FIN 335 Southern New Hampshire University Risks and Returns Project

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FIN 335

Southern New Hampshire University

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FIN 335 Milestone Four Guidelines and Rubric The final project for this course is the creation of a market analysis report that analyzes various organized global and domestic exchange markets and compares and contrasts performance for different investment products. In this milestone, you will submit a draft of Risks and Returns (Section IV) of the final project. You will analyze the risks and returns of different investment instruments in the U.S. and non-U.S. markets you selected in Milestone One. You may find it helpful to use online brokerage aids or other tools (e.g., Yahoo! Finance, Bloomberg Business, TD Ameritrade) in conducting this analysis. Review stock, bond, mutual fund, and commodity performance and their movement over time in these markets. Your analysis should include dividend yields, capital gains, price relative to intrinsic values, and foreign exchange considerations, which were discussed in Module Four. Last, you will come to a conclusion about each market’s performance and assess risk versus return when comparing investment vehicles within the different markets. Specifically, the following critical elements must be addressed: IV. Risks and Returns. Use this section to analyze the risks and returns of different investment instruments in the U.S. and non-U.S. markets you selected. You may find it helpful to use online brokerage aids or other tools in conducting this analysis. Specifically, you should: A. Investment Instruments. Review stock, bond, mutual fund, and commodities performance in the two markets. Be sure to: 1. Analyze investment returns in each of the two markets, including dividend yields, capital gains, prices relative to intrinsic values, and foreign exchange considerations associated with each of the instruments. Use relevant indicators and visual displays to help present your findings. 2. Explain what your analysis of returns suggests about each market’s performance and how that might affect decisions on where to list. Justify your response. 3. Compare and contrast how the different types of instruments move in the two markets over time, explaining the significance of this information for decisions on where to list. Provide specific examples to support your answer. For example, have certain types of instruments historically performed better in one market over another? Have certain types of instruments yielded higher returns more quickly? 4. Assess the risks versus returns associated with the different types of investment instruments in the two markets. How might these tradeoffs affect listing decisions? Support your response with specific examples. B. Interest and Inflation. Analyze how interest rates and inflation affect different investment instruments and investor decisions. Give specific examples from the two markets selected to support your answer. For example, how do inflation and interest rates affect stock, bond, and mutual fund returns in each market? How does that, in turn, affect business and individual short- and long-term investment planning? C. Taxation. Would tax policies in the two markets make one a better option for IPO listing than the other? Why or why not? Give specific examples. Guidelines for Submission: Your paper must be submitted as a 3- to 4-page Microsoft Word document with double spacing, 12-point Times New Roman font, one-inch margins, and at least two sources cited in APA format. Critical Elements Risks and Returns: Dividend Risks and Returns: Suggest Proficient (100%) Analyzes dividend yields, capital gains, prices relative to intrinsic value, and foreign exchange considerations associated with instruments in markets selected, using relevant indicators and visual displays Determines what analysis of returns suggests about each market’s performance and effect on listing decisions, justifying response Needs Improvement (75%) Analyzes specified investment returns in markets selected, but does not use relevant indicators and visual displays or analysis is cursory or contains inaccuracies Determines what analysis of returns suggests about each market’s performance and effect on listing decisions, justifying response, but response contains inaccuracies or omits key details Risks and Returns: Types Compares and contrasts movement of Compares and contrasts movement of different instruments over time in selected different instruments over time, explaining markets, explaining significance for listing significance for listing decisions and decisions and providing specific examples providing specific examples, but response is cursory or contains inaccuracies, or examples are not relevant Risks and Returns: Assesses risks versus returns trade-offs in Assesses risks versus returns trade-offs and Assess selected markets and how these affect listing how these affect listing decisions, supported decisions, supporting response with specific by examples, but response is cursory or examples contains inaccuracies, or examples are not relevant Risks and Returns: Analyzes how interest rates and inflation Analyzes how interest rates and inflation Interest and Inflation affect