Finance

Introduction
The cost of equity is the opportunity cost of raising funds through equity. In other words, it is the minimum rate of return that a firm must offer to its shareholders to compensate for bearing risk and waiting for their returns. A firms shareholders always have an opportunity to sell their existing shares and invest in another company. The return they require from investments in a firm is, at the same time, the firms cost of equity, that is, the opportunity cost of raising funds through equity. There are three basic models of estimating the firms cost of equity Dividend Growth Model, Capital Asset Pricing Model (CAPM), and, Arbitrage Pricing Theory (APT) model. Each of these models has different assumptions, inputs, ease of use and accuracy. On the basis of these criteria the Capital Asset Pricing Model can be considered as the best model to estimate the require rate of return for the shareholders.

Three Models
Dividend Growth Model This model is based on the expected growth of the future dividend issued by the company to its shareholders. In dividend growth model

Required Rate of Return  (Next expected dividend)  (Current Share Price)  Growth Rate
Capital Asset Pricing Model This model is based on the theory that the shareholders require compensation for the market risk they bear.

Required Rate of Return  Risk free rate of return  Beta  (Market Risk Premium)
Arbitrage Pricing Theory APT assumes that the return on an asset is linearly related to a set of risk factors as shown below

Required Rate of Return  Risk Free Return on Asset   Sensitivity of asset  (Risk Factor)

Ease of use
CAPM is very simple and easy in use. It requires only three inputs for the estimation of the required rate of return risk free rate of return, beta and the market premium. If the firm is already listed in a market then its beta can be calculated using the historical price movement of the share with respect to the market price. In case the firm is not listed in any market then the beta can be estimated using the other similar firms in the industry which are already listed in the market. The risk free rate can be estimated by the looking at the yields of bonds issued by the government. And, finally market premium is the premium over risk free return, which market pays for the additional risk taken. It can also be estimated using the historical market prices (Ross, Wetserfield,  Jaffe, 2005).
Dividend growth model is also a simplistic model but there is a significant challenge in estimating the reasonable growth rate. Commonly three approaches are used to estimate the growth rate using analysts forecasts, the historical time series approach, and the sustainable growth model. The analysts forecasts method can be quite unreliable at times due to the biasness of the analysts towards a particular industry or company (Arnold, 2008). The other two approaches require analysis of past data of the firm with detailed analysis of financial figures of the firm.

The APT model is quite cumbersome in nature. Since the model does not specify the factors which can affect the riskiness of the firms, the first task in using APT is to identify various risk factors which can add to the risk profile of the firm. This may require the use of multivariate techniques like factor analysis. Then it requires estimating the sensitivity of the firms share price with respect to the risk factors identified, obviously most of the times this will not be easy with the availability of the data regarding the risk factors (Fabozzi, Focardi,  Kolm, 2006). The model becomes complex as the number of factors increases so their interpretation also become abstruse. Empirical studies of this kind so far suggest that there is hardly any consistency in terms of the number of basic factors, the interpretation that may be put on these factors (typically, the factors identified are artificial construct representing several economic variables), and the stability of these factors from test to test.

Accuracy of Results
Several studies have been done to check the accuracy of above models with different-2 findings. In case of CAPM, several empirical studies have cross verified the linear relationship between the expected return and the market risk. Their finding reflects that the relation is linear the y-intercept is greater than risk free rate while the slope is less than market premium, so, the actual relationship may be flatter than what CAPM says in addition to beta, some other factors, such as standard deviation of returns and company size, too have a bearing on return (Chandra, 2007). While reviewing these empirical evidences, two important problems need to bear in mind. First, the studies use historical returns as proxies for expectations. This assumes that expected returns will be the same as realized returns. Second, the studies use a market index as a proxy for the market portfolio (Chandra, 2007). However, certain studies have shown that broad based indexes (such as SP 500 Index) mirror stock market movements quite well (Ross, Wetserfield,  Jaffe, 2005). So, the CAPM may not offer a surgical accuracy but its results are certainly conclusive enough to estimate the required rate of return.
Because many factors appear on the right hand side of the APT equation, the APT formulation has the potential to measure expected returns more accurately than does CAPM. However as mentioned earlier, one cannot easily determine which are the appropriate factors. These factors cannot be derived theoretically.

