We have been working very hard since 2009 to facilitate in your learning Read More. We can't keep up without your support. Donate Now.

www.bit.ly/vucodes

+ Link For Assignments, GDBs & Online Quizzes Solution

www.bit.ly/papersvu

+ Link For Past Papers, Solved MCQs, Short Notes & More

MGT411 - Money & Banking

Graded Discussion Board

Dec 5-10, 2013

Total Marks 30
 


 “RETURN ON BONDS & SOURCES OF BOND RISK”

 

LEARNING OBJECTIVES:

 

Money & Banking students will be enabled to understand:

 

  • What are the different sources of bond risk and their impact on bonds’ value?

 

  • The behavior and strategy of an investor (bondholder), to manage & deal with the risk of a bond according his needs and market conditions.

 

Case:

Luxurious life, who does not wish to live. Nowadays, a good education is essential for such a wishful life. Getting quality education has become a dream that can hardly come true for lower middle class which strives tooth and nail. They put their lives and even their hard earned savings at risk to secure better future for themselves and their coming generations.

Mr. Amjad recently completed his graduation from a local university and now plans to pursue higher studies abroad, Australia. Getting admission and   study visa may take thirteen to fifteen months. He has sufficient money that can only help him secure admission, get visa and travel to desired location but cannot pay for accommodation, food and other expenses; therefore requires more money. An idea knocked him to invest the money in hand in some corporate bonds that may earn him high profits(which he actually needs); would sell these bonds without any loss upon the confirmation of admission to pay dues (admission charges, semester charges, travel, boarding and messing) and start working for making his dreams come true.

Requirement:

1.      Suppose Mr. Amjad invests money in 12% corporate bonds, after a month, government changes its policy regarding interest rate. How can Mr. Amjad incur loss due to such change?                                                   

2.      Does the above change (in part 1) link with the liquidity of a bond? Support your answer with logical reasoning.                                          

3.      After two months, a banker approaches Mr. Amjad and attempts to convince him to move his money from bonds and invest in bank’s “Mahana Certificates (MCs)”, he claims that MCs are 100% secure and fully insured by the government. How would Mr. Amjad respond?                          

    

Note: Complete your comment within 250 words

Important Instructions:

 

1.   Your discussion must be based on logical facts.

2.   The discussion board will remain open for 4 working days.

3.   Do not copy or exchange your answer with other students.  Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.

4.   Obnoxious or ignoble answer should be strictly avoided.

5.   Questions / queries related to the content of the discussion board, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of discussion board is over.

v  For detailed instructions please see the discussion board announcement

 


+ http://bit.ly/vucodes (Link for Assignments, GDBs & Online Quizzes Solution)

+ http://bit.ly/papersvu (Link for Past Papers, Solved MCQs, Short Notes & More)

+ Click Here to Search (Looking For something at vustudents.ning.com?)

+ Click Here To Join (Our facebook study Group)


Views: 2451

Replies to This Discussion

Please Discuss here about this GDB.Thanks

Our main purpose here discussion not just Solution

We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.

what is the liquidity of a bond

Liquidity risk: The market for bonds is considerable thinner than for stock. The simple truth is that when a bond is sold on the secondary market, there’s not always a buyer. Liquidity risk describes the danger that when you need to sell a bond, you won’t be able to.
Liquidity risk is nonexistent for government debt. And shares in a bond fund can always be sold.

But if you hold any other type of debt, you may find it difficult to sell.

 

MGT 411, GDB# 1

DUE DATE: 10-12-2013

MARKS: 30


 “RETURN ON BONDS & SOURCES OF BOND RISK”

 

LEARNING OBJECTIVES:

 

Money & Banking students will be enabled to understand:

 

  • What are the different sources of bond risk and their impact on bonds’ value?

 

  • The behavior and strategy of an investor (bondholder), to manage & deal with the risk of a bond according his needs and market conditions.

 

Case:

Luxurious life, who does not wish to live. Nowadays, a good education is essential for such a wishful life. Getting quality education has become a dream that can hardly come true for lower middle class which strives tooth and nail. They put their lives and even their hard earned savings at risk to secure better future for themselves and their coming generations.

Mr. Amjad recently completed his graduation from a local university and now plans to pursue higher studies abroad, Australia. Getting admission and   study visa may take thirteen to fifteen months. He has sufficient money that can only help him secure admission, get visa and travel to desired location but cannot pay for accommodation, food and other expenses; therefore requires more money. An idea knocked him to invest the money in hand in some corporate bonds that may earn him high profits(which he actually needs); would sell these bonds without any loss upon the confirmation of admission to pay dues (admission charges, semester charges, travel, boarding and messing) and start working for making his dreams come true.

Requirement:

1.      Suppose Mr. Amjad invests money in 12% corporate bonds, after a month, government changes its policy regarding interest rate. How can Mr. Amjad incur loss due to such change?                                                   

2.      Does the above change (in part 1) link with the liquidity of a bond? Support your answer with logical reasoning.                                          

3.      After two months, a banker approaches Mr. Amjad and attempts to convince him to move his money from bonds and invest in bank’s “Mahana Certificates (MCs)”, he claims that MCs are 100% secure and fully insured by the government. How would Mr. Amjad respond?                          

    

Note: Complete your comment within 250 words

 

 Liquidity Risk:
The risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss. Liquidity risk is typically reflected in unusually wide bid-ask spreads or large price movements (especially to the downside). The rule of thumb is that the smaller the size of the security or its issuer, the larger the liquidity risk.

kaisey krna hai yeh ... samjh nahi aa rahi ..  plzz help

Anyone plzzzzzzzzz give the solution

he is using zero coupon bond rebetter ideaad lesson 13 and 14 for better idea

plzz share solution

Dear Students Don’t wait for solution post your problems here and discuss ... after discussion a perfect solution will come in a result. So, Start it now, replies here give your comments according to your knowledge and understandings....

UK visa is easy to process for studiees with short time... he must try this to avoid any liquidity......

there may be no direct effect on change of govt policy regarding intrest rate

yar aj last date hai

RSS

Looking For Something? Search Here

Latest Activity

HELP SUPPORT

This is a member-supported website. Your contribution is greatly appreciated!

© 2020   Created by +M.Tariq Malik.   Powered by

Promote Us  |  Report an Issue  |  Privacy Policy  |  Terms of Service

.