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Essay Instructions: Volatility of interest rates is very important for insurance companies, especially those underwriting premature death risks and selling annuities. It is also imporatant for other financial institutions like banks and corporation in general who hold some interest related securities an their balance sheet. Write and essay on the current status of the interest rate risk management being undertaken by different corporations. In particular be sure to mention the type of risk management contracts that are being sold in the market. Keep in mind the following guidelines:

1. Mention why interest rate risk matters. What will happen if interest rate risk is not managed?

2. What tools/contracts are available in the market today to manage the interest rate risks?

3. Try and relate the interest rate risk to the risk of insolvency - especially for financial institutions.

Essay Instructions: Prepare a 3 page report addressing the following topics:

Interest Rates- Determine, from a business person or lender, what a likely current interest rate would be on a loan to a small, successful business. What factors combined to make up this rate? In the current economic climate, is this rate, in your opinion, attractive or unattractive to business? Explain Why.

Welfare economics

Public choice- Compare some recent governmental policy decision to public choice theory.

Taxation policy

Essay Instructions: Discuss the history of interest rates. how interest rate started. and why.and how the auto industry uses it to boost sales

Essay Instructions: Compose a 2-4 page report, single-spaced, on the following topic. Be sure to illustrate your report with relevant financial numbers and data, and to explain the significance of this data.

BACKGROUND INFORMATION: During the Carter administration, long-term US Treasury yields exceeded 15%, and short-term T-Bills yielded near 20%. After Reagan's inauguration, interest rates began to fall as Fed Chairman Volcker's restrictive monetary policy succeeded in containing inflation. Over the past 25 years, US rates have steadily declined: T-Bills are hovering under 1% and the long bond is yielding about 4%.

Lately, though, rising oil prices have incited inflationary forces. China and other developing nations have increased their consumption for oil, metals, materials, and food. Thus, both foreign and domestic factors have spurred demand and are contributing to rising prices on a global scale. In addition to this commodity-induced inflation, US consumers are faced with rising costs for essential services such as healthcare and education.

The Chairman of the Federal Reserve, Ben Bernanke, is faced with a dilemma. Should the Fed increase rates to contain inflation; or, should the Fed keep rates very low to spur the US economy which is beset by a collapse in home values, an extensive banking crisis, and a faltering stock market ?

YOUR ASSIGNMENT: Given this economic background...Compose a 2-4 page report, single-spaced, on the following topic: If the Fed decides to raise interest rates next year, what effect would rising rates have upon the following: (1) Consumer financing for big-ticket items such as autos and homes; (2) the present and future values of annuities; (3) the NPV calculation; (4) the WACC; (5) corporate earnings ?

Be sure to illustrate your report with relevant financial numbers. Hint: for topic (3), above, one approach you might adopt is to cite the NPV calculation from the previous case problem (will be up loaded), then to contrast it against a new calculation performed with a higher interest rate. Cite the numeric effect upon the NPV, and then explain its rationale and its significance. This is the kind of "numeric illustration" that you should provide for each of the five topic sections.


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