In case of dividend growth model, the accuracy of results depends entirely on the accuracy of the forecasts about future dividends (Brigham  Ehrhardt, Financial Management, 2008). Accurate forecasting is not an easy task. Despite the increased sophistication of forecasting technology and more powerful computers, we are, after all, living in a world of uncertainty, and any forecast about the future should reflect this uncertainty. The PE ratio may be used just to check the cost of equity calculations quickly, but under very limited conditions.

Assumptions
The dividend growth model assumes, only dividends as the returns from an asset one gets out of it. However, in reality the returns are not only the dividend returns but also the capital gains. The model is also based on assumption that firms always issue dividends to its shareholders. In reality, there are number of firms in the market which are performing outstandingly but do not issue dividends to their shareholders (such as Infosys). The model is also inapplicable to the firms which are not traded on the market, because it requires the current market price to estimate the required return.

The CAPM assumes that an investor always has a portfolio of shares and hence can diversify some of the risks, and these risks are called unique risks. There is still some part of the risk that cannot be diversified which is called market risk. So CAPM assumes that firms compensate the shareholders for only the market risk taken by them. Some more assumptions used by CAPM are as following
Individuals are risk averse.

Individuals seek to maximize the expected utility of their portfolio over a single period of planning horizon.

Individuals have homogeneous expectations  they have identical subjective estimates of the means, variances, and co-variances among returns.

Individuals can borrow and lend freely at a riskless rate of interest (Arnold, 2008).
The market is perfect there are no taxes there are no transaction costs securities are completely divisible market is competitive.

Looking at these assumptions, one may feel that the CAPM is unrealistic. However, the value of model depends not on the realism of its assumption, but on the validity of its conclusions.

Although, the APT seems an extension of CAPM, but it does not require above assumptions as it is in case of CAPM. The APT only assumes that the capital markets are perfectly competitive and that investors always prefer more wealth to less wealth with certainty (Ross, Wetserfield,  Jaffe, 2005).

Conclusions
Notwithstanding the problems mentioned above, the CAPM is the most widely used risk return model. It has advantages over other models in terms of its simple and intuitive nature. Its basic message that diversifiable risk does not matter is accepted by nearly everyone. It offers some objective estimate of risk premium which is better than a completely subjective estimate or no estimate.

When the management of a company feels that they should make the company public, one option they can always use is to offer its shares to the public through an Initial Public Offer (I.P.O.). This is usually a means through which some companies come up with capital. There are two types of IPOs. The first one is the traditional method whereby a company floats its shares in the stock market through underwriting banks or stock brokerage firms. The second method, which is relatively new in the stock market is the auction of stock online otherwise referred to as the Dutch auction. In this method, the shares are sold online to bidders who are otherwise exposed to the stock under equal conditions so that none of them has an edge over the other. Bidding is done upon which a price is settled on. This is the best option for E-bay to auction Skype as most of the users of Skype are actually online customers. Choosing the online option is the best due to a lot of advantages it offers the company over the traditional method.

