Reference no: EM133133997
Topic: Annuities
The time value of money is used for many important financial decisions that could affect long-term goals. The interest rate you pay on a loan can affect the amount you pay each period.
An advertised monthly lending rate of 9% is about 11% per year. This difference between an advertised rate and the annualized rate is based on finer TVM details that may be overlooked by borrowers. Discuss how you may have used TVM in a recent investment or loan decision and explain the TVM involved in your transaction.
If you have not used TVM in a past financial transaction, what practical TVM application would you expect to encounter in your future? Explain.
Topic: The Federal Reserve System and the Money Supply
The Federal Reserve manages the amount of money in circulation by buying or selling U.S. Treasury securities, usually Treasury bills. The increase or decrease of money in circulation helps the Fed to control inflation or deflation. This has an effect on your disposable income. Research the Federal Reserve system and money supply, then answer the following questions.
Under what conditions would the Fed choose to decrease the money supply, how would it do so, and what is the goal of doing so? How does the Fed factor inflation into its actions?
Topic: Risk
Systematic risk evaluates the probability and extent of negative consequences to the larger body. For example, the government has a record of intervening in the event of a probable bank failure; the government's larger concern is the negative impact on bank customers. Some call this a government bailout.
Research a recent government bailout and explain why the government felt it was necessary. What risks do you think the government had to consider in making its decision?
Topic: Bonds
When you have a fixed investment horizon, it is important to maximize your earnings. You must understand the risks and returns of the security and the risk factors that can affect the price of the bond.
If an investor has a fixed investment horizon, what type of security can be used to minimize both the price risk and the reinvestment risk? Does this security protect the real payoff? Explain.
Topic: Stocks
There are two primary means to earn income as a stockholder. The first method is dividend income, and the second method is earnings from capital gains. With respect to the investor seeking dividend income, when an investor buys a stock from a corporation with a primary focus to earn dividend income, they will typically expect a higher dividend on common stock versus preferred stock.
Discuss the dividend payment requirements of a common stock versus preferred stock, in terms of which type of stock has a primary claim on dividend distributions. Explain why the common stock investor demands a higher dividend rate.