FIN 650 Grand Canyon

FIN 650 Grand Canyon Week 3 Complete Work

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FIN 650 Grand Canyon Week 3 Discussion 1

How would companies benefit from running sensitivity analysis? How do they determine the most relevant items to evaluate?

FIN 650 Grand Canyon Week 3 Discussion 2

This discussion thread will be used to discuss the practice problems completed in this module. After completing the problems, submit your answers to the instructor. Your instructor will specify which problems will be reviewed for discussion. Post your answers to the posted problem to this discussion thread and discuss any challenges you had with completing the problems, tips that helped you arrive at the correct answers, and/or questions you may still have.

FIN 650 Grand Canyon Week 3 Case Study

Fixed Income Securities

Congratulations. You have been promoted to vice president and director of your mid-size firm’s pension fund management team located in Cincinnati, OH. Before you have even had the opportunity to settle into your new office, your senior vice president tapped you to take her place and present an investment seminar to "a group of investment decision-makers" comprised of government analysts from all over the tri-state area but that is the extent of the information you’ve been provided. After doing some quick research, you’ve identified that the specific target audience for this presentation is composed primarily of individuals with little or no professional investment experience who are attending this seminar to build their skills.

In order to address the range of information these individuals need to know and the likely range of questions that may crop up, you’ll need to be able to:

1. Describe the essential characteristics of a bond and how these characteristics interact to determine bond value, inclusive of how both the interest rate and coupon rate influence bond value and pricing.

2. Summarize call provisions and sinking fund provisions. Explain how these click here types of provisions individually make bonds more or less risky for a) an investor, and b) the issuer.

3. The value of get more info an asset whose value is based on expected future cash flows is determined by the present value of all future cash flows the assets will generate. Given the case scenario and target audience provided, select and discuss a simple asset situation that could apply to exemplify this concept.

4. Define what it means when a bond is callable. Provide two measures you can review to understand what type of returns to expect if the bond is called or if it is not called.

5. Describe the type of returns one could one expect with a callable bond trading at a premium price and provide your rationale. Explain the significance of the designation "premium price." Discuss why or why not a callable bond trading at a premium price would be an appropriate investment for the target audience’s organizations.

6. Select an example scenario appropriate to the seminar’s target audience Write a general expression for the yield on a probable debt security (rd) and define these terms in regards to that hypothetical security: real risk-free rate of interest (r*), inflation FIN650Week3 premium (IP), default risk premium (DRP), liquidity premium (LP), and maturity risk premium (MRP).

FIN 650 Grand Canyon Week 3 Complete Work

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