Reference no: EM132873411

Part 1: Money Markets vs. Stock and Bond Markets and Foreign Exchange

Why would a firm or individual hold funds in the money market, as opposed to investing these holdings in the stock or bond markets? Justify your response.

Explain why most firms need to have an understanding of the foreign exchange markets and exchange rates. How does the behavior of exchange rates influence trade?

Part 2: Market Research

You have observed that the NYSE has been extremely volatile over the last month. Select any 30 day period in the last year and plot the behavior of the NYSE over that period on a graph, using Microsoft Excel. Address the following questions and cite your sources using APA format:

What were the highs and lows for your selected 30-day Period? What is the projected long term trend based on this period? Justify your answers.

What factors/events influenced market behavior over this 30-day period?

How have these factors/events influenced market behavior for interest rates? Explain and justify your answers.

How have these same factors/events affected the money markets? The bond markets? The mortgage markets? Explain and justify your answers.

Has the Fed reacted with policies that are in response to these factors/events over the 30-day period? Explain the purpose of these policies, and justify your responses.

Part 3: Mortgage Markets

Scenario:

You have been offered a house that is available for sale at a price of $320,000, and financing with a minimum down payment of 20% and an annual fixed interest rate of 5.5%, for 20 years. Your personal credit rating is not excellent, but considered good.

How do the mortgage interest rates being offered in your area compare to rates being offered in other areas across the country?

What factors cause the differences in mortgage rates across the country?

What factors cause the differences offered to individuals in the same market?

What are the trends for interest rates in your area?

Scenarios:

If you were the lender on the mortgage in the above-noted scenario, would you want to hold or sell this mortgage? What factors would you consider when deciding to hold or sell the mortgage? Explain and justify your responses.

Assume you accept the conditions of the loan and purchase the home with the described financing. Using a Microsoft Excel spreadsheet, construct an amortization schedule showing the amount of each payment that goes to interest and the amount that is applied to the loan balance.

How much of the third payment goes to interest, and how much is applied to the principal balance?

You would like to pay off the loan on the day the 100th payment is due. What is the payoff, assuming no penalties?