Explain how prices of u.s. money market securities
Course:- Finance Basics
Reference No.:- EM13298349

Assignment Help
Assignment Help >> Finance Basics

As a personal financial planner, one of your tasks is to prescribe the allocation of available funds across money market securities, bonds, and mortgages. Your philosophy is to take positions in securities that will benefit most from your forecasted changes in economic conditions. As a result of recent event in Japan, you expect that in the next month Japanese investors will reduce their investment in U.S. Treasury securities and shift most of their funds into Japanese securities. You expect that this shift in funds will persist for at least a few years. You believe this single event will have a major effect on economic factors in the U.S. such as interest rates, exchange rates, and economic growth in the next month. Because the prices of securities in the U.S. are affected by these economic factors, you must determine how to revise your prescribed allocations of funds across securities.

Assume that day-to-day exchange rate movements are dictated primarily by the flow of funds between countries, especially international bond and money market transactions. How will exchange rates be affected by possible changes in the international flow of funds that are caused by the event?

Explain how prices of U.S. money market securities, bonds, and mortgages will be affected.

Assess the impact on security prices. Would prices of risky securities be affected more or less than those of risk-free securities with a similar maturity? Why?


Put your comment

Ask Question & Get Answers from Experts
Browse some more (Finance Basics) Materials
Assume that company management expects sales growth of 8 percent during 2009, and during 2009 expects stable relationships between net income and sales, sales and total asse
Explain why the central bank's intervention caused such panic among currency futures traders with buy positions. Explain why the floor broker's willingness to sell 300 pound f
Based on your own experience and knowledge, develop conclusions and explain the ethical implications of financial decisions within an organization. You may need to do additi
Woodstock Inc. expects to own a building for five years, then sell it for $1,500,000 net of taxes, sales commissions and other selling costs. Woodstock's cost of capital is
Refer to Figure 7.1. Where is system engineering accomplished? Who is responsible for the accomplishment of system engineering functions? Identify some of the major concerns
The before tax lease payments per year would be $90,000. The tax rate is 35%. From a financial perspective, should Mercy lease the surgical device or borrow the money to pur
Why do we adjust for taxes in determining the cost of debt, but not for the costs of preferred stock and common stock? What is traded off in the trade-off theory of capital
Assume that REC's stock price rises from €29 to €35 per share. If the exchange rate does not also change, what will happen to REC's ADR price. If the euro appreciates from $1.