Analyse Recent Developments in  the Euro Era - Investigated the Annual Deposit Rate - Finance Assignment Help

Assignment Task :

QUESTION 1  

(THE INTEREST RATES) 

You are a senior financial analyst and have been asked to analyse recent developments in  the Euro era and the U.S markets and advise the top management on the economic  conditions in both markets. You have collected data on the euro area yields of the central  government bonds and the U.S. treasury bond yields. For this purpose, you have  downloaded the following data from the European Central Bank and the U.S Federal  Reserve Bank on 24th September 2020 (Mo = month, Yr = Year): 

REQUIRED:  

1) Considering both yield rates on 24th September 2020, depict the yield curves charts and  describe the implied market outlook in the Euro area and the U.S. market to the top  management. 

QUESTION 1 (continued) 

2) Calculate the market price of each bond on 24th September 2020 that issued by North  Polar Ltd., a European company specialises in manufacturing semiconductors, using  the yield curve data provided in the table above. What is the current total value of minimum application? 

3) Suppose the Australian government has announced tax cuts for the business sector.  Using the loanable funds model, explain how this will impact the supply of and demand  for loanable funds and the interest rate in Australia. (Explain your answer using  diagrams). 

QUESTION 2  

(TIME VALUE OF MONEY) 

1) You have just received a bonus of $15,750 and are looking to deposit the money in a  bank for 5 years. You have investigated the annual deposit rate of several Australian  banks and collected the following information:

i. To determine which bank you should deposit your money in, calculate how much  money you will earn at the end of 5 years at each bank. (round your answer to 2  decimal places). 

ii. You understand that the more frequently interest is earned in each year, the more  you will have at the end of your investment horizon. Is this always true? Discuss  this statement considering your answer from the previous part. 

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