Firstly, it ensures that the securities of a company do not stagnate. This is due to the fact that in traditional IPOs, the prices of stocks rise almost exponentially immediately they are floated. This would make the investors keen on market prices to sell frequently without the profits piling on the companys capital. Therefore, the traditional IPOs make the investors richer than increase company capital instantly. When carrying out a traditional IPO, the company has to enlist the services of an underwriting company. Not only is this costly in comparison to the online auction in terms of charges, but it also plunges the company into uncertainty. Uncertainty arises when such banks allocate more shares to a select-few of their customers so that they can benefit from business favors. One of the ways through which they are likely to succeed in doing this is by the use of practices such as insider trading. Whether they register at the Securities and Exchange Commission to do this, the practice is likely to undermine the fairness in trading of stocks.  This negates the need to have a fair allocation of shares to all the interested parties. When a select-few of the interested parties gain, then the assumption that it is a Public Offer ceases to exist. Therefore, in as much as the traditional IPO is likely to have a sudden jump in prices that would interest investors much, the kind of IPO that would ensure a more stable climb in profits is the online auction which is cheaper, fairer and keeps the profitability of the company at a reasonable level.

The kind of investors that this auction is likely to attract is the savers. These are investors who as opposed to the speculators, tend to buy shares and let their prices mature so that they can get reasonable profits. Drawn from the fact that online auction ensures prices of stock do not sky rocket on the initial period of being floated, the speculators are likely to shy off as this deal would make them reap minimal profits. In the online IPO that Google held, the prices did not soar much. A healthy range of an 18 shift was noted from an initial price of 85 to 104.05. This is a fair deal as most speculators are mainly interested in prices that soar exponentially at the initial stages. We can therefore conclude that the sale of Skype through a traditional IPO is likely to affect EBay as an entity and therefore would threaten the interests of the investors who own EBay. As such, only the kind of investors who are in the business to stay will keep their stocks in the original company and in the Skype portion that is being sold.

The online selling of shares should be used due to the fact that when compared to the ones that were done by Google and Morningstar, the likelihood of success is very high. Google chose an underwriting bank to evaluate its shares first and propose a period within which floating its shares would be safe. The charges to carry out the two procedures were lower than if Google chose the traditional IPO. Lower prices for such services would mean that the company maintains a healthy capital base due to the fact that the charges that the banks require border on a percentage of the whole value of shares to be floated at the IPO. During the sale of Google, its profitability was not quite stable. Its sale went on to bring about profits and much stronger capital base. As at last year, the performance of Skype indicated that its growth was on a slump due the effects of the financial crisis that had affected economies across the world. The similar conditions as at time of being offered for online auction indicate a trend. Google emerged out of its financial uncertainty stronger after the sale. Therefore, the probability that the sale of Skype would salvage its stunting growth is very high.

Morningstar, on the other hand, is a Wall Street company and as such tried democratizing the issuance of shares by undertaking auction IPO. One way or the other, its market plan is more defined and has customers who are mainly institutions. As such, its IPO would not face a similar condition to the one that EBay is likely to face when auctioning its stock. All the same, there are standard lessons that can still be learnt from the sale of Morningstar. The reliance that Morningstar has had with institutional investors let it down when it decided to use auction IPO due to the fact that share prices did not stabilize steadily. This would not be a threat to Skype as it is not a Wall Street company with institutional investors. That does not mean that measures to stabilize the shares should not be taken. As stated above, the auction IPO does not experience sky-rocketing prices in the initial stages. As such, Skype seems to have escaped the predicaments that afflicted Morningstar.

Both Google and Morningstar have experienced faltering stock prices when the market goes through a bearish face. EBay needs to come up with ways of stabilizing market capital during this period as the net capitalization of Skype is bound to be affected. One way of doing this is by doing successive IPOs that are well-spaced so that expenses are minimal and do not dent the capital. Another means is by ensuring that the shares reach as many investors as they can. This would in turn spread the risk over a big number of people so that in the event that share prices start experiencing a bearish run, the cover is ample.