different investment instruments and affect different instruments and investor investor decisions, supported by specific decisions, supported by examples, but examples from two markets selected examples do not cover both markets, are not relevant, or response is cursory or contains inaccuracies Risks and Returns: Assesses whether tax policies in the two Assesses whether tax policies in the two Taxation markets make one a better option for IPO markets make one a better option for IPO listing than the other, justifying response listing than the other, justifying response with specific examples with examples, but response contains inaccuracies, omits key details, or examples are not relevant Not Evident (0%) Does not analyze specified investment returns in markets selected Value 15 Does not determine what analysis of returns suggests about each market’s performance and effect on listing decisions, justifying response 15 Does not compare and contrast movement of different instruments over time in selected markets, explaining significance for listing decisions 15 Does not assess risks versus returns tradeoffs in selected markets and how these affect listing decisions 15 Does not analyze how interest rates and inflation affect different investment instruments and investor decisions 15 Does not assess whether tax policies in the two markets make one a better option for IPO listing than the other, justifying response with examples 15 Articulation of Response Submission has no major errors related to citations, grammar, spelling, syntax, or organization Submission has multiple errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas Earned Total 10 100% 1 Governance and Oversight Governance and Oversight A. Exchanges in the United States The New York Stock Exchange (NYSE) is the world's largest stock exchange. It is a well-known exchange, and most companies are likely to list their stock there have high expectations of being accepted. The NYSE has a set of registration standards that must be met in order to be registered on its marketplace. The NYSE considers each request to list company securities for exchanges on its own grounds, as well, as its posting conditions are considered (Fontann& Howarth, 2021). There are regulations, the NYSE has its own set of governance guidelines that must be followed that include:• Independent directors make up the majority of the board of directors of issuers. • Independent directors must meet stringent requirements to serve on the boards of issuing firms. • Non-management directors have their own meetings on a regular basis. • Issuers have a nominating/corporate governance and remuneration committee, each of which are made up completely of independent directors and has its own charter outlining some basic roles and duties. • Issuers adopt corporate governance rules and codes of business behavior and ethics and make them public. 2 • CEOs of issuing companies must confirm that they are in conformity with the NYSE corporate governance listing guidelines and must notify the NYSE in writing if they are not. These requirements require the IPO business to have a majority of independent directors, and the company will lose significant influence over its financial and operational management. B. International Exchange There are no worldwide stock exchanges that trade snowflakes. According to the official website, all London Stock Exchange businesses are obliged by the London Stock Exchange's laws and must follow them. The guidelines are established in a 100-page manual that spells out the rules in great detail. Furthermore, the Financial Services and Markets Act 2000 (FSMA), which replaced the Financial Services Act 1986 and took effect on December 1, 2001, governs how investment operations are handled in the United Kingdom. The Financial Conduct Authority (FCA) is the government entity in charge of enforcing the FSMA's accounting and finance rules. This information is available on the London Stock Exchange Group's website under the grievances section. The European Securities and Markets Authority (ESMA) is the only supranational financial regulatory agency with the power to develop legally enforceable technical standards, prohibit securities market activity that is likely to exacerbate systemic risks, and launch fast-track country-specific processes to guarantee that EU legislation is applied consistently. The ESMA has the authority to initiate inquiries and propose that EU member countries collect evidence and offer suggestions for future research. 