High risk should produce high returns. Illustrate this concept with a real-life example of junk bonds that actually generated high returns for investors. (I know it says to illustrate, however please explain it in text).
Financial analysts argue that the higher the investment returns, the higher the risks that an investor face. Junk bonds are an excellent example of the above concept because they offer high returns to investors willing to take higher risks. Junk bonds have higher returns; however, they have high risks since the issuer's chances of default are high. If there are no defaults, the investor gets high returns on the investment.
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What happens with the stock price of a company whose debt rating is downgraded? Please refer to a specific example in the last three years. Did the company recover? Was it able to actually service the debt? What happened with its stock price?
The downgrading of a stock price happens when its rating shifts negatively. The negative change happens when the stock price deteriorates due to several factors affecting the organization or the industry. During the COVID-19 pandemic, most companies' stock prices were downgraded. One of these companies is Amazon, which is a global e-commerce organization. At the onset of the pandemic, Amazon's stock was downgraded by R5 Capital analysts, shifting the stock from a buy to sell position as the Covid-19 situation creating rising uncertainty in the economy. With people are shifting to online purchasing with the social-distancing rules, the company has achieved tremendous growth and sales have increased enabling the firm to service its debt in times of calamity. The share price did not drop but even rose higher above $2408 at the time of the downgrade. Therefore, Amazon's stock-price is expected to upgrade as the company is making more profits at the moment.
Go to the Federal Reserve website and get a list of the type of databases available to the public. Comment on how managers can use this type of info to make better decisions. Give 1 example.
The Federal Reserve Website consists of a list of databases, such as the Monetary Policy, News &Events, and Recent Statistical Releases. Managers use this type of information to predict the economy's future performance, making them align their business decisions with the information derived from the database. For example, the website highlights the financial risks exposure to the financial system. The section provides information about the risks in the financial system, evaluate them to ensure that it can support a healthy economy. Managers can use the information to make better decisions on the financial risk exposures for their companies and institute possible ways of mitigating the exposure.
Go to a financial company’s website and get the mortgage rates for a home purchase for 15 year and for 30-year mortgages.
Report the quote and include the APR. (and points when available) and the day when you obtained the quote. Specify any specific requirements (credit score, down payment required)
The mortgage rates for the Bank of America are as follows; the 15-year rate is 2.250%, and its APR is 2.571%. The 30- year rate is 2.750%, while the APR is 2.939%. The 30-year points are 0.840, while the 15-year points are 0.680. The credit score should be 740 or more, and the down payment is $50,000. The quote was obtained on 15 th October 2020.
There are plenty of websites that assist in calculating mortgage payment and other TVM (Time Value of Money) numbers. Please introduce one of them and comment on its uses, advantages, etc. and how it compares against the competition.
The Mortgage Payment Calculator is one of the websites that help in calculating mortgage payment and TVM. The website guides its users to know the exact amount people applying are supposed to pay to prevent the chances of being overcharged by the mortgage companies. It also helps in financial planning. The website is easy to use as it offers step to step tutorial for beginners. The website is friendly for beginners who have less information in calculating mortgage rates.