The costs involved in the traditional IPO are numerous. The documentation procedures and time dedicated to carrying out a successful IPO weighs heavily on the company. This is due to the numerous registration procedures at the Securities and Exchange Commission. Decision-making will be rendered public hence some bad decisions. The pressure to grow will be profound than before as the purpose of the IPO is to raise capital that can enable it do so. The costs of carrying out an IPO are high. This due to the fact that the company employees will be paid allowances to help in the running of the whole IPO processes like documentation. Other charges include bank underwriting fees. A dip in stock prices might attract lawsuits by shareholders who feel duped. On the other hand, auction IPOs present a slightly different risk factor. The slow rising stock prices do not favor all sorts of companies. These include companies that have a very big network of institutional investors. The investors are usually interested in stable share prices that also rise faster hence ensuring their constant benefit from the trading of stocks. The means of deciding a share or stock price by bidding may affect the final outcome due to its egalitarian nature. Prospective bids might come up with comparatively low prices hence making investors to shun the shares.

In conclusion, we see the auction IPO as having an edge over the traditional IPO in the case of EBay wanting to float the shares of Skype in the public domain. It has been proved otherwise that in as much as the other companies experienced challenges, this did not last and as such, they are now doing comparatively well. Skype might be a bigger success if all the steps mentioned are taken into consideration by the parties involved.          

PART I
DO YOU THINK FINANCE DEPARTMENTS ARE THE BEST PLACE TO TRAIN FUTURE CEOs
The responsibilities and duties of Chief Finance Officer (CFO) for any company are sine qua non and pivotal in the financial standing and position of any company. It is sole responsibility of CFO to assure and play a role of guardian to comply with all the rules and regulations of Generally Accepted Accounting Principles (GAAP) and Securities and Exchange Commissions (SEC). To grind all together, the CFO of the company is able to define its capital structure, investment opportunities and communicate other related affairs to board of directors. The role of CFO is very scrupulous and precise with all the financial numbers. The CFO must develop his own interpersonal skills such communication which is a very important pillar towards the success of any CFO because better and thoughtful communication with peers, different stake holders, etc makers the CFO successful. CFO must have a thorough and in-depth accounting knowledge and know all the matters related with the companys account. The CFO must able to handle all the affairs related with the financial managers of the company and also segregates the duties of financial mangers so that financial managers diligently accomplish and perform their job. CFO must assign all the duties to treasurers, insurance managers, cash managers, credit managers, etc.    

The main duty of CEO is to communicate well, knows the organizational culture and structure, attractive leadership skills and well known regarding the different products of the company and business segment of the company. In addition, the CEO sets objective and goals for the company and sketches a roadmap of success and also knows the art of motivation to the employees and also built the leaders in the employees through his leadership skills and styles. All these trades come from experience so the CEO must be a good learner and observer and know how to overcome with the mistakes. The CEO must have a capability to foresee the direction he wants the company to go with and assess the risk or hindrances of the company, and ability to make tough and hard decisions. Moreover, the CEO is the centre of gravity of any company so the CEO must look after all the affairs and issues related with the company and take corrective measures where it needed the most.      

There are numerous pros and vantages for promoting the CFO to CEO. Ian Butcher states that When recruitment of CFO is made every stakeholder must take onboard because the recruitment of CFO makes a reflection on the performance of the company and also highlighted the strength and weaknesses of the company. He further added the two most seeable and visible stars for the different stakeholders the chief executive and the finance director. The advantages of promoting the CFO to CEO will unquestionably his financial knowledge and scope. The CFO are financially versed with complete details of companys different project so do the companys management is able to draw a conclusion whether any further finance is needed or not on daily basis. On finger tips CFO knows the performance of different departments of the company and evaluates that which department is in distress and which are on the satisfactory side. The one vital advantage of CFO that at one point of time he deals with different stakeholders of the company like investors, board members, etc.          

There are various cons for promoting the CFO to CEO. The image of CFO is company leader. If the CFO has no background of production experience and only experience in the finance department then he cant server the organization properly because he doesnt know much about the marketing department, HR department, and other departments. The CEO just familiar with these departments on the basis of numbers. In addition, he has not complete and thorough knowledge of these particular departments. As it discussed earlier that the CFO is the premier leader of the company so he should know all the facts and figures of all the related departments. If the CFO has insufficient and meager knowledge of these departments then he cant implement and communicate the companys objective and goals to the head of departments. Moreover, if CFO has autocratic leadership style then it is dangerous and curse for the company.  
     
