Submitted By Poemsf1
Words: 1007
Pages: 5

Thursday 15 December 2011 1.00 pm – 3.00 pm

DEGREE OF MFin, MSc

DIPLOMA IN FINANCIAL STUDIES

Answer TWO questions from Part A, and ONE question from Part B

Examination Instructions No candidate shall leave until the Invigilators have collected, and recorded receipt of all candidates’ scripts. Invigilators will require candidates to remain during the first hour and last half-hour of the examination to avoid disturbing others. Students are allowed to use calculators that have standard arithmetic, scientific, graphical or algebraic functions provided that they are NOT programmable and can NOT store text (other than algebraic notation). Students are NOT allowed to use multifunction devices, for example electronic organisers, PDAs or mobile phones, which include calculator functions.

1 CONTINUED OVERLEAF…

Part A
Answer two questions from Part A All questions carry equal weight QUESTION ONE (40% of the Total Marks)

Firms in the UK manufacturing sector have been hard hit by the economic crisis and have experienced significant changes in the costs associated with the materials they need for their production lines. Below is information on a group of 20 firms that includes a size indicator, i.e. how many employees the firm has and their material costs of production. Cost of Material (£ 000’s) 13.7 19.1 33.5 19.6 5.6 0.2 0.3 2.6 4.2 5.4 1.1 0.7 10.4 4.1 7.1 9.0 5.5 0.7 8.9 11.1

Firm 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

No. Emp. 89 26 143 171 21 3 2 6 52 74 13 17 169 51 55 84 61 27 200 294

REQUIRED Model the relationship between the cost of materials data and the number of employees using the simple linear regression model. Show all your work. (For this 2 problem,  X  239544 .) Once you have modeled the data, determine how well the model fits the data. Show all your work. Interpret your results indicating the relevant assumptions you made to complete your analysis. 2 CONTINUED OVERLEAF…

QUESTION TWO

(40% of the Total Marks)

Consider that you are part of a team attempting to build a new stock market index that will represent the performance of smaller firms. As part of the development of the new index, the team decides to include data on the smallest 30 firms in the market over the period March 2007 to February 2009 to construct a ‘trial’ index. The ‘trial’ index calculations are recorded in the table below. ‘Trial’ Market Index 1659 1856 1820 1851 2320 2678 2930 2834 3182 3305 2971 3030 3094 3567 3680 4060 3493 3067 2868 2786 2638 2598 2534 2476

Time Period 09-Feb 09-Jan 08-Dec 08-Nov 08-Oct 08-Sep 08-Aug 08-Jul 08-Jun 08-May 08-Apr 08-Mar 08-Feb 08-Jan 07-Dec 07-Nov 07-Oct 07-Sep 07-Aug 07-Jul 07-Jun 07-May 07-Apr 07-Mar REQUIRED

Analyze the data above for the team as they examine how the new index is operating across the time periods. Include in your analysis an appropriate suite of descriptive statistics for the time series data. On the basis of your analysis, discuss whether the data is stationary and write a report for the team summarizing your results and discussing the issues in analyzing time series data. 3 CONTINUED OVERLEAF…

QUESTION THREE

(40% of the Total Marks)

Accounting and finance research has recently examined the dividend payment behavior of firms across the world, as there seems to be a decrease in the number of US firms paying dividends. A research team is currently investigating the dividend policies and practice of UK firms in response to the US results, considering there may be a relationship between firm size as defined by total assets and dividends per share. The information the team have gathered is