all trades of the world, but it starts with education. â€Å"Technological education can provide students with a wealth of information and knowledge, which they can then use in the future to pursue related career or simply as a subject of interest and intrigue† (Importance of Technology in Schools, 2009). Creativity and encouragement for young minds to explore all the possibilities produces more productive adults. The introduction of the internet is obviously a worldwide phenomenon. Although this phenomenon provides unlimited access to any genre of information, it may not be true. Educating students on how to productively search for information and how to evaluate credible material makes all of the difference. Furthermore, American literacy is in the process of transition that is constantly improving education and communication. Each individual has different learning capabilities separating themselves from others. The traditional ways of reading and writing with books and pens and paper are updated. It is now made much more convenient, just at a touch! The ability of modern technology provides education for students and adults with special needs that a regular education cannot meet. â€Å"Despite the lack of data showing that technology has a tremendous effect in the classroom; teachers have found that using technology may help address students’ specific learning needs. Charles MacArthur, a special education professor at the University of Delaware, explains that students who have learning disabilities, including dyslexia, typically need help with transcription processes to produce text, spell, and punctuate correctly. However, any students having trouble with writing fluency can benefit from teachers integrating technology into the classroom. And sometimes tried-and-true technology works the best† (Allen, 2008). Addressing students special needs are vital because it encourages and guides them to reach their full potential. The world of technology created an opportunity for special needs students to learn and communicate just as well as independent students. Have you ever wondered what the world would be like without communication? The basic method of communication such as telegraphy advanced to â€Å"snail mail† and it is now at the stage of texting and emailing. Technology is used as a tool in various approaches and may be beneficial or harmful. Finally, the freedom of the new age of information is limitless which raises concerns about privacy laws and ethical issues. With the good, comes the bad. It seems as though there is no way around it. As beneficial as technology is, issues of ethics and privacy concerns Americans who are violated of their personal information. The conveniences of being able to shop, pay bills, create and maintain online accounts online leaves vulnerability to identity thefts and fraud. A USA report suggest that although many Americans acknowledge the potential benefits of being able to interact with government online, similar proportions of the population express concerns about the privacy and security of their personal information submitted through government websites (The New E-Governement equation, 2003). Regulating the internet is going to be a battle. The freedom to explore quality in the truth is a personal right. Criminals and violators will constantly prey on their victims. The resolution lies within the future, but the solution starts with each individual protecting their own identity and prevents fraud and theft. The age of information provides an outlet to send and receive information quickly and efficiently. It is important for students to correctly learn how to utilize the web to enhance their creative expression and information technology comprehension. Education and knowledge is the most powerful took to use when conducting anything. Technology is only progressing and dominating the world. American literacy could not be described as more or less in today’s society but rather enhanced and evolved into normalcy. References: * Education Update:Leveraging Technology to Improve Literacy:Leveraging Technology to Improve Literacy. (2008). Membership, policy, and professional development for educators ASCD. Retrieved 2012, from http://www.ascd.org/publications/newsletters/education- * Excellence in Government Home | Online Registration by Cvent. (2003). Retrieved 2012, from http://www.excelgov.org/usermedia/images/uploads/PDFs/egovpoll2003.pdf * Importance of technology in schools | Centre for Education in Science Technology. (2009).Centre for Education in Science Technology. Retrieved 2012, from http://www.cest.org.uk/importance-of-technology-in-schools/ * literacy. (2006). In Collins Dictionary of Sociology. Retrieved from http://www.credoreference.com/entry/collinssoc/literacy

Ferrari Marketing Analysis

Ferrari Marketing Analysis Jump to:   Ferraris Marketing Strategies | Product Life Cycle of Ferrari | SWOT Analysis of Ferrari | Porters 5 Forces Introduction Ferrari history Ferrari is a manufacturer of Italian sports cars, and is based in Maranello, Italy. It was founded by Enzo Ferrari in 1929, and was originally named Scuderia Ferrari. When Enzo was ten year old, his father had taken him and his brother to watch motor racing circuit. Enzo was completely motivated by this action. In 1918 Enzo works as a test driver for a small company in Turin. In 1919 Enzo works for C.M.N in Milan, Initially as a test driver and later on as a racing driver. In 1920 Enzo finishes second in the Targo Florio. This lead the gateway for a 20 year collaboration with marquee that saw Ferrari do test driving to racing, and finally appointed head of racing division for Alfa Corse. Ferrari opens Auto Avio Costruzioni on Viale Trento Trieste in Modena. On September 13th, at the same headquarters of the old