3 The rules for establishing on the London Stock Exchange differ markedly from those on the New York Stock Exchange. They also have different sectors, as well as Premium and Standard Segments, for enterprises of various sizes and trade volumes. This market has its own listing regulations in addition to the many market options. On their "Listing Regime and Obligations" website, for example, they state that "inside information should be given as soon as feasible, and an annual report should be published. The Model Code limits directors' transactions in the remaining stock on their own account at specific periods and supervises the authorization procedure as well as the method and scheduling of such transactions at all other times, it adds (Fontan, & Howarth, 2021). Nevertheless, it introduces a new regulatory authority with which to comply. As a result, large additional internal costs are incurred. C. Multiple Markets Although listing on several markets incurs additional costs, Snowfloke's total capacity to raise finance globally may be enhanced as a result. With currency exchange rates continually fluctuating, being able to raise and maintain funds in international markets can be a useful asset. Finance is required for a company's value creation. Entering one of our markets will help you gain access to London's huge pool of investment capital, whether you want to raise money right away or later (Moradi et al., 2021). By joining one of the London Stock Exchange's marketplaces, your company will get greater access to financing, a higher worldwide profile, and liquidity. Furthermore, there are instances when using these worldwide platforms to raise this additional capital is advantageous due to interest rates and/or currency valuations. D. Interest Rate Policies 4 The Federal Reserve System (FOMC) is the recognized central bank of the United States, and it oversees our financial system. Their mission is defined on their online webpage, www.federalreserve.gov. The Federal Reserve manages the level of short-term lending rates and influences the total affordability of money in the economy to execute monetary policy. Shortterm interest rates are directly influenced by monetary policy; longer-term interest rates, currency exchange rates, and the prices of stocks and other investments, as well as wealth, are influenced indirectly by monetary policy. Exchange rates affect consumer spending, economic activity, manufacturing, unemployment, and the rate of inflation through these channels. The FOMC accomplishes this by moving the federal funds rate upward or downward, based on their economic change objective. Overall, adjustments to the FOMC's goal for the Federal Reserve have a number of effects on overall financial conditions. For example, adjustments in the federal funds rate are quickly reflected in the interest rates that banks (Aronovich et al., 2021). The European Central Bank (ECB) functions similarly to the FOMC, with the exception that it strives for economic balance throughout the European Union as a whole. The ECB's objective is to enable velocity of the pass-through of adjustments in international prices to the financial sector and the overall economy, and also movements between direct and indirect finance. They're also necessary for assessing financial stability and integration (Aronovich, et al., 2021). Investors may be persuaded to move funds from their savings accounts to the equity stock market if interest rates rise. Lower rates could also help to boost the economy by enabling firms to borrow money for capital advancement and innovation. IPOs are more common and effective during economic downturns because the stock market is often performing well at this time. 5 References Aronovich, A., Dobrev, D., & Meldrum, A. (2021). The Treasury Market Flash Event of February 25, 2021. FEDS Notes, (2021-05), 14. Indraswono, C. (2021). Traditional and Modern Analysis Performance Indicators: Evidence from New York Stock Exchange. Fontan, C., & Howarth, D. (2021). The European Central Bank and the German Constitutional Court: Police Patrols and Fire Alarms. Politics and Governance, 9(2), 241-251. Moradi, M., Jabbari Nooghabi, M., & Rounaghi, M. M. (2021). Investigation of fractal market hypothesis and forecasting time series stock returns for Tehran Stock Exchange and London Stock Exchange. International Journal of Finance & Economics, 26(1), 662-678. Teall, J. L. (2018). Financial trading and investing. London, United Kingdom: Academic Press. 1 Macroeconomic Environment Macroeconomic Environment 2 Macroeconomic Environment Macroeconomics is the study of how the economy functions as a whole, or the big picture. Entrepreneurs use characteristics such as GDP, inflation, market forces, economic models, and currency fluctuations and trade when planning or predicting developments in various markets. Various factors are examined in macroeconomics in order to create models that explain the interactions between these factors. Boom and Bust Cycle The economic cycle, commonly known as the boom and bust cycle, is defined as the overlapping stages of contraction and expansion (Amadeo, 2018, para.1). In periods of economic expansion or surge, the economy thrives, with large growth in gross domestic product (GDP) and strong dividend income. It precedes a bull run, rising home values, income growth, and higher employment rates over the course of a bubble (Amadeo, 2018, para.2). Low interest rates make it simpler to acquire credit from a creditor or bank, which can subsequently be used to buy stocks, real estate, or other financial products. Renewed confidence adds to more turbulent markets growing in tandem with the economy, as well as strong investment returns. Malinvestment happens when borrowing becomes too easy to obtain and interest rates are too low. When interest rates go up, traders sell their stocks and buy safer alternatives like bonds, which starts the bust cycle. The economic depression of 2008 was an amazing illustration of how job expansion and then shortages impacted individual markets. After the terrorist attacks in 