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1) There are various factors which could potentially impact value of the security. Text provides some main economic factors to be measured when making investment decisions. Select two and, in your own words, describe how these economic factors will impact value of the security.

You can choose any two of the following: There are many main economic factors to be measured when making investment decisions. They are as given: Government fiscal policy-Taxes, Monetary policy-Money Supply, Debt management; Government Spending, Interest rates; other factors- Business investments, Inflation, Foreign trade, Consumer Spending and foreign exchange rates

2) Assume you buy a 10-year, AAA-rated Swiss bond for par which is paying the annual coupon of 6 percent. Bond has the face value of 1,000 Swiss francs (SF). Spot rate at the time of purchase is SF1.50/$. At the end of year, bond is downgraded to AA and yield rises to 8 percent. Additionally, SF appreciates to SF1.35/$.

Basic Finance, Finance

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