Market Analysis Case Solution
In the bond market, the investor usually purchases a bond that gives higher return on the investment. However, the economic condition pushes the market towards safer investment that leads to falling in the bond yield. Economic conditions include a higher rate of unemployment and slow economic growth or recession that might decrease the bond yield. If the interest rate increases, the price of the bond tend to fall or vice versa.
Moreover, the Canadian bond market is much riskier than the United States bond market. However, the Canadian bond pays less interest on bond maturity as compared to the United States market. It can be determined that the higher return on U.S bond leads to greater risk,as determined by the investor. Additionally, the U.S bond market fluctuates less frequently as compared to the Canadian bond market. The U.S economic conditions are more stable than the Canadian economy.
On the other hand, the investor face more risk in the Canadian bond market as compared to the U.S market. The relationship between interest rate and price of the bond is inversely proportional to each other. However, if the interest rate increases the price of the bond tends to fall or the price of the bond rises if the interest rate falls.Furthermore, the Canadian economy is less stable than U.S economy. In the same manner,the investor would purchase bond above the market price, in order to earn higher return on the bond. However, if the investor purchases bond at par value, equal to the market price, the yield of the bond is same as the market price of the bond. Furthermore, if the bond price above the market price, the bond is stated as premium bond. The price of the bond is much higher than the market price of the bond.
In other words, the investor would purchase praseodymium, so the investor earns higher interest than the market prevailing interest rates. Generally in the bond market, as the price of the bond rises, the bond yield tends to fall. However, if the price of the bond decreases, the yield of the bond increases. In such case, they are related to inversely proportional to each other.
Market Analysis Harvard Case Solution & Analysis
The tolerance level indicates that the investor requires a high return on the investment. The current risk tolerance level specifies that the investor would willingly tolerate the risk associated with the stock that the investor held in the market. However, the investor would balance their portfolio in order to earn higher rate of return on the investment. The company stock pays interrelationship return on the investment,so in order to earn nonreturnable, the investor should purchase MS FT, NEVADA, and AMEN. Additionally, these stocks pay relatively higher return at higher risk.............
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