2001, interest rates were low, which encouraged people to buy homes, resulting in rising property prices. Mortgage borrowers were unable to make payments when interest rates rose in tandem with the fed funds rate. This had such a broad impact across all markets, with banks ceasing all lending, even to 3 their rivals, and the entire housing market collapsing, kicking off a recession. The financial markets were thrown into chaos when Lehman Brothers declared bankruptcy in 2008. Social and Political Climate Various situations and occurrences, such as military conflict, environmental catastrophes, terrorist attacks, and political action, have an impact on market performance. As the economy became increasingly shaky after the 9/11 attack, investors became less interested in dealing and concentrated more on low-risk bonds and equities. Following the news of war, traders were more likely to buy stocks of firms that provide military weapons parts and technologies, as there would be a significant demand for their products, prompting stock prices to rise. Every four years, the nation's monetary policies undergo a shift in ideology. Investors can perceive campaigns as an isolated case of a significant political upheaval, which often translates into more volatility in a nation's currency value (Lioudis, 2019, para.3). Interest rates Interest rates and inflation are both elements that influence the market's performance. As interest rates rise, the Federal Reserve aims for a 2% annual increase in inflation, which reduces supply and demand for goods and services as spending falls. This subsequently has an impact on companies, as consumers cut back on their spending, forcing enterprises to lay off workers or close entirely, resulting in a rise in the unemployment rate. This results in a downturn, depression, or bust in the economy. Rising interest rates influence stocks, money market funds, and commodity markets because of the higher risk and reduced return, whereas securities keep improving because of the higher yield and reduced risk. Lower interest rates cause When interest 4 rates are low, people spend more money on products and services, causing an increase in supply and demand. Organizations can seek loans more freely for expansion, resulting in more profits. When interest rates go too low, however, banks become more hesitant to make loans because they do not see a way to profit from them. When interest rates are low, banks lose money because businesses have more money in their pockets and don't need as many loans. Financial Instruments In reaction to various macroeconomic situations, all financial products carry a certain level of risk. Long-term stocks and bonds issued by a company, states, or other entities are referred to as bonds (Teall, 2013). Bonds often produce a higher return at a reduced price in a robust or flourishing economy. Bonds have a direct relationship with the country's economic interest rates. Borrowing costs fall in a bad economic climate or during a recession, which is done through lower interest rates. Bonds and equities have an inverse relationship with interest rates. An increase in one causes the other to decrease. During an inflationary period, a firm's initial public offering (IPO) may result in a rise in listings, whereas during a downturn, the number of IPOs decreases as the economy deteriorates. Investments in an initial public offering (IPO) can be hazardous and unpredictable because there is no monetary background to assess and just the alternative of looking at large organizations. Researching an organization to see if it's a sound investment and what the future holds is one thing that can make a corporation's IPO succeed. 5 References Amadeo, K. (2018, August 23). 28 Booms and Busts Since 1929. Retrieved from https://www.thebalance.com/boom-and-bust-cycle-causes-and-history-3305803 Kenton, W. (2019, March 27). Boom And Bust Cycle. Retrieved from https://www.investopedia.com/terms/b/boom-and-bust-cycle.asp Lioudis, N. K. (2019, March 12). How global events affect the forex market. Retrieved from https://www.investopedia.com/articles/forex/11/international-events-affect-forex.asp Teall, J. L. (2013). Financial Trading and Investing. Elsevier Science. Running head: SNOWFLAKES INITIAL PUBLIC OFFERING Snowflakes Initial Public Offering 1 SNOWFLAKES INITIAL PUBLIC OFFERING 2 Snowflakes Initial Public Offering Almost two years ago, most companies went public despite the outbreak of the COVID-19 disease across the globe. In 2020, one of the companies that went public most in the USA is the Snowflake. The company was founded in Bozeman, Montana, in 2012 (Martin, 2020). It is a cloud computing and data warehousing company built on Amazon Web Services or Microsoft Azure cloud infrastructure. Snowflake offers cloud-based data storage and analytics services and can be termed as data warehouse-as-a-service. Corporate users store and analyze data using cloud-based hardware and software. Examples of companies using Snowflakes are GEICO, Salesforce, Microsoft, and US Foods. The main feature in the principal global organized exchanges is the electronic exchange. Most stock exchanges are offering investors electronic platforms to invest their capital. Through the New York Stock Exchange (NYSE), Snowflakes’ investors buy their shares