Unemployment and Inflation” Please respond to the following: Imagine that you have a fixed 30-year interest rate for your mortgage, and the economy has experienced unanticipated inflation. Examine who the winner and loser would be. Is it the borrower or the lender in the given scenario? Provide support for your response.
Unemployment and Inflation” Please respond to the following:
•Imagine that you have a fixed 30-year interest rate for your mortgage, and the economy has experienced unanticipated inflation. Examine who the winner and loser would be. Is it the borrower or the lender in the given scenario? Provide support for your response.
RESPOND TO JULIA
In the financial industry, inflation will cause interest rates to increase. When anticipated inflation occurs, it gives society a chance to prepare for it. However when unanticipated inflation occurs, it catches everyone by surprise. In my perspective, if unanticipated inflation occurred, the winner will be the home owner with the fixed rate mortgage. For an individual whom is holding a 30 year fixed mortgage, in the long run and during unanticipated inflation, they will be saving money. If interest rates were to rise due to the market, these fixed loan rates will remain. Banks tend to lose money in these cases since they cannot increase their earning potential through these loans. In the event that mortgage interest rates are lower, homeowners may choose to refinance their loans for the lowered fixed rate. Therefore, homeowners that are locked into fixed rates win. On the other hand, homeowners whom choose to have adjustable fixed rate mortgages can lose if an unanticipated inflation were to occur since their loans interest rate can have a dramatic increase. These increases can even lead such homeowners towards losing their homes in the event that they are unable to refinance their homes for lower rates or meet the new mortgage payments.
•Select a company with long term bonds outstanding. There are many examples in the textbook. Locate and analyze a current quotation for that bond. Use figure 10.2 in the textbook as a guide. Compare the current price with the par value. Explain at least one (1) reason for the difference.
Chapter 11: DQ1 – DQ16 (Select / complete any 10 DQs within the provided range)
•Why do corporations employ investment bankers
•Identify the primary market functions of investment banker
•Explain market stabilization
•Identify the costs associated with going public
•Briefly describe how investment banking is regulated
•Describe the inroads into investment banking being made by commercial bank
•What are some of the characteristics of an organized securities exchange
•What is a short sale
•Describe buying on margin
•What is program trading
RESPOND TO LAQUILLA
The company I chose to research is Bayerische Moteren Werke AG, known affectionately as BMW AG vehicles.
Company Ticker is BMW AG
Coupon – 8.52%
Maturity – 2015
Last Price – 601.995 EUR
Last Yield – 96.31 EUR
Spread – 96.19 – 97.94 EUR
Par Value – 62.807
Est $ value – 936,301 EUR
The current price is 62.807 EUR and the par value is 9.28 EUR = 6.77 EUR
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