Please see attached.
Assignment 1: Textbook Questions The following Course Outcome is assessed in this assignment: GF500-4: Evaluate the different types of financial institutions. Please work on the following assignment to further your knowledge regarding financial institutions, interest rates, and financial markets. Throughout your career you will be exposed to financial institutions. Review and complete the following: Unit 1 - Assignment 1 · Chapter One: Question 16 (Page 60 of PDF) Question 16. Comparing Financial Institutions Classify the types of financial institutions mentioned in this chapter as either depository or nondepository. Explain the general difference between depository and nondepository institution sources of funds. It is often said that all types of financial institutions have begun to offer services that were previously offered only by certain types. Consequently, the operations of many financial institutions are becoming more similar. Nevertheless, performance levels still differ significantly among types of financial institutions. Why? · Chapter Two: Question 13 and Problem 1 and 2 (Question 13 page 79 of PDF) (Problem 1 & 2 page Question 13. Global Interaction of Interest Rates Why might you expect interest rate movements of various industrialized countries to be more highly correlated in recent years than in earlier years? Problem 1: Nominal Rate of Interest Suppose the real interest rate is 6 percent and the expected inflation rate is 2 percent. What would you expect the nominal rate of interest to be? Problem 2: 2. Real Interest Rate Suppose that Treasury bills are currently paying 9 percent and the expected inflation rate is 3 percent. What is the real interest rate? · Chapter Three: Question 20 and Problem 4 and 5 (Question 20 page 105 of PDF) Question 20. Assessing Interest Rate Differentials among Countries In countries experiencing high inflation, the annual interest rate may exceed 50 percent; in other countries, such as the United States and many European countries, annual interest rates are typically less than 10 percent. Do you think such a large difference in interest rates is due primarily to the difference between countries in the risk-free rates or in the credit risk premiums? Explain Problem 4: 4. After-Tax Yield You need to choose between investing in a one-year municipal bond with a 7 percent yield and a one-year corporate bond with an 11 percent yield. If your marginal federal income tax rate is 30 percent and no other differences exist between these two securities, which would you invest in? Problem 5: 5. Deriving Current Interest Rates Assume that interest rates for one-year securities are expected to be 2 percent today, 4 percent one year from now, and 6 percent two years from now. Using only pure expectations theory, what are the current interest rates on two-year and three-year securities? Also answer the below question of the Point/Counter-Point Exercise Point/Counter-Point: Should a Yield Curve Influence a Borrower’s Preferred Maturity of a Loan? Point: Yes. If there is an upward-sloping yield curve, a borrower should pursue a short-term loan to capitalize on the lower annualized rate charged for a short-term period. The borrower can obtain a series of short-term loans rather than one loan to match the desired maturity. Counter-Point: No. The borrower will face uncertainty regarding the interest rate charged on subsequent loans that are needed. An upward-sloping yield curve would suggest that interest rates will rise in the future, which will cause the cost of borrowing to increase. Overall, the cost of borrowing may be higher when using a series of loans than when matching the debt maturity to the time period in which funds are needed. Who Is Correct? Use the Internet to learn more about this issue. Offer your own opinion on this issue. Directions for Submitting your Assignment One Word® file, including a title page, should be submitted to the Dropbox for the Unit 1 Assignment. The Questions and Applications and Point-Counter Point Activity should be answered in paragraph form fully addressing each aspect of the question or scenario presented. Any problems should be done in Excel® and pasted into the Word® document using the “Paste Special-Excel Worksheet Object” feature. This will allow the instructor to double click on the students work to see the formulas and calculations used to answer the selected problems. Financial Markets and Institutions 12th edition Jeff Madura Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 But the right way to go about it isn’t always so obvious. Go digital to get the grades. MindTap’s customizable study tools and eTextbook give you everything you need all in one place. Engage with your course content, enjoy the flexibility of studying anytime and anywhere, stay connected to assignment due dates and instructor notifications with the MindTap Mobile app... and most of all…EARN BETTER GRADES. TO GET STARTED VISIT WWW.CENGAGE.COM/STUDENTS/MINDTAP Want to turn your C into an A?Obviously, right? Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Financial Markets and Institutions Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Australia • Brazil • Mexico • Singapore • United Kingdom • United States Florida Atlantic University Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Financial Markets and Institutions, 12th Edition Jeff Madura SVP, General Manager for Social Sciences, Humanities & Business: Erin Joyner Executive Product Director: Mike Schenk Sr. Product Team Manager: Joe Sabatino Project Manager: Julie Dierig Developer: Stacey Lutkoski, MPS Product Assistant: Denisse A Zavala-Rosales Marketing Manager: Emily McLellan Marketing Coordinator: Hillary Johns Content Project Manager: Nadia Saloom Media Developer: Mark Hopkinson Manufacturing Planner: Kevin Kluck Marketing Communications Manager: Sarah Greber Production Service: Lumina Datamatics, Inc. 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[email protected]. Except where otherwise noted, all content is © Cengage Learning. Library of Congress Control Number: 2016945877 Student Edition ISBN: 978-1-337-09974-5 LooseLeaf Edition ISBN: 978-1-337-26987-2 Cengage Learning 20 Channel Center Street Boston, MA 02210 USA Cengage Learning is a leading provider of customized learning solu- tions with employees residing in nearly 40 different countries and sales in more than 125 countries around the world. Find your local represen- tative at www.cengage.com. Cengage Learning products are represented in Canada by Nelson Education, Ltd. To learn more about Cengage Learning Solutions, visit www.cengage.com. Purchase any of our products at your local college store or at our preferred online store www.cengagebrain.com. Printed in Canada Print Number: 01 Print Year: 2016 Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 This text is dedicated to Best Friends Animal Sanctuary in Kanab, Utah, for its commitment to, compassion for, and care of more than 1,500 animals, many of which were previously homeless. Best Friends has recently taken the initiative to help animal shelters across the country. Most of the royalties the author receives from this text are invested in a fund that will ultimately be donated to Best Friends. During the 2012–2015 period, this fund donated $275,000 to support a new healthcare facility for Best Friends, and to sponsor a Public Broadcasting Service (PBS) documentary on the efforts of Best Friends to help animal shelters throughout the United States. This fund has also donated more than $100,000 to other animal care societies, including Friends of Greyhounds (Fort Lauderdale, FL), Florida Humane Society (Pompano Beach, FL), Greyhound Pets of America in Central Florida (Melbourne, FL), Tri-County Humane Society (Boca Raton, FL), and Doris Day Animal League (Washington, D.C.). Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Brief Contents PART 1: Overview of the Financial Environment 1 1 Role of Financial Markets and Institutions 3 2 Determination of Interest Rates 27 3 Structure of Interest Rates 47 PART 2: The Fed and Monetary Policy 77 4 Functions of the Fed 79 5 Monetary Policy 101 PART 3: Debt Security Markets 131 6 Money Markets 133 7 Bond Markets 159 8 Bond Valuation and Risk 185 9 Mortgage Markets 219 PART 4: Equity Markets 247 10 Stock Offerings and Investor Monitoring 249 11 Stock Valuation and Risk 285 12 Market Microstructure and Strategies 325 PART 5: Derivative Security Markets 351 13 Financial Futures Markets 353 14 Option Markets 377 15 Swap Markets 415 16 Foreign Exchange Derivative Markets 445 PART 6: Commercial Banking 479 17 Commercial Bank Operations 481 18 Bank Regulation 503 19 Bank Management 533 20 Bank Performance 563 PART 7: Nonbank Operations 583 21 Thrift Operations 585 22 Finance Company Operations 607 23 Mutual Fund Operations 619 24 Securities Operations 651 25 Insurance Operations 679 26 Pension Fund Operations 703 Appendix A: Comprehensive Project 727 Appendix B: Using Excel to Conduct Analyses 737 Glossary 741 Index 753 vi iCopyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Contents Preface, xxvi About the Author, xxxiii PART 1: Overview of the Financial Environment 1 1: ROLE OF FINANCIAL MARKETS AND INSTITUTIONS 3 1-1 Role of Financial Markets, 3 1-1a Accommodating Corporate Finance Needs, 4 1-1b Accommodating Investment Needs, 4 1-2 Securities Traded in Financial Markets, 5 1-2a Money Market Securities, 5 1-2b Capital Market Securities, 5 1-2c Derivative Securities, 7 1-2d Valuation of Securities, 8 1-2e Securities Regulations on Financial Disclosure, 10 1-2f Government Intervention in Financial Markets, 11 1-2g International Financial Markets