whose interests are high in the company. Apart from NYSE, Snowflakes could choose NASDAQ as an alternative stock exchange. In NASDAQ, buyers and sellers are connected by computers over telecommunications networks. Dealers carry their inventory stock and stand ready to purchase and market stocks in the NASDAQ. The dealers are required to post their bids and ask for prices. However, the number of investors in Snowflake has been growing significantly with NYSE, especially since February 2020 (Bursztynsky, 2020). Thus the company has been able to go head-to-head with more established veterans like Google, Amazon, IBM, Oracle, and Microsoft. All these firms have adopted electronic exchanges to tap investors across the globe. Both NYSE and NASDAQ have threshold requirements that a company must meet before its stock is marketed by one of these exchanges. The standards are common for the two exchanges and include meeting the minimum number of years of operating history, initial stock SNOWFLAKES INITIAL PUBLIC OFFERING 3 price criteria, and a minimum earnings threshold (Kumar et al., 2018). For example, a stock must maintain a $4 minimum price, and failure to maintain this minimum leads to a company being de-listed to an over-the-counter (OTC) market. The major difference between NYSE and Nasdaq exchanges is that NYSE operates like an auction market that uses specialists or designated market makers (MMs), while Nasdaq is a dealer market with numerous MMs who compete amongst themselves (Dang et al., 2018). Therefore the main difference is how market participants interact in their stock exchange business. In the NYSE auction method, market participants directly buy and sell from each other, and thus competitive bids characterize these exchanges. In the dealer model of NASDAQ, market participants transact via a dealer known as market makers. These market-makers could be a brokerage firm or a bank that matches buyers and sellers. Snowflake had an incredible performance in its stocks rally between February and September 2020. As of mid-September 2020, Snowflake shares surged more than 111% in the NYSE. This surge was the largest ever software IPO in the USA. The stock began trading at $245 per share and closed at $253.93 (Bursztynsky, 2020). Snowflake's valuation grew five times between February and September-the company was worth $12.4 billion in valuations in February and $70.4 billion in September. The growth rate of the IPO was an influence of the services provided by the company. Snowflake competes with the major public cloud vendors by providing technical services that allow clients to analyze and share substantive data quickly. They also increase capacity as needed instead of relying on databases that are tied to hardware. Hence numerous investors have gained confidence in the company. 4 References Bursztynsky, J. (September 16, 2020). Snowflake more than doubles in market debut, largest ever software IPO. Retrieved on July 8, 2021 from https://www.cnbc.com/2020/09/16/snowflake-snow-opening-trading-on-the-nyse.html Dang, V. A., Michayluk, D., & Pham, T. P. (2018). The curious case of changes in trading dynamics: When firms switch from NYSE to NASDAQ. Journal of Financial Markets, 41, 17-35. Kumar, G., Jain, S., & Singh, U. P. (2020). Stock market forecasting using computational intelligence: A survey. Archives of Computational Methods in Engineering, 1-33. Martin, J. B. (2020). Snowflake Bentley. Houghton Mifflin Harcourt.
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Risks and Returns
Student’s Name
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Risks and Returns

A. Investment Instruments
The U.S. stock market offers a wide variety of investing options such as
stocks, bonds, mutual funds and commodities. Investment options include
purchasing stocks of domestic firms listed on the New York Stock Exchange
(NYSE), investing in a mutual fund that strives to imitate the S&P 500 Index, or
investing in a fund that seeks to produce both dividend income and capital gains.
They could chose to invest in bonds in order to generate interest income or
precious metals. A stock exchange lists their fundamental investments, regardless
of the fact that mutual funds themselves do not (Albeverio, Steblovskaya, &
Wallbaum, 2013). ETFs, which are similar to mutual funds, help shareholders to
grow passively by acquiring portfolios of assets listed on the stock exchange.
When evaluating a security's performance, it's vital to consider both risk
and reward factors. In addition, there are a number of factors that affect a
security's overall performance. If you want to compare any security listed in the
U.S. or abroad, you can use this information. Using www.bigcharts.com and its
dynamic visualization, it is easy to determine the profitability securities
(Albeverio, Steblovskaya, & Wallbaum, 2013). Stocks from each category that
are traded on both the NYSE and the LSE were chosen for this assessment.
Look first at the 10-year performance of the S&P500 composite index and
the NYSE listed securities. Johnson & Johnson (JNJ) and JPMorgan (JPM) have

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underperformed the S&P 500 index, as you can see. An apparent difference in
capital appreciation betwe...


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