StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

The financial system and the economy - Statistics Project Example

Cite this document
Summary
The global financial system has proved to be challenging as the economy tries to counter the global financial crisis of the year 2008 which have contributed towards to instability of world prices. The global financial system has been in a difficult position as it is unable to…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER97.5% of users find it useful
The financial system and the economy
Read Text Preview

Extract of sample "The financial system and the economy"

Running head: The financial system and the economy The financial system and the economy Name Institutions Failures in Global Financial system and RecommendationsThe global financial system has proved to be challenging as the economy tries to counter the global financial crisis of the year 2008 which have contributed towards to instability of world prices. The global financial system has been in a difficult position as it is unable to efficiently serve the debtors and the creditors in the economy.

The failure in global financial system has led to countries being bankrupt with many banks being closed down (Dean, 2006).There has also been an increase in the cost of living as the financial crises spread across other countries. The major failure in Global finical system is the policies that are laid down to counter the problem in the world’s economy. It is this failure in policy making that has resulted to more crises in the world today. There is need for review of the regulatory laws that are used to respond to crises as they pave way for more crises rather that curbing future crises.

The different stake holders in the economy should come up with better policies while responding to any financial crisis if the problem of re-occurrence of the crises is to be eliminated (Dean, 2006).Determinants of Investment decisionsThey are factors that determine an investor decision whether to invest or not. These factors also determine the type of investment an investor can undertake. The most primary determinants include;The return on investment in terms of interest rates.Cost of capitalTax on returnsAvailability of funds Attitude of InvestorInstitution rigidities in the country that affect investment.

Risk involvedThe risk involved in an investment affects the decision of many investors. Investors will invest more in ventures which have low risk level than high risk projects. The type of risk also affects the decision of an investor.1. A) Pay off of securitiespercentage return1000(1000/1500)*100 =66.67%1500(1500/1500)*100 =100%2000(2000/1500)*100 =133.33%2500(2500/1500)*100 =166.67%B) Expected return of securityExpected return= (66.7*0.25) + (100*0.25) + (133.33*0.25) + (166.67*0.25) =116.675%C) Standard Deviation of return on securityDeviation=(R-ER)0.

25(deviation squared)-0.500650.0626626-0.166750.00695140.166550.00693470.499950.0624875total0.139036 Standard deviation = √0.139036 =0.3729*100 =37.29%2. A)PayoffsPercentage return3000(3000/3000)*100 =100%3300(3300/3000)*100 =110%3600(3600/3000)*100 =120%3900(3900/3000)*100 =130%4000(4000/3000)*100 =133.33%B) Expected ReturnExpected return = (100*0.1) + (110*0.2) + (120*0.3) + (130*0.2) + (133.33*0.2) =120.

66ReferenceDean Croushore, (2006) Money and Banking: A Policy-Oriented Approach. Retrieved from: http/www.books.google.co.ke/books?isbn=0618161252.

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“The financial system and the economy Statistics Project”, n.d.)
The financial system and the economy Statistics Project. Retrieved from https://studentshare.org/statistics/1593078-the-financial-system-and-the-economy
(The Financial System and the Economy Statistics Project)
The Financial System and the Economy Statistics Project. https://studentshare.org/statistics/1593078-the-financial-system-and-the-economy.
“The Financial System and the Economy Statistics Project”, n.d. https://studentshare.org/statistics/1593078-the-financial-system-and-the-economy.
  • Cited: 0 times

CHECK THESE SAMPLES OF The financial system and the economy

Microeconomics of Financial Markets

Creation of money refers to the methods that the Fed uses to manage the quantity of money that is in circulation in the economy.... As the government buys bonds, it releases money into the economy.... Alternatively, in case the Fed wants to reduce the amount of money in the economy, it can sell government bonds to the public (Mishkin, 2010).... This method can be used to direct the quantity of money in the economy.... Microeconomics of Financial Markets Name Instructor Task Date This paper discusses various topics in economics with the purpose of enabling a better understanding of the financial markets....
10 Pages (2500 words) Assignment

The Mechanism of the Money Multiplier

This paper will aim to provide an explