Finance/Annual report analysis

 

 

Obtain an annual report of (1) a commercial bank, (2) a savings institution, (3) a securities firm, and (4) an insurance company. The annual reports will allow you to relate the theory in specific related chapters to the particular financial institution of concern. The exercises in Part II of this comprehensive project require the use of these annual reports. The annual reports can be obtained by calling the shareholder services department for each financial institution, or they may be available online. Also, order a prospectus of a specific mutual fund in which you are interested. The prospectus can be obtained from the specific investment company that sponsors the mutual fund, or it may be available online. 1. Commercial bank operations (from Chapter 17) For the commercial bank that you selected at the beginning of the term, use its annual report or any other related information to answer the following questions: a. Identify the types of deposits that the commercial bank uses to obtain most of its funds. b. Identify the main uses of funds by the bank. c. Summarize any statements made by the commercial bank in its annual report about how recent or potential regulations will affect its performance. d. Does it appear that the bank is attempting to enter the securities industry by offering securities services? If so, explain how. e. Does it appear that the bank is attempting to enter the insurance industry by offering insurance services? If so, explain how. 2. Commercial bank management (from Chapter 19) For the commercial bank that you selected at the beginning of the term, use its annual report or any other related information to answer the following questions. a. Assess the bank ’s balance sheet as well as any comments in its annual report about the gap between its rate-sensitive assets and its rate-sensitive liabilities. Does it appear that the bank has a positive gap or a negative gap? Appendix A: Comprehensive Project 711 © 2014 Cengage Learning. All Rights Reserved. This content is not yet final and Cengage Learning does not guarantee this page will contain current material or match the published product. b. Does the bank use any methods to reduce its gap and therefore reduce its exposure to interest rate risk? c. Summarize any statements made by the bank in its annual report about how it attempts to limit its exposure to credit risk on the loans it provides. 3. Commercial bank performance (from Chapter 20) For the commercial bank that you selected at the beginning of the term, use its annual report or any other related information to answer the following questions. a. Determine the bank’s interest income as a percentage of its total assets. b. Determine the bank’s interest expenses as a percentage of its total assets. c. Determine the bank’s net interest margin. d. Determine the bank’s noninterest income as a percentage of its total assets. e. Determine the bank’s noninterest expenses (do not include the addition to loan loss reserves here) as a percentage of its total assets. f. Determine the bank’s addition to loan loss reserves as a percentage of its total assets. g. Determine the bank’s return on assets. h. Determine the bank’s return on equity. i. Identify the bank’s income statement items described previously that would be affected if interest rates rise in the next year, and explain how they would be affected. j. Identify the bank’s income statement items described previously that would be affected if U.S. economic conditions deteriorate, and explain how they would be affected. 4. Savings institutions (from Chapter 21) For the savings institution (SI) that you selected at the beginning of the term, use its annual report or any other related information to answer the following questions. a. Identify the types of deposits that the SI uses to obtain most of its funds. b. Identify the main uses of funds by the SI. c. Summarize any statements made by the SI in its annual report about how recent or potential regulations will affect its performance. d. Assess the SI’s balance sheet as well as any comments in its annual report about the gap between its rate-sensitive assets and its rate-sensitive liabilities. Does it appear that the SI has a positive gap or a negative gap? e. Does the SI use any methods to reduce its gap and therefore reduce its exposure to interest rate risk? f. Summarize any statements made by the SI in its annual report about how it attempts to limit its exposure to credit risk on the loans it provides. g. Determine the SI’s interest income as a percentage of its total assets. h. Determine the SI’s interest expenses as a percentage of its total assets. i. Determine the SI’s noninterest income as a percentage of its total assets. j. Determine the SI’s noninterest expenses (do not include the addition to loan loss reserves here) as a percentage of its total assets. 712 Appendix A: Comprehensive Project © 2014 Cengage Learning. All Rights Reserved. This content is not yet final and Cengage Learning does not guarantee this page will contain current material or match the published product. k. Determine the SI ’s addition to loan loss reserves as a percentage of its total assets. l. Determine the SI ’s return on assets. m. Determine the SI ’s return on equity. n. Identify the SI ’s income statement items described previously that would be affected if interest rates rise in the next year, and explain how they would be affected. o. Identify the SI ’s income statement items described previously that would be affected if U.S. economic conditions deteriorate, and explain how they would be affected. 5. Mutual funds (from Chapter 23) For the mutual fund that you selected at the beginning of the term, use its prospectus or any other related information to answer the following questions. a. What is the investment objective of this mutual fund? Do you consider this mutual fund to have low risk, moderate risk, or high risk? b. What was the return on the mutual fund last year? What was the average annual return over the last three years? c. What is a key economic factor that influences the return on this mutual fund? (That is, are the fund ’s returns highly influenced by U.S. stock market conditions? By U.S. interest rates? By foreign stock market conditions? By foreign interest rates?) d. Must any fees be paid when buying or selling this mutual fund? e. What was the expense ratio for this mutual fund over the last year? Does this ratio seem high to you? 6. Securities firms (from Chapter 24) For the securities firm that you selected at the beginning of the term, use its annual report or any other related information to answer the following questions. a. What are the main types of business conducted by the securities firm? b. Summarize any statements made by the securities firm in its annual report about how it may be affected by existing or potential regulations. c. Describe the recent performance of the securities firm, and explain why the performance has been favorable or unfavorable. 7. Insurance companies (from Chapter 25) For the insurance company that you selected at the beginning of the term, use its annual report or any other related information to answer the following questions. a. How does the insurance company allocate its funds? (That is, what is its asset composition?) b. Is the insurance company exposed to interest rate risk? Explain. c. Does the insurance company use any techniques to hedge its exposure to interest rate risk? d. Summarize any statements made by the insurance company in its annual report about how it may be affected by existing or potential regulations. e. Describe the recent performance of the insurance company (using any key financial ratios that measure its income). Explain why its recent performance was strong or weak.

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A flicker into the future, and all wrongdoing is predicted. The “precogs” inside the Precrime Division utilize their prescient capacity to capture suspects preceding any damage. In spite of the fact that, Philip K. Dick’s epic, “Minority Report,” may appear to be implausible, comparable frameworks exist. One of which is Bruce Bueno de Mesquita’s Policon, a PC model that uses man-made reasoning calculations to foresee occasions and practices dependent on inquiries posed over a board of specialists. At the point when one considers man-made reasoning, their brain promptly hops to the idea of robots. Current misguided judgments are that these frameworks represent an existential danger and are equipped for global control. The possibility of robots assuming control over the world stems from sci-fi authors and has made a cover of vulnerability encompassing the present state of computerized reasoning, generally instituted as the expression “simulated intelligence.” It is a piece of human instinct to tackle issues, particularly the issue of how to make cognizant, yet safe man-made reasoning frameworks. In spite of the fact that specialists caution that the advancement of computerized reasoning frameworks arriving at the multifaceted nature of human insight could present worldwide dangers and present phenomenal moral difficulties, the uses of man-made consciousness are differing and the conceivable outcomes broad, making the mission for genius worth endeavor. The possibility of computerized reasoning frameworks assuming control over the world ought to be left to sci-fi authors, while endeavors ought to be focused on their movement through AI weaponization, morals, and mix inside the economy and occupation showcase. Because of the authentic association between man-made consciousness and safeguard, an AI weapons contest is as of now under way. As opposed to restricting independence inside the military, man-made reasoning scientists ought to develop a security culture to help oversee improvements in this space. The most punctual weapon without human info—acoustic homing torpedoes—showed up in World War 2 furnished with gigantic power, as it could point itself by tuning in for trademark hints of its objective or in any event, following it utilizing sonar recognition. The acknowledgment of the potential such machines are equipped for excited the AI development. Nations are starting to intensely finance computerized reasoning activities with the objective of making machines that can advance military endeavors. In 2017, the Pentagon mentioned to allott $12 to 15 million dollars exclusively to support AI weapon innovation (Funding of AI Research). Moreover, as indicated by Yonhap News Agency, a South Korean news source, the South Korean government likewise declared their arrangement to burn through 1 trillion dollars by 2020 so as to support the man-made reasoning industry. The inclination to put resources into man-made brainpower weaponization shows the worth worldwide superpowers place on innovation. By and by, as firearm control and brutality turns into a problem that is begging to be addressed in America, the contention encompassing independent weapons is high. In this manner, the trouble in what establishes a “self-governing weapon” will block a consent to boycott these weapons. Since a boycott is probably not going to happen, legitimate administrative estimates must be set up by assessing every weapon dependent on its deliberate impacts as opposed to the way that it fits into the general class of self-ruling weapons. For instance, if a specific weapon improved strength and common security its ought to be invited. In any case, coordinating computerized reasoning into weapons is just a little segment of the potential military applications the United States is keen on as the Pentagon needs to utilize AI inside choice guides, arranging frameworks, coordinations, and reconnaissance (Geist). Self-sufficient weapons, being just a fifth of the AI military environment, demonstrates that most of uses give different advantages rather require exacting guideline to maintain control like weapons may. Truth be told, self-rule in the military is generally supported by the US government. Pentagon representative Roger Cabiness declares that America is against prohibiting self-rule and accepts that “independence can assist powers with meeting their legitimate and moral obligations at the same time” (Simonite). He assists his explanation that self-governance is basic to the military by expressing that “commandants can utilize exactness guided weapon frameworks with homing capacities to lessen the danger of regular citizen losses.” A cautious guideline of these obviously helpful frameworks is the initial move towards dealing with the AI weapons contest. Standards ought to be built up among AI analysts against adding to unwanted utilization of their work that could cause hurt. By setting up rules, it lays the preparation for arrangements between nations, making them structure bargains to renounce a portion of the warfighting capability of AI just as spotlight on explicit applications that improve shared security (Geist). Some even contend that guideline may not be essential. Amitai and Oren Etzioni, man-made reasoning specialists, look at the present state of man-made brainpower and talk about whether it ought to be controlled in the U.S in their ongoing work, “Should Artificial Intelligence Be Regulated?”. The Etzioni’s attest that the risk presented by AI isn’t up and coming as innovation has not propelled enough and innovation ought to be progressed until the idea of guideline is important. Also they express that when the possibility of guideline is vital, a “layered basic leadership framework ought to be executed” (Etzioni). On the base level are the operational frameworks doing different undertakings. Over that are a progression of “oversight frameworks” that can guarantee work is done in a predetermined way. Etzioni depicts operational frameworks just like the “working drones” or staff inside an office and the oversight frameworks as the bosses. For instance, an oversight framework, like those utilized in Tesla models furnished with Autopilot, on driverless autos would avert as far as possible from being abused. This equivalent framework could likewise be applied to self-sufficient weapons. For example, the oversight frameworks would keep AI from focusing on zones restricted by the United States, for example, mosques, schools, and dams. Furthermore, having a progression of oversight frameworks would keep weapons from depending on insight from just source, expanding the general security of self-ruling weapons. Forcing a solid framework rotating around security and guideline could expel the hazard from AI military applications, lead to sparing regular citizen lives, and increasing an upper edge in indispensable military battle. As AI frameworks are winding up progressively associated with the military and even day by day life, it is critical to consider the moral worries that man-made consciousness raises. Dark Scott, a main master in the field of developing innovations, accepts if AI keeps on advancing at its present rate, it is just a short time before computerized reasoning should be dealt with equivalent to people. Scott expresses, “The genuine inquiry is, when will we draft a man-made brainpower bill of rights? What will that comprise of? Furthermore, who will get the opportunity to choose that?”. Salil Shetty, Secretary General of Amnesty International, likewise concurs that there are huge potential outcomes and advantages to be picked up from AI if “human rights is a center plan and use standard of this innovation (Stark).” Within Scott and Shetty’s contention, they authenticate the misinterpretation that man-made reasoning, when comparable to human capacity, won’t be have the option to live among different people. Or maybe, if man-made consciousness frameworks are dealt with also to people with common rights at the focal point of significance during improvement, AI and people will have the option to collaborate well inside society. This perspective is as per the “Computerized reasoning: Potential Benefits and Considerations,” composed by the European Parliament, which keeps up that “simulated intelligence frameworks should capacity as per values that are adjusted to those of people” so as to be acknowledged into society and the planned condition of capacity. This is fundamental in self-governing frameworks, yet in forms that require human and machine joint effort since a misalignment in qualities could prompt ineffectual collaboration. The embodiment of the work by the European Parliament is that so as to receive the cultural rewards of self-governing frameworks, they should pursue the equivalent “moral standards, virtues, proficient codes, and social standards” that people would follow in a similar circumstance (Rossi). Self-governing vehicles are the main look into man-made consciousness that has discovered its way into regular day to day existence. Robotized vehicles are lawful due to the guideline “everything is allowed except if denied”. Since, as of not long ago there were no laws concerning mechanized vehicles, so it was splendidly legitimate to test self driving autos on interstates which helped progress innovation in the car business hugely. Tesla’s Autopilot framework is one that has upset the business, enabling the driver to expel their hands from the wheel as the vehicle remains inside the path, moves to another lane, and progressively changes speed contingent upon the vehicle in front. Be that as it may, with late Tesla Autopilot related mishaps, the spotlight is no longer on the usefulness of these frameworks, but instead their moral basic leadership capacity. In a hazardous circumstance where a vehicle is utilizing Autopilot, the vehicle must have the option to settle on the right and moral choice as found in the MIT Moral Machine venture. During this task, members were set in the driver’s seat of an independent vehicle to perceive what they would do whenever stood up to with an ethical quandary. For instance, questions, for example, “would you keep running over a couple of joggers over a couple of youngsters?” or “would you hit a solid divider to spare a pregnant lady, or a lawbreaker, or an infant?” were asked so as to make AI from the information and show it the “typically good” activity (Lee). The information mama

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