w12as1 - Capital Markets and Institutions Assignment 1...

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Capital Markets and Institutions Assignment 1 Discussion Questions 1. “Interpreting Financial News” tests your ability to comprehend common statements made by Wall Street analysts and portfolio managers who participate in the financial markets. Interpret the following statements made by Wall Street analysts and portfolio managers. a. “The lending operations at Bank of America should benefit from strong economic growth.” b. “The brokerage and underwriting performance at Merrill Lynch should benefit from strong economic growth.” 2. Explain how investors' preferences for commercial paper change during a recession. How should this reaction affect the difference between commercial paper rates and T-bill rates during recessionary periods? Problems 1. Assume an investor purchased a six-month T-bill with a $10,000 par value for $9,000 and sold it ninety days later for $9,100. What is the yield? 2. Newly issued three-month T-bills with a par value of $10,000 sold for $9,700. Compute the T-bill discount rate. 3. Assume an investor purchased six-month commercial paper with a face value of $1,000,000 for $940,000. What is the yield?
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w12as1 - Capital Markets and Institutions Assignment 1...

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