All in all, one should think that the finance department is the best place and the nursery of future CEOs then it is not true and the answer is ambiguous. As per my personal views, experiences and sentiments leaders are not born in the organization some people are leaders by birth and the organization just polished those leaders.  

PART II

1. Discount Rate 3.80
AccountAmountYearPVA4,70014,528B7,90027,332Together11,860

2.
Dis.
RateYear0123Total PVAnnual Profit26,000,000 64,000,000 57,000,000 0.02Coefficient  20.98040.96120.9423Present Value  225,490,196.08 61,514,802.00 53,712,373.07 140,717,371.15 0.04Coefficient  40.96150.92460.8890Present Value  425,000,000.00 59,171,597.63 50,672,792.44 134,844,390.08 0.06Coefficient  60.94340.89000.8396Present Value  624,528,301.89 56,959,772.16 47,858,299.13 129,346,373.18 0.08Coefficient  80.92590.85730.7938Present Value  824,074,074.07 54,869,684.50 45,248,437.74 124,192,196.31 0.10Coefficient  100.90910.82640.7513Present Value  1023,636,363.64 52,892,561.98 42,824,943.65 119,353,869.27 0.12Coefficient  120.89290.79720.7118Present Value  1223,214,285.71 51,020,408.16 40,571,474.13 114,806,168.00

CONCLUSION
After applying different discount rates from 2 to 12 on three years net income, it is clearly noted that as the  2 discount rate the present value of oil field project at its peak but as the discount rates rises up to 12 the present value of oil field project shrinks. The best discount rate for this project is 4, 6 and 8 respectively which produces healthy present values.    
3.
(a).
YEAR012345CASH FLOW(1,000)200 250 300 350 400
IRR 13.45
NPV 101.25

(b).
YEAR01234CASH FLOW(16)3.30 2.70 3.70 10.70
IRR 8.39
NPV 0.17

RECOMMENADTION ON THE BASIS OF NPV
In all the four years time period, the company generates positive cash flow stream which is good going but the NPV of the project looks unattractive initially due to the initial outlay and then the discount rate of 8 which shrinks the NPV of the project and in the end it not glitters. On the basis of NPV one should recommend that not to undertake the project on the basis of NPV.

RECOMMENADTION ON THE BASIS OF IRR
In all the four years time period, the company generates positive cash flow stream which is positive going and in the end it makes an impression on the IRR with 8.39.In all the four year time company generates positive and better returns due to the heavy cash flows. So, one should recommend that company should undertake the project on the basis of IRR.

(c).
NPV  04.40NPV  42.11NPV  80.17NPV  12-1.47NPV  16-2.87
TREND OF NPV FUNCTION
After the assessment of NPV by applying different discount rate from 0 to 16 it is clearly indicated that 0 discount produces healthy NPV while the other dont. The NPV  4 and 8 also produces fair NPV but the NPV at 12 and 16 produces negative NPV of the project which is not up to the mark and the management of the company should consider the NPV  0 and 4 discount rate in their decision making.

Every company must assess and evaluates its cash position before the declaration of cash dividend to their share holders. The main reason behind this evaluation is to make sure that company should have indispensable cash to continue the operating activities and also ample cash is available for daily expenses. At this particular juncture, it is very important to understand that dividend is a reward for stockholder in response to their investments and also it creates trusts on their investments. Generally, there are two most common types of dividends that company declares against the investment of shareholders. One is cash dividend and the other is stock dividend. When company declared cash dividend to their stockholders it means that company runs its business and operation in an efficient and smooth way and it also suggest that enough cash is available to cope up with day to day cash transactions. The first priority of the stockholder is to get a reward in the form of cash dividend.

