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Compose a 4 page report. illustrate relevant financial numbers and explain the significance of this data.




Question;Compose a 4-6 page report;double-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;4-6 page report, double-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 previous case problems, 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.;References;Cornett, M. M., Adair, T. A., Jr., & Nofsinger, J.;(2014). Finance (2nd ed.). New York: McGraw-Hill/Irwin.


Paper#47943 | Written in 18-Jul-2015

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