Scuderia Ferrari, Fiat platform Auto Avio Costruzioni builds 2 versions of Ferrari 815 in the year 1940. The factory was bombed in the world war on November 4th 1944, but they managed to rebuilt it quickly. Ferrari had an ambitious plan to build a V12 engine, and thus started designing the first Ferrari in 1945. Scuderia Ferrari sponsored drivers and manufactured race cars, but in 1946, it moved into the production of street legal vehicles, as Ferrari. In 1956 Ferrari turns into a Limited Liability Company. The professional industry and artisanship training institute was built in Maranello, which provides the company with special technicians even till today. In 1965 Ferrari signs an agreement with Fiat Group giving 50% of its share in the company to Fiat group in order to grow into a powerful company. Through the years, Ferrari has been celebrated for its unceasing contributions in the field of racing, specifically in Formula One, where it has been considerably successful. As on the writing of this assignment, Fiat owns 56% of Ferrari, Mediobanca owns 15%, Commerzbank AG owns 10%, Lehman Brothers Owns 7%, and Enzos son Piero Ferrari owns 10%. Vision and Mission of Ferrari Ferraris vision and mission has remained the same for years: To build unique sports cars that are suppose to bring out the excellence of Italian cars on the roads and on the racing circuits. Market Orientation Market orientation defines an organization that understands customer needs and their importance, focusing on providing products that are of high value to their customers, and marketing the products and services across all departments using a coordinated holistic program in marketing concept, taking into consideration Customer is King. Market orientation mainly focuses on: Understanding customers needs Competitors abilities and continuously collecting information about them. Sharing of information across various departments. Creating customer value using above mentioned information. The following table identifies and describes the marketing orientations Orientation Profit driven Western European Timeframe Characteristics Production Methods of production Until the 1950s The improving production and distribution, to achieve a reduction in cost and improved efficiency. Product Product quality Until the 1960s Products quality is paramount main Focus is on product not customers needs Selling Methods of selling 1950s and 1960s Effective selling and promotion are the major drivers to success. Marketing Needs and wants of customers 1970s to present day providing goods and services that are sure to satisfy the needs and wants of customers or end users. Further approaches include Relationship marketing and Societal marketing Relationship marketing Building and keeping good customer relation 1980s to present day Main focus is placed on the whole relationship between the suppliers and customers. The basic aim is to give good or best possible attention, customer services and build customer loyalty. Societal marketing Benefit to society 1990s to present day It has similar characteristics as marketing orientation but with the added condition that there will be limitations on any harmful activities to society, in product, production, or selling methods and procedures. Customers needs keeps changing over time to time. Ferrari has persuaded their customers to buy their product because of its style, speed, luxury, and elegance. Then, as soon as a company brings out a car that is a better match for Ferrari, They might drop Ferrari in favour for that car. But interestingly Ferrari has always managed to develop cars that reflects their customers needs and they may not switch so readily. And Ferrari has managed to do this for the past several decades, and till today. Ferrari has always focussed on their competitors and their customers by continues improvement in performance of their products and services. Ferraris success can be scaled only with respect to product or brand value. It is not done based on sales and revenues. Neither is it done based in terms of market capitalization, because no initial public stock offering was done by Ferrari. It is said that the Ferrari brand is worth more than Google brand, the Apple brand, BMW, Mercedes, or any other brand in the world. Yet, Ferrari never spends any money in advertisement. Marketing Concepts: Ferrari is a Product oriented company Ferrari produces excellent, well designed, quality products which are great value for money. Customers are sure to want our products. Thats the kind of approach Ferrari demands out of it customers. Product orientation occurs where the focus is given to the product rather than to the needs and wants of a customer. In a company like Ferrari they need to concentrate on their products, because over the years Ferrari managed to satisfy its customers through its superiority in quality and performance by delivering speed, style, luxury in their products. Relationship marketing of Ferrari Ferrari has always managed to Build and keep good relationship with their customers, by providing value for the customers money. Ferraris focus is on the whole relationship between suppliers and customers. Ferraris aim is to provide the best possible attention, Customer services to their customers by providing quality and increased performance in their products and services, and therefore build customer loyalty. Societal marketing of Ferrari This concept is based on social responsibility or societys long term interests. It explains an organisations task is not only to provide customers with quality products, but also to do that in a way that preserves, protects, and improves the societys well-being. In the 21st century, people are more aware of the sensitive issues than the earlier generation, such as health issues, global warming, shortage of resources etc. Ferrari has adopted this marketing philosophy to get the attention of the customers, The organisation understood the need for bringing out a new car that is eco friendly, thus they introduced the new electric hybrid Ferrari 599, which has a maximum speed of 200mph. The main aim of this car is to cut fuel consumption and pollution with the motive of breathtaking acceleration and performance. Marketing Strategy of Ferrari The success behind the marketing strategy of Ferrari is done by the review of Ferrari and its development through the ages. Enzo Ferrari never went to college or high school, he was just a mechanic at Alfa Romeo, not an engineer either, but his strong passion for racing, speed and engine, made him have his own ideas on engines and cars. Passion has always been the drive of Ferrari. And its the only marketing tool of Ferrari till today. Competitive Advantage Impact of the Organisations Marketing Mix Marketing mix can be defined as the use and specification of the 4ps (place, promotion, price and product) to describe the strategic position of an organisation in a market place. Other 4ps could be included as people, public relations, physical evidence and packaging (Kotler, Philip, lane and Keller: 2005) â€Å"Marketing management Prentice hall The mix represents the â€Å"variety of integrated decisions† which is taken by a company in order to assure the success of the marketing department. Usually, decisions are made in four areas represented by the 4Ps used in marketing mix: product, price, place and promotion. The 4Ps involve issues like brand name, product type, pricing, advertising, retailing and distribution (Business and Management Dictionary 2007). These fundamentals have to be managed effectively by the marketers to top customers needs enhanced than competition this means that decisions concerning the marketing mix forms a major aspect of marketing concept implementation (Jobber 2007), the combination of these elements also helps in influencing the demand and supply of the products and service presented to customers by the company. Product: This is regarded as a very vital element of the marketing mix. It is whatever thing that can be offered to a market which can be noticed, acquired, used or consumed that might gratify a want or need .Physical objects, services, ideas, organizations, persons places may be part. (Kotler et.al. 2005). It also involves the decision of what goods or services that should be offered to a collection of customers (Jobber 2007). The decision for product involves branding, quality, packaging, guarantees. Price: This is the only element of the marketing mix that generates revenue. â€Å"Price is the sum of all values that consumers exchange for the benefits of having or using the product or service.† (Kotler et.al. 2005). Promotion: It involves all the forms of communications used by the marketer at the market place about benefits, added features etc of a product. These are the major components of the promotional mix Advertising, Personal selling, Direct marketing, Internet promotion, Sales Promotion and publicity. Place: It is the mechanism through which goods or services are moved from the manufacturer/service provider to the end user/consumers. The accessibility of a companys product or service at the right quantities in the right (convenient) locations at the times when the customers want to buy them that is the distribution channels to be used and their management (Jobber 2007) According to Ivy (2008) tangible products uses the traditional 4Ps model while the intangible product or services sector on the other hand uses a 7P approach in order to satisfy the needs of the service provided to customers: product, price, place, promotion, people, physical facilities and processes. Product The product is one of the main building blocks of the marketing mix. It is known as the merchandise which provides the consumer with the basic functional requirements. Jobber describes a product as anything that is capable of satisfying customer needs. A product has to be appealing to its customers; therefore, producers need to ensure that their product would meet consumer satisfaction. This section will look at the product strategy of Ferrari Company and analyse a sector of their products using the product life cycle. A Ferrari principal automobile product group includes, 360 spider, 456M GT, 550 Maranello, 550 Barchetta Pininfanna, super -america salon, F430 spider. â€Å"The core element in the marketing mix is the companys product because this provides the functional requirements sought by customers†(Jobber,2007 p326).A well thought out product will provide the company with a good external image as well as customer loyalty which are essential for a companys competitive advantage.(BrassingtonPetitt, 2006:288) further defined a product as â€Å"a physical good idea, person or place that is capable of offering tangible attributes that individuals or organisations regard as so necessary, worthwhile or satisfying that they are prepared to exchange money, patronage or some other unit of value in order to acquire it†. This above definition gives the idea that a product can be classified into tangible or intangible products. The tangible products are the physical goods whilst the intangible are the services that offered for example the Porsche car by Ferrari is the tangible product while the FI car race competition, after sales services are all intangible product to Ferrari. 3. DIAGRAM Product is classified into the following three categories namely the core product, the actual product and the augmented product. The product when benefited, is made valuable by the core product. For example, the core products in the Ferrari automobile is the speed attribute that comes with every Ferrari brand of automobile. This is one of the reasons why people that love fast cars will always prefer a Ferrari brand to any other brand of vehicle. Also Ferrari shows off this benefit to the prospective customers by organizing the car racing competition and also in their various advertising mediums. The tangible physical product is the actual product. This includes the physical automobile itself that comes in every different shapes and sizes. The physical attribute or component of the automobile itself is what is called the actual products. For example the Ferrari automobile F430 spider is an actual product for Ferrari. The non-physical part of the product is the augmented product. For example, warranty and customer service support. This shows the other services or component that comes with the buying of the automobile itself. The replacement part is an example of the augmented products. 4.1.2. Ansoff Matrix Planning for Growth The Ansoff matrix is a tool that helps businesses to strategize on their product and make necessary decisions for their market growth. With the Ansoff matrix, Ferrari would be able to know how the F430 spider automobile is doing in the market place and decide whether or not there is an advantage of entering the market place. The Ansoff matrix is a tool used to generate direction for strategic development for companies. It gives a sense of scope for the companies with regards to marketing of its products, whether to diversify, or to further develop more of its markets. Market penetration: According to Johnson, Scholes Whitington (2008:258) this is the process by which the organisation takes increased share of its existing markets with its existing product range. This will in turn lead to higher bargaining power of the supplier as Ferrari will have a larger market share. Johnson; ScholesWhitington (2008:258) also explain that â€Å"in terms of the five forces increasing market penetration is likely to exacerbate industry rivalry as other competitors in the market defend their share†. For example Jaguar cannot let Ferrari continue to have growth in market share while it sits behind. Ferrari has a % in speed car market while Jaguar has a % in market share in luxury car market. Product development: is where organisations deliver modified or new products to existing markets. Here product development implies greater degrees of innovation. Johnson, ScholesWhitington (2008:261).With the car manufacturing industry there is a continuous need to develop products so as to make sure customers needs are effectively met. For example Ferrari has even committed itself to sponsoring the formula one racing competition yearly to showcase new technology and improvement in diverse innovation. Market development involves offering existing products to new markets. Johnson; ScholesWhitington (2008:261). Ferrari moved over to other international markets like Canada, Mexico and USA. Market development might take three forms, new segments, new users and new geographical location. Johnson, ScholesWhitington describe diversification as a strategy that strictly takes the organisation away from both its existing markets and its existing products, it tends to imply unrelated or conglomerate diversification. Johnson further gives the reason for diversification saying that â€Å"efficiency gains can be made by applying the organisations existing resources or capabilities to new market and product or service†. This in turn will increase market power leading high entry barriers for new entrants. 4.1.3. The Product Life Cycle Every product must have a limited life span. The product life cycle tool allows a company to evaluate its product based on four stages. These stages include the introduction, the growth, the maturity and then the decline. All products must go through these four basic stages; therefore to maintain a good competitive advantage all companies ought to have the product life cycle tool as a basis of analyzing a product as it changes over time and also to be able to know what stage their product falls under a particular time. Price All products and services have a price, just as they have a value. According to Armstrong and Kotler, â€Å"Price is simply the amount of money charged for a product or service†. In a broader context, price is said to be the sum of all the values that consumers exchange for the benefits of having or using the product or service. Price is also one of the most flexible elements of the marketing mix in the sense that pricing decisions can be implemented relatively quickly, a tool used by companies to achieve their marketing objectives as well as the only element in the marketing mix that produces revenue. (Armstrong and Kotler, 2006) Price is one of the most significant essentials of the marketing mix because it is a unit source of what the company receives for the product or service that is being sold. Furthermore, Price is the only aspect of marketing mix that creates returns or produces profits. Price can also be defined as the perceived value derived by consumers of a product or service from the purchase of it or the sum of the value that consumers exchange for the benefits of having or using the product or service (Kotler and Keller 2006). Furthermore, price is a crucial product-positioning fact or that defines the products market, competition and design. The intended price determines what product features can be offered and what production cost can be incurred. There are different strategies that can be used by companies to price various products based on different reasons. Setting prices too high could amount to an abrupt reduction in sales, while setting prices too low could also cause a reduction in profits. The most appropriate strategy depends on how the product is positioned. A product could be positioned as being of premium value with a high price adding to the way it is perceived, individual products could be positioned high or low with consistent pricing across a product range, different strategies could also be appropriate at different stages in the life cycle of a product and charging a fixed price across a range of products could also be an a appropriate strategy. Charging fixed prices makes it easier for a company to predict its income. (www.is4profit.com) Pricing of a product can be determined in different ways, the company must however have decided on its own strategy for the product and this is however a direct function of its target market and market positioning that is past decisions on its market position. The diagram below illustrates the pricing strategies matrix. Price Skimming: This strategy is where a high price is charged because of substantial competitive advantage, the price is firstly made high, which offers an excellent initial cash flow to make up for high development expenses. If its a new product, with a competitive advantage, then consumers would definitely pay a premium to obtain the product offering excellent quality.(Adcock, Dennis 2001:267 ) .According to Kotler (1996), â€Å"the skimming price strategy is a high price which provides a strong margin but risks a depressed sales level†. The Ferrari price skimming strategy is because of its core benefit and to have a niche for itself in the market place. Premium Pricing: A ‘premium strategy uses a high cost, but offers superior product/service in return. (Adcock, Dennis 2001:264)This is used when a significant competitive advantage is present and high price is set because of the exclusivity of the product or service. The exclusivity of the fastest car model by Ferrari contributes to its premium pricing strategy. Economy Pricing: This is also known as no-frills, it is a low price approach where costs of production and promotion costs are kept to the lowest, that is the product or service would be set at its cheapest price. Economy pricing is a deliberate strategy for low costs. However, prior to the product launch, it is vital to decide the position/market share of such product. That position of the product is how it is distinguished in the market. A product that is solely dependent on price is likely to be helpless and prone to that compete purely on price is helpless and prone to attack from more established products. (Adcock, et.al. Dennis 2001:2006). According to our research, Ferrari automobile does not use this pricing strategy. Penetration Pricing: This is when the price for a product or service is firstly set low in other to have a price advantage to gain a large market share for penetration of the market. Once a deep access to the market share is attained, the prices would raise. According to our research, Ferrari automobile does not use this pricing strategy. Versioning/Price discrimination: This strategy charges customers different prices for the same product/service .The company (sellers) segments its customers based on their different attributes and charges each group a different price. This contributes to the various models of automobile designed by Ferrari in order to satisfy the quest of every vrsion of the customer need. (www.AINI.com 2008). Bundle Pricing: This is where the seller combines several of its products and offers the bundle at a reduced price(Kotler.et.al 2006) Geographical Pricing: This strategy is applicable where diverse prices are charged according to locations either different parts of the country or different parts of the world. It involves the modification of the main price list based on the geographical location of the buyer. It usually takes into consideration the transportation costs to different locations. 4.2.1 Recommendations for the Pricing Mix Because of the recent global recession, consumers are not willing to spend on luxury goods to be saturated as many consumers perceive the product as a premium product; Ferrari can therefore produce the different model of automobile that can suit different set of people and also at various ranges of prices for its to compete like other competitor like Toyota, Honda, Ford etc at the marketplace. Place Place can also be referred to as the distribution channel which is used by producer or service provider to reach the indented target market. There is need for producer to make its products available in adequate quantities, in convenient locations and at times when customers want to buy them. It is important that producer need to consider not only the needs of their ultimate customers but also the requirement of channel intermediaries, that is those organizations or agents that facilitate the distribution of product to customers. Establishing an appropriate channel of distribution is critical for marketing success. (Jobber 2007:679). To achieve a fully effective marketing mix the element of place is to be studied, this element can be referred to as distribution. Distribution channels are the links that connect marketing organizations together and are used to transfer products from distributor to end consumer or final markets. DIAGRAM 6:DISTRIBUTION CHANNELS FOR CONSUMER PRODUCTS (Jobber, 2007:682) The different types of distribution channels are: Direct channels which link the producer directly to the consumer, Indirect channels which vary in length depending on the number of intermediaries, and Hybrid channels. Direct Channels- This form of links does not always happen in Ferrari sales of cars except when the car is to be built customised for the customer in question. This is a gives a direct relationship between Ferrari and the customer. Intermediaries These can vary from sales representative, agents, merchants, wholesalers, retailers, dealers, distributors and franchisee. Their basic roles involve reaching customers at a lower cost per unit than the supplier can achieve directly. Other responsibilities of intermediaries could include stockholding costs, transport and delivery to final customers, breaking bulk and consolidation of orders, and providing local services such as display or after-sales service. Producers must meet intermediarys needs as well as the final customers needs, in some markets; intermediaries may lead the market and promotional effort. Producers put an effort to keep the end customers aware of their intermediarys locations. Disintermediation: The channels efficiency is improved and the cost is cut down by eliminating some layers of the distribution channel. ‘Among the decisions then to be taken is the important one of how products will reach customers. Unless the channels of distribution are appropriate for the type of product and are efficiently operated., even intrinsically good products can end up as failures . . . it is worth spending a considerable amount of time and effort in evaluating alternative ways of ensuring that the channel eventually selected will make its full contribution to the marketing mix. (Chisnall 1995) Ferrari has been able to improve accessibility to their customer by using intermediaries to retail their products all over the world. This shortens the location and time gap between the actual company and its end users. Ferrari also provides some products that provide specialist services. Intensive, selective and exclusive distribution channels ‘Digital technologies are changing the face of distribution. For example, the Internet has changed the distribution of music and video (downloads). And also ‘Mobile networks permit the distribution of such products as music, video and ringtones. In business-to-business markets customers can place orders, receive quotes and track deliveries over the Internet† (Jobber 2007). Exclusive availability, a consumer characteristic that highlights the interest of the consumer to obtain the product individually with a sense of uniqueness is seen with the ability to customize different cars parts to the taste of the customer. According to Adcock (2001) â€Å"any purchase decision made by a customer can be helped by making the products available where potential buyers can find them† (Adcock et al. 2001). Products may be offered directly to the final customer or through a chain of distributor(s), this is also known as the channel choice. The Internet Dynasty The elements limitations have changed with the introduction of the internet market place, the ability to reach customers on a global scale are what multinational firms aim for, putting all their resources and capabilities to ensure that consumers all over the world are able to get their hands on their products. Though the internet has many negative attributes in the minds of many consumers, it still accounts for a large share of Ferrari product enquiries and sales magnitude. Customers are able to receive the same quality of service and even the additional advantages from the comfort of their home. Promotion Promotion could be defined as a way of communicating or passing across of information about a particular product to the public. The major goal of promotion is to notify the public about the product, the benefit of the product and the use of the product (Jobber 2007). Promotion could be classified into 2 categories: Technical promotion: It involves the use of technical presentation of data on the product or service to attract and persuade the potential customer of its merit by using magazines, researched papers, trade conferences, exhibitions, online adverts e.t.c Consumer promotion: It involves devices that promote the product with developing any fundamental relationship but may be effective where customer loyalty is low or especially when a new product is being introduced (Richard lynch 2006: 174) The main task and challenges of an organisation is to combine both technical and consumer promotions to attract and satisfy customer needs and want respectively (Keller and Kotler 2006: 383). The various modes of promotion include the following; Advertising Ferrari will hold a successful position on both magazine and television advertisements and will focus on: The target market (teenagers, young adults, car racers, young and rich customers etc) The frequency of the target market exposed to the advertisement Time to attain the target market On achieving these, it adds value to their product. This is done by alteration of the consumer perceptions. Below-the-line Promotions Car exhibition shows are availed free to make the customers purchase the product. This is the direct method used by Ferrari. This will allow the individual and prospective customer to have a firsthand feel and knowledge about the products. Television-this is a means of communicating to the public through the use of cable television, that is different television stations. This particular medium composes the majority of the media mix. Internet-the high rate of the internet user around the globe has made Ferrari to use the internet as a means of their advertising. Ferrari has launched a website, developed by AKQA, featuring a virtual test drive of its new California model, which will be launched publicly on 2 October 2009 at the Paris Motor Show. Users can watch videos from last weeks industry launch in Maranello, as well as embark on a virtual test drive using footage from Sony PlayStation game Gran Turismo. Hear, See and Feel areas allow visitors to experience the look and sound of the car (source: www.ferarri.it) Magazines-this is another means of advertising been used by Ferrari, this medium is been used to target a particular class of the public b