What is the primary difference between money markets and capital markets?
1. As a financial manager, you examine many different projects to assess if they are positive or negative Net Present Value (NPV) projects. You find a come across a 10 year project that is has a 0 NPV when using a discount rate of 5%. Currently, interest rates on 10 year bonds for companies similar to yours are 4%. Also, interest rates on 1 year bonds for companies similar to yours are 1%. Why might you, as a financial manager, choose to lock in a 4% rate for 10 years by issuing ten year bonds rather than finance with a series of 1 year bonds?
2. Give 2 reasons why a firm may want to exercise the call option on its bonds.
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Get Help Now!3. Stockholders are often described as residual claimants. What does this mean?
4. As an investor, you know that ETFs have lower fees than index mutual funds. Why might you still invest in index funds in your employer sponsored retirement account (i.e. 401(k))?
Trivia: Two US presidents ran for the presidency without an opponent. Which two presidents were they?
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