FIN 364 DeVry Complete Week Discussions Package
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<strong>FIN</strong> <strong>364</strong> <strong>DeVry</strong> <strong>Week</strong> 3 Discussion 1<br />
Loanable Funds and Interest Rates (graded)<br />
Let’s discuss the relationship between loanable funds and interest rates. What are the sources of loanable funds in the<br />
economy? How does the availability of loanable funds affect interest rates? What does this imply for the way in which<br />
the Fed manages the money supply?<br />
<strong>FIN</strong> <strong>364</strong> <strong>DeVry</strong> <strong>Week</strong> 3 Discussion 2<br />
Expectations and Interest Rates (graded)<br />
What is the role of expectations in interest rate determination? How does expectations affect real and nominal interest<br />
rates? How and why do lenders make interest rate adjustments? How does this affect borrowers?<br />
<strong>FIN</strong> <strong>364</strong> <strong>DeVry</strong> <strong>Week</strong> 4 Discussion 1<br />
Bonds and Bond Duration (graded)<br />
Suppose you have a goal of starting a new business 3 years from now and must accumulate enough funds for this<br />
project. You decide to invest in bonds, but are concerned about interest rate risk. How can duration be used to estimate<br />
and manage interest rate risk? How can the duration of a bond portfolio be adjusted? Why might an institution or<br />
investor want to do this?<br />
<strong>FIN</strong> <strong>364</strong> <strong>DeVry</strong> <strong>Week</strong> 4 Discussion 2<br />
Bond Characteristics and Behavior (graded)<br />
How are bond prices related to interest rates? What are the impacts of tax treatments; marketability; and characteristics<br />
such as call provisions, put options, and conversion options on yield? Given your earlier answer, what are the<br />
characteristics of an ideal bond from an investor’s perspective?<br />
<strong>FIN</strong> <strong>364</strong> <strong>DeVry</strong> <strong>Week</strong> 5 Discussion 1<br />
Money Market Instruments in Detail (graded)<br />
You are the CEO of a Fortune 500 company. You have two objectives:<br />
1. invest $5 million cash on hand short term (overnight to one month); and<br />
2. borrow $100 million for your firm’s working capital needs.<br />
How would you achieve both objectives using the money markets? Describe your alternatives in terms of the<br />
characteristics of money markets instruments. Which of the money market instruments would you choose in each case?<br />
Why?<br />
This section lists options that can be used to view responses.<br />
<strong>FIN</strong> <strong>364</strong> <strong>DeVry</strong> <strong>Week</strong> 5 Discussion 2<br />
Repos and Repo Transactions (graded)<br />
What are repos? How popular are they as a money market instrument compared to other money market options? Under<br />
what circumstances does engaging in a repo transaction makes sense? How important are expectations to the repo<br />
transaction?
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