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##### UMUC FIn300 discussions

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Question;Wk 1 -;Conference Questions;Ratio;analysis is a very powerful tool for analyzing financial performance that has;many valuable applications and some inherent potential weaknesses. Answer the;following two questions in one paragraph each: (1) identify the major;application of Ratio Analysis and (2) identify some of the potential weaknesses;that are inherent in ratio analysis overall.;Wk 2-;Conference Questions;The core;formula underlying the time value of money theory, FV= PV x (1+r)nand;its reciprocal;PV =;FV/(1+r)n, is based on the assumption that a dollar today is worth;more than a dollar tomorrow because it is assumed you can invest the dollar;today and earn additional value.;While;this is generally true;Can you identify some conditions;where the assumption might not hold?When the conditions do not;hold, what is the wise course of action for today?s dollar holder?When the invested dollar;does not earn additional value, are the basic time value formulas still;valid? Explain your answer.;Wk 3-;Conference Questions;The ?Nominal? rate of interest is composed of several components;each of which has an impact on the actual interest charged or received: (1);Identify these interest rate components, (2) define what they represent, (3);what determines their magnitude, and (4) specify how they impact on the nominal;rate. Use illustrative examples or formulas if and as necessary.;Wk 4-;Conference Questions;Traditional financial theory states that there is;an inverse relationship between a bond?s price and the current interest rates;i.e. when interest rates go up, bond prices fall and when interest rates go;down, bond prices rise.;(1) For the following two scenarios is that;statement true? - provide your supporting rationale.;Scenario 1: You purchase a $1,000 par value bond 5 year;maturity bond with a coupon rate of 5% and a Yield to maturity of 6%, You;plan to sell this bond in 3 years.;Scenario2: You purchase a $1,000 par value bond;5 year maturity bond with a coupon rate of 5% and a yield to maturity of 6%.;You plan to keep the bond to maturity (5 years).;(2) Also identify some factors other than the;interest rate that can affect the price of a bond?;(3) Who bears the risk, gain or loss, of a;change in bond price?

Paper#50401 | Written in 18-Jul-2015

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