Investment Management Assignment Sample

Added on - 21 Feb 2021

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InvestmentManagement
Table of ContentsINTRODUCTION..........................................................................................................................3Question. 1.......................................................................................................................................3Question 2........................................................................................................................................8Question 3......................................................................................................................................12CONCLUSION..............................................................................................................................16References.....................................................................................................................................17
INTRODUCTIONIn present business world, Decision taken by shareholders and senior executivesregarding the number of monetary resources deployed in useful investment opportunities isknown as investment decision (Adekola and Sergi, 2016). Longer-term capital investmentstrategy is defined as Capital Budgeting. It is a method of choosing the asset or a plan for aproject which will generate long-term profits. Making investment decision related to short termassets is also significant for an organisation because it support in obtaining regular profit whichis beneficial for long term success. It aid company to keep actual investment in goods, programs,machinery and technology that support to reach the desired results. This also takes intoconsideration depreciation spending for an organisation in long run. This is the method ofpreserving which support to keep established services and products available for real consumeror stakeholder.In this project, concepts and calculation for pricing bond and mispricing, forward Yieldsand Holding Period Returns are discussed. In addition report also defines the concepts of InterestRate Risk which would help roosters bond trust to provides meaningful advice to several groupsof investors relating to manage the risk they are exposed to when interest rates change.Question. 1(A).Reasons for decreased in cash rate in June 2019 by RBAThe Reserve Bank of Australia define the cash rate target for a specific period which isconsider to be market interest rate overnight funding (Reason fordecreased cash rate, 2019).The RBA uses it as a monetary planning tool and controls the cash rate across its activities uponfinancial market. In respective meeting Broad of RBA decided to reduce the cash rate by 0.25%points equals to new low rate of 1% that mainly reflect a high concern to slow economy. Thereare some reasons due to which the decision of cut down in cash rate have been made by RBSwhich are discussed below:Outlook for the global economy remains reasonable:It have been observed that,investment is influenced by the uncertainties created by trading and technological conflicts andthe threats to world economy are skewed downwards. Inflation continues to decline in certaindeveloped economies, unemployment rates considered to be low and productivity growth hasrisen.
Global financial conditions remain accommodative:The continued potential risks forglobal economy leading to low inflation that have contributed to assumptions that global centralbanks would loosen monetary and fiscal policy. Lengthy-term treasury bond rates in a variety ofcountries, like within Australia, have fallen significantly at are recorded as the lowest. Bankbond yields have already decreased in Australia, to money market premiums having totallyreversed from last year's increases (Balaman, 2016).The announcement today related with lower the cash rate would contribute in makingfurther advances within economy's excess capacity. This will allow better progress for improvingthe economy and more confident movement upwards to the goal of inflation.(B). Twenty Treasury Bonds and twenty zero-coupon yields (ZCY).(I).CodeMaturity (years)Face valueCoupon (p.a.)couponsBond PriceGSBG200.51005.25%$2.63102.1168GSBU201.01002.50%$1.25101.5863GSBI211.51005.75%$2.88107.2873GSBW212.01002.00%$1.00102.3857GSBM222.51005.75%$2.88112.1934GSBU223.01002.25%$1.13104.2046GSBG233.51005.50%$2.75115.9013GSBG244.01002.75%$1.38107.1362GSBG254.51003.25%$1.63110.1021GSBG265.01005.25%$2.63120.8336GSBG275.51005.75%$2.88125.3308GSBU276.01001.75%$0.88104.0564GSBI286.51002.25%$1.13107.2938GSBN287.01001.50%$0.75102.5223GSBG297.51003.25%$1.63115.0504GSBU318.01001.50%$0.75102.3238GSBG338.51003.25%$1.63116.3784GSBK359.01002.75%$1.38112.7113GSBK379.51001.50%$0.75101.9507GSBK3910.01002.75%$1.38113.5748
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