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A2 Assignment on Financial Institutions

A2 Assignment on Financial Institutions - stream would be...

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A2 Assignment on Financial Institutions. 1) Make a list of all the financial instruments you currently hold Savings bank account, checking bank account, stocks, interests, deposits and loans, and health insurance, etc. 2) Make a list of all the financial instruments you will likely hold by the time you retire. Insurance, pension funds, government bond, company’s options, foreign exchange swaps, stocks (both common stocks and preferred stocks), fixed income, retirement bonds, savings bank account, etc. 3) Consider you future after graduation and how you plan of obtaining income. At the beginning of your career, you will likely depend primarily on labor as the source of income. Write a brief paragraph discussing the risks over your lifetime of depending 100% on the labor component of that income stream. Discuss all the possible things that could affect that stream. For each risk, list a financial instrument the system has created to mitigate that risk. The risks over the lifetime of depending 100% on the labor component of that income
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Unformatted text preview: stream would be as follow: • Time value of money. The salary I earn from the work may be not worthy it should be as in the past. Maybe it because of the inflation of extra money in the financial system. A financial instrument I might consider is to invest the money in the bank for interests or loans. • The money I deposit in the bank, but the interest rate may decrease accordingly. In order to transfer this kind of risks, I can also use all the income I did not spend to buy insurance contracts. • This kind of income stream would take very long time to accumulate enough money to afford a house or an apartment. By the time I have enough money from this stream, my money may be worthy less or more. In order to reduce this kind of risks and make the current money value more, we can also take the mortgage or loan to buy a house first. By using the future money, we may decrease the inflation risks....
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