One thing should take into consideration that if the companys sales growth is 20 year by year then it doesnt mean that in the end of the fiscal year companys management declares the cash dividend. Because there is no significant clue that either companys sales is on account or on cash and more importantly more sales means higher amount of cost of sales is incurred mainly in the form of purchasing of raw material on account or on cash. As a result, the cash inflow generated during the year automatically used for the payment purpose to the creditors and suppliers. In this situation every thing was looked well but at the end of the year company may be not declared cash dividends after examine the cash position of the company. The other reason might be the high finance cost which is in the form of interest on debt which the company pays with the principal amount of debt. Other situation might be the working capital position and the companys internal restructuring in the form of capital expenditures can also disturb the companys cash position.

One of the expert concluded that company must do analyze cash management before establishing the dividend policy for the shareholders and it is better to pay dividend in the form of cash dividend and if the cash position of the company is worst other dividend options are surely available. All in all, keep all disclosed points into consideration the companys management designed and formulate its dividend policy.

The computation of Net Cost of the Call Premium is stated below
Real Rate 9 (1-35)
Real Rate 5.85
Debt Refunding 12 million x  of debt
Debt 12,000,000 x 10
Debt 1,200,000
Interest 12,000,000 x 09
Interest 108,000
Now, costs of call premium is
Costs of Call Premium 108,000 (1-35)
Costs of Call Premium 70,200

Quantitative easing

What is quantitative easing
Usually, central banks try to raise the amount of lending and activity in the economy indirectly, by cutting interest rates.

Lower interest rates encourage people to spend, not save. But when interest rates can go no lower, a central banks only option is to pump money into the economy directly. That is quantitative easing (QE).

The way the central bank does this is by buying assets - usually financial assets such as government and corporate bonds - using money it has simply created out of thin air.

The institutions selling those assets (either commercial banks or other financial businesses such as insurance companies) will then have new money in their accounts, which then boosts the money supply.

QE had never been tried before in the UK.

Research Paper Flow
What is quantitative easing How does the policy works Expected results
How does the policy works Expected results

Problems of QE
Reception of QE on Banks (insert banks as major players) (how each respond to QE
Study briefs on banks decision to apply the policy, its journal entry input in the balance sheet
Study briefs on banks decision on not applying the policy, and their alternatives.
Examples of commercial banks outside UK (Japan, and find a local bank) regarding the application of QE, and the success rate (can input oecd report)

Inflation as a major cost drive
Is it effective
1. Is zero Inflation necessary What is the right inflation rate then
2. Public perception of the governments implementation of the policy.
3. Detecting the inception factors of a financial bubble. And is it present should a monetary policy takes place
4. The correlation of printing money to inflation.
Is a stimulus package or a QE a quick band-aid to ugly financial forecast ahead
In a February 5 QA article of the BBC, it has been reported that QE, or quantitative easing, has never been tried before in the UK.

The quantitative easing policy has, albeit, been a successful monetary policy introduced in Japan last 2001. The policy targets reserves, or the banks current account balances at the central bank, while keeping short  term interest rates at zero (OECD, year, p. 45). The results reflected on the countrys economy through the following observations promoted financial-sector stability through the provision of ample liquidity to banks helps keep long-term interest rates at a lower level (policy duration effect)
pumped up the monetary base to higher levels (GDP rate was 22)

The monetary policy further stabilized inflation, as measured by the core CPI, by keeping it to zero or above.

How quantitative easing and stimulus package are similar
In simpler terms, Quantitative easing is a monetary policy that increases the money supply through the creation of money.

The Scenario
1. The Central Bank creates money electronically. (This is similar effect to printing money, except they are increasing bank reserves which dont need to be printed in the form of cash)
2. With this increase in Bank reserves, the Central Bank is using them to buy various securities. These include government bond and corporate bonds.

Buying these securities achieves two things
Banks sell assets for cash. Therefore they see an increase in their liquidity (cash reserves). In theory the bank will then be more willing to lend to customers. This lending will be important for increasing investment and consumer spending.

