The financial system and the economy - Statistics Project Example

Running head: The financial system and the economy The financial system and the economy Name Institutions Failures in Global Financial system and RecommendationsThe global financial system has proved to be challenging as the economy tries to counter the global financial crisis of the year 2008 which have contributed towards to instability of world prices. The global financial system has been in a difficult position as it is unable to efficiently serve the debtors and the creditors in the economy.

The failure in global financial system has led to countries being bankrupt with many banks being closed down (Dean, 2006).There has also been an increase in the cost of living as the financial crises spread across other countries. The major failure in Global finical system is the policies that are laid down to counter the problem in the world’s economy. It is this failure in policy making that has resulted to more crises in the world today. There is need for review of the regulatory laws that are used to respond to crises as they pave way for more crises rather that curbing future crises.

The different stake holders in the economy should come up with better policies while responding to any financial crisis if the problem of re-occurrence of the crises is to be eliminated (Dean, 2006).Determinants of Investment decisionsThey are factors that determine an investor decision whether to invest or not. These factors also determine the type of investment an investor can undertake. The most primary determinants include;The return on investment in terms of interest rates.Cost of capitalTax on returnsAvailability of funds Attitude of InvestorInstitution rigidities in the country that affect investment.

Risk involvedThe risk involved in an investment affects the decision of many investors. Investors will invest more in ventures which have low risk level than high risk projects. The type of risk also affects the decision of an investor.1. A) Pay off of securitiespercentage return1000(1000/1500)*100 =66.67%1500(1500/1500)*100 =100%2000(2000/1500)*100 =133.33%2500(2500/1500)*100 =166.67%B) Expected return of securityExpected return= (66.7*0.25) + (100*0.25) + (133.33*0.25) + (166.67*0.25) =116.675%C) Standard Deviation of return on securityDeviation=(R-ER)0.

25(deviation squared)-0.500650.0626626-0.166750.00695140.166550.00693470.499950.0624875total0.139036 Standard deviation = √0.139036 =0.3729*100 =37.29%2. A)PayoffsPercentage return3000(3000/3000)*100 =100%3300(3300/3000)*100 =110%3600(3600/3000)*100 =120%3900(3900/3000)*100 =130%4000(4000/3000)*100 =133.33%B) Expected ReturnExpected return = (100*0.1) + (110*0.2) + (120*0.3) + (130*0.2) + (133.33*0.2) =120.

66ReferenceDean Croushore, (2006) Money and Banking: A Policy-Oriented Approach. Retrieved from: http/www.books.google.co.ke/books?isbn=0618161252.