Reference no: EM13714546
Compose a 4-6 page report, double-spaced, on the following topic. Be sure to illustrate your report with relevant financial numbers and data, and to explain the significance of this data.
BACKGROUND INFORMATION: During the Carter administration, long-term US Treasury yields exceeded 15%, and short-term T-Bills yielded near 20%. After Reagan's inauguration, interest rates began to fall as Fed Chairman Volcker's restrictive monetary policy succeeded in containing inflation. Over the past 25 years, US rates have steadily declined: T-Bills are hovering under 1% and the long bond is yielding about 4%.
Lately, though, rising oil prices have incited inflationary forces. China and other developing nations have increased their consumption for oil, metals, materials, and food. Thus, both foreign and domestic factors have spurred demand and are contributing to rising prices on a global scale. In addition to this commodity-induced inflation, US consumers are faced with rising costs for essential services such as healthcare and education.
The Chairman of the Federal Reserve, Ben Bernanke, is faced with a dilemma. Should the Fed increase rates to contain inflation; or, should the Fed keep rates very low to spur the US economy which is beset by a collapse in home values, an extensive banking crisis, and a faltering stock market ?
YOUR ASSIGNMENT: Given this economic background...Compose a 4-6 page report, double-spaced, on the following topic: If the Fed decides to raise interest rates next year, what effect would rising rates have upon the following: (1) Consumer financing for big-ticket items such as autos and homes; (2) the present and future values of annuities; (3) the NPV calculation; (4) the WACC; (5) corporate earnings ?
Be sure to illustrate your report with relevant financial numbers. Hint: for topic (3), above, one approach you might adopt is to cite the NPV calculation from previous case problems, then to contrast it against a new calculation performed with a higher interest rate. Cite the numeric effect upon the NPV, and then explain its rationale and its significance. This is the kind of "numeric illustration" that you should provide for each of the five topic sections.
|
All income in a tfsa accumulates tax-free
: Michael Piemontese is 50 years old and would like to retire at age 65. He currently earns $55,000 per annum. He pays tax at an average rate of 18% of his gross income, and a marginal rate of 32%. He has $4,000 in deductions from his take hom..
|
|
How would you hedge the account receivable
: How would you hedge the account receivable (A/R) using the Forward Market, Money Market and the Options market? Calculate the U.S. dollar equivalent of the hedged amount of the account receivable, for each method write out the steps and amounts..
|
|
Define redox reaction that occurs in a acidic solution
: Balance the following redox reaction that occurs in a acidic solution using the half reaction method. Show work Pb(s) + PbO2(s) + H2SO4(aq) ---> PbSO4(s)
|
|
Define a particular reactant decomposes with a half-life
: A particular reactant decomposes with a half-life of 101 s when its initial concentration is 0.370 M. The same reactant decomposes with a half-life of 239 s when its initial concentration is 0.156 M.
|
|
The carter administration, long-term us treasury
: BACKGROUND INFORMATION: During the Carter administration, long-term US Treasury yields exceeded 15%, and short-term T-Bills yielded near 20%. After Reagan's inauguration, interest rates began to fall as Fed Chairman Volcker's restrictive moneta..
|
|
Write a balanced chemical equation
: Write a balanced chemical equation showing how each of the following metal oxides is dissolved by HI:MgO
|
|
The tax formula for individuals
: Leslie is a single taxpayer who is under age 65 and in good health. For 2014, she has a salary of $23,000 and itemized deductions of $1,000. Leslie is entitled to one exemption on her tax return.
|
|
Define carbon steel is affected by a heating
: The flexibility, strength, hardness, and malleability of carbon steel is affected by a heating and cooling process called.
|
|
What is abbott''s cash conversion cycle
: 16. Abbott Corp. has a debt ratio of 37.5%, a days sales outstanding ratio of 49, a return on equity of 22.6%, a cash turnover of 14%, days sales in inventory of 83, a times interest earned of 1.5, and a days payables outstanding ratio of 36. ..
|