Buying assets reduces their interest rate. Lower interest rates on these securities may also encourage banks to lend rather than keep securities which are paying low interest.

Problems to encounter in QE
1. Inflation. When economy recovers it might be difficult to take out the excess money supply causing uncontrollable inflation.
2. Investors could lose confidence in economy due to risk of inflation
3. Danger of bond bubble. Bonds and gilts will rise in price encouraging investors to buy and interest rates to fall. This could cause a bubble in the price of gilts which could collapse at a later stage causing long term interest rates to rise at an early stage in the business cycle.
4. Could cause lower value of Pound - Pound slumps on QE fears
5. Problem of printing money
6. Printing money and inflation

The Bank of England explains the benefits of a low inflation, and keeping it stable within minimum range

Unstable rates of inflation are costly to households and companies. They make it hard to see how prices of individual goods are changing compared with one another. And uncertainty over future prices makes it more difficult to enter into long-term contracts.

Why inflation is an issue
Hellerstein (Winter 1997) notes that inflation is a common misnomer that generates a lot of public tension regarding a regions economy. Perhaps the greatest reminder of what inflation has done was the 1970 insurgence in the US economy. The cost of living was not highly anticipated by most people who had set up long-term investment funds.

A much more underlying issue is the use of the inflation phenomenon to account for state and government decisions that most likely will not sit well on the public. The unsettlement on this theory was supported by economists Peter Diamond, Eldar Shafir, and Amos Tversky that people mostly consider nominal earnings rather than real earnings (qtd in Hellerstein, Winter 1997).

Bank of England uses Credit market interventions as a debit journal entry, and is treated as an asset.

In another BBC article dated February 4 of this year, The Bank of England had decided to postpone quantitative easing. Inflation is termed by economists as the rate of which the general level of prices for goods and services is rising, and that in an adverse effect, purchase power is falling (Investopedia).

Banks and their stand on inflation
1. Bank of England
The financial institution has been founded in 1694, and has been nationalized on the 1st of March 1946. They have gained their independence in 1997, and has committed itself to promote and maintain monetary and financial stability as its contribution to a healthy economy (Bank of England 2010).

2. RBS
It has sought state and international goals to be one of the formidable financial institutions, with over 280 years of financial services experience starting 1727.

In a public statement echoed in various media, RBS has expressed gratitude of the governments extension of quantitative easing

We are in a privileged position to have the support of the UK taxpayer while we restructure. That privilege exists because of our central role in the UK economy and society. That role brings responsibilities for us to change both the business we do and the way we do business which we are already doing.

Our strategic plans will take three to five years to achieve, given the scale of the task and the economic conditions we face. However, we expect to make purposeful progress each and every year. We have already begun a programme of reducing our costs and aligning the Banks activities to the reality of our situation.

Initial details of the plan

3. Lloyds Banking Group
Lloyds was initially named Lloyds TBS Group on the 19th of January last year, following a revamp of the financial institution with the acquisition of HBOS. They are currently the largest retail bank in the UK.

4. Barclays
Established by John Freame and Thomas Gould in 1690, Barclays emerged as a global financial services provider that engages in retail and commercial banking, credit cards, investment banking, wealth management and investment management services all over the world (Barclays).

It is to note that Barclays acquired Lehman Brothers (its North American investment banking and capital markets business) in 2008, and completes integration in 2009.

Is it effective
1. Is zero Inflation necessary What is the right inflation rate then
2. Public perception of the governments implementation of the policy.
3. Detecting the inception factors of a financial bubble. And is it present should a monetary policy takes place
4. The correlation of printing money to inflation.

The fact that the United Kingdom is still reeling under the economic pressures brought about by the global economic crisis is proof enough that the country is in dire need of policies which will help mitigate the risks that are brought about by such financial crises. In fact, it is a time measures were put in place to ensure such crises do not recur in the future as no-one is prepared to bear the huge burdens that come with them. Policy think-tanks and institutions of higher learning are expected to play a greater role in informing and advising the political class on the way forward if this country has to be safe from the debilitating effects of economic and financial crises.

