Finance Homework

User Generated

UNZ8

Writing

Description

I posted the file with question and I want you to answer each question in your mind (thinking) and I do not need any sources ( work cited) please do it good quality

I posted other file for example ( the same question )

thanks

Unformatted Attachment Preview

Assignment Chapter 07 PLEASE give me the typed answers to the following questions: (Due date: March 14, 2018) POINT/COUNTER-POINT: Should Financial Institutions Invest in Junk Bonds? POINT: Yes. COUNTER-POINT: No. WHO IS CORRECT? Use the Internet to learn more about this issue and then formulate your own opinion. CRITICAL THINKING QUESTION Integration of Bond Markets Wrtie a short essay on the integration of bond markets. Explain why adverse conditions within one bond market (such as a particular country) commonly spread to other bond markets. Interpreting Financial News Interpret the following statements made by Wall Street analysts and portfolio managers. a. “The values of some stocks are dependent on the bond market. When investors are not interested in junk bonds, the values of stocks ripe for leveraged buyouts decline.” b. “The recent trend in which many firms are using debt to repurchase some of their stock is a good strategy as long as they can withstand the stagnant economy.” c. “Although yields among bonds are related, today’s rumors of a tax cut caused an increase in the yield on municipal bonds, while the yield on corporate bonds declined.” POINT/COUNTER-POINT: Should Financial Institutions Invest in Junk Bonds? POINT: Yes. Financial institutions have managers who are capable of weighing the risk against the potential return. They can earn a significantly higher return when investing in junk bonds than the return on Treasury bonds. Their shareholders benefit when they increase the return on the portfolio. COUNTER-POINT: No. The financial system is based on trust in financial institutions and confidence that the financial institutions will survive. If financial institutions take excessive risk, the entire financial system is at risk. WHO IS CORRECT? Use the Internet to learn more about this issue and then formulate your own opinion. ANSWER: The answer may depend on the type of financial institution of concern. Lending institutions are expected to provide credit to creditworthy customers, and junk bonds may be viewed as a form of gambling. These institutions do not invest in junk bonds. Insurance companies may invest in junk bonds, but there is some concern that the confidence in insurance companies could be shaken if there are failures because of defaults on junk bonds held by insurance companies. Perhaps the ideal type of institutional investor in junk bonds is a mutual fund that specializes in investing in junk bonds, since the fund’s objective would be clearly communicated to investors, and only those investors who wanted to accept the high risk would invest in these types of mutual funds. CRITICAL THINKING QUESTION Integration of Bond Markets Wrtie a short essay on the integration of bond markets. Explain why adverse conditions within one bond market (such as a particular country) commonly spread to other bond markets. ANSWER When creditors provide funding in the bond market, it is for a long period of time. There is much uncertainty surrounding the ability of the borrowers to repay debt over a long period of time. Creditors look to other related markets for signals. When one country is unable to repay its debt, creditors question whether other countries have a similar profile and may also experience similar problems in the future. In addition, the economic conditions in one country can spread to other countries because that country might normally purchase a large volume of imports from other countries. The demand for imports will likelydecline if the country experiences financial problems. This could reduce the amount of sales generated by the exporting countries. Furthermore, many banks in other countries might have provided loans to one country’s government, so all of those banks could experience financial problems when their loans are not repaid. Interpreting Financial News Interpret the following statements made by Wall Street analysts and portfolio managers. a. “The values of some stocks are dependent on the bond market. When investors are not interested in junk bonds, the values of stocks ripe for leveraged buyouts decline.” The likelihood of a firm engaging in an LBO is dependent on whether it can obtain debt financing. If the junk bond market is inactive, the likelihood of obtaining debt financing is low and so is the chance of engaging in an LBO. The market value of the firm’s stock may decline if the likelihood of a takeover is reduced. b. “The recent trend in which many firms are using debt to repurchase some of their stock is a good strategy as long as they can withstand the stagnant economy.” When firms use debt to repurchase some of their stock, they create a higher degree of financial leverage. While this can enhance the firm’s return to its remaining shareholders, it results in higher debt payment, and can therefore increase default risk, especially when the economy is stagnant. c. “Although yields among bonds are related, today’s rumors of a tax cut caused an increase in the yield on municipal bonds, while the yield on corporate bonds declined.” If investors expect a tax cut, they recognize that the benefits from tax-free municipal bonds will be reduced. Therefore, they sell municipal bonds immediately in response to this expectation, and purchase corporate bonds. The sale of municipal bonds causes lower prices and higher yields of municipal bonds, while the purchase of corporate bonds results in higher prices and lower yields of corporate bonds.
Purchase answer to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

Hello,.. here is the full answer for you... :)

NAME: 1

Name:
Course:
Tutor:
Date:
Finance Homework

POINT/COUNTER-POINT:
Should Financial Institutions Invest in Junk Bonds?
POINT: Yes. Financial institutions have managers who are capable of weighing the risk against
the potential return. They can earn a significantly higher return when investing in junk bonds
than the return on Treasury bonds. Their shareholders benefit when they increase the return on
the portfolio.
COUNTER-POINT: No. The financial system is based on trust in financial institutions and
confidence that the financial institutions will survive. If financial institutions take excessive risk,
the entire financial system is at risk.
WHO IS CORRECT? Use the Internet to learn more about this issue and then formulate your own
opinion.
ANSWER:
The answer to the question is that both the point and counterpoint are correct. This is because
they do not state expressly the types of financial institutions that are involved. I...


Anonymous
Excellent resource! Really helped me get the gist of things.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Related Tags