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Financial Institutions Management Assignment

   

Added on  2020-06-06

6 Pages1196 Words139 Views
FINANCIAL INSTITUTIONSMANAGEMENT

TABLE OF CONTENTSQUESTION 1...................................................................................................................................1Introduction......................................................................................................................................1Discussion........................................................................................................................................1A. Prediction of U.S. Interest rates in the next year as per the provided information............1B. Based on provided situation suitable type of loan.............................................................1C. Change in forecasted upcoming trend of U.S. Interest rates.............................................2Conclusion.......................................................................................................................................2QUESTION 2...................................................................................................................................2Introduction......................................................................................................................................2Discussion........................................................................................................................................2Problems of issuing too many shares in stock market............................................................2Role of securities firm which are providing services as underwriter.....................................3Conclusion.......................................................................................................................................3REFERENCES................................................................................................................................4

QUESTION 1IntroductionRate of interest determined with several aspects like budget deficit, monetary policies,household savings etc. in an economy. The question reflects that how future trend of interest rateis predicted and shown about the appropriateness of kind of loan after considering providedinformation. Apart from this, it shows that due to changing in interest rates of another economyin which way future direction of U.S. Interest rates affected. DiscussionA. Prediction of U.S. Interest rates in the next year as per the provided informationOn the basis of given information, economic growth will stagnant or increase with thelow rate in upcoming periods. Along with this, reduction in government spending and enhanceinflation with 3 percent are also sign of declining demand of the loanable funds. When talkingabout the supply side then, households not make more savings in the bank and other financialinstitutions. In addition to this, Federal Reserve bank expects that current supply level ofloanable amount will remain constant in the next period. Due to which it can be assumed that,supply should remain unchanged of the funds which are loanable. After considering the above stated assumptions it can be said that, demand and supply ofloanable amounts should reduce and constant at the next year. Therefore, it has been predictedthat, future trend of U.S. Interest rates should decline or downward in the upcoming fiscal year(Spaulding, 2017).B. Based on provided situation suitable type of loanAs per the given information, rate of interest will fluctuate over the every month where itmay be increase or decrease. Further, if the interest rate improves then lead to create economicburden on the people and firms. Under the fixed rate, the loan taker is free from fluctuating costburden of debt. Henceforth, fixed rate loan at the 8 percent interest is more suitable to make aninvestment in comparison to the floating rate.On the opposite of this, if it is expected that interest rate will fluctuate with the lower ratein upcoming year then floating-rate loan will be the most appropriate. Under this, chances oflosing money will become negligible as compare to fixed-rate loan. 1

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