The doctorate program Dphil in Financial Economics is one such program designed to help train postgraduate students in matters that are relevant to the country as far as economic policies are concerned. Under this research degree program, I intend to focus on the research topic Measuring Systemic Risk for Financial Stability and Prudential Bank Regulation, which I believe will equip me with the requisite skills to enable me contribute to government policies deigned specifically to mitigate risks brought about by financial crisis especially in the financial markets and commercial investment banks. The main objectives which I seek to achieve upon completion of my research is to be in a better position to prevent future financial crises by measuring systemic risk of financial institutions and therefore recommending to the relevant authorities the appropriate actions to take.

This is because the current global economic crisis had its roots in the financial sector which could not stand against the systemic risk that it was exposed to. This, coupled with a lack of prudential banking regulations, led to the spiraling effect which caused banks to fall one by one. However, as was evident in this crisis, this is usually too late a measure as the damage is usually already done. The tendency is also for unaffected banks to hold onto their assets and refuse to lend, plunging the economy into a state of stagnation or recession. Among the control measures is to ensure that financial institutions do not take unnecessary risks in their lending, and so prudential banking is an ideal recommendation.

Among the lifelong commitments of Green Templeton College is the ensuring that there is a blend of theoretical work and practical application of what has been learnt. The college seeks take a great part in current matters in the country through provision intellectuals and graduates with the skills necessary for solving problems in the corporate world, both in the private and public sectors. In addition, Green Templeton College has a duty to provide the country and the world at large with business leaders who will not only further promote the suitability of the college as an ideal destination for business graduates seeking to venture in different fields but also contribute to the much needed sustainable development.

Therefore, as one seeking to carry out this research, I will be contributing to the morals and policies for which the college stands for. I will be helping put Green Templeton College in particular and Oxford University at large at the place where they rightly belong and taking them where they want to go in the future. Green Templeton College also specializes in disciplines that are linked with contemporary life. My research proposal, Measuring Systemic Risk for Financial Stability and Prudential Bank Regulation, is a typical example of this goal. In essence, as I will be undertaking my research, I will not only be benefitting my own self but also adding to the value systems of the college.

Part of my motivation for choosing this research proposal is that my own family members are really of the view that it is the right kind of research as it is relevant to the emerging needs of the world today. My own father, who holds a PhD degree and is an Economics professor and current member of the Monetary Policy Committee of the Bank of Korea, has been a role model to me, making me to understand and appreciate the value of specialized training. Since GTC also seeks to develop professionals in the fields that they really are passionate about, and adopts a training approach that is geared toward making its graduates trained with the dream career in mind, I believe this will give the college the opportunity to play a role in developing my passion even as I contribute positively to the colleges core values and principles.

That aside, because my research is in an area that has caused a lot of controversy in the country and around the world, my work at the college will serve as a model to other institutions of higher learning what it really means to have programs in place which are designed to resolve problems in society. This will bring great honor to Green Templeton College, and place it on the forefront of institutions that are responsive to emerging needs in the contemporary world. As a new college, Green Templeton College is keen to assert its capability not only to adapt to the now popular good reputation and traditions of Oxford University of developing all-rounded intellectuals but also to do this with the required level of commitment and diversity.

Finally, the fact that I am currently undertaking my Master of Science in Financial Economics (MFE) degree at Said Business School, Oxford University - a school that collaborates a lot especially in the business and management disciplines with Green Templeton College - makes my doing of the research project at Green Templeton College an epitome of what collaboration can bring about as far as helping students is concerned. It is therefore on the basis of the factors mentioned, and on the basis of my academic qualifications, that I apply for the Green Templeton Management Dphil (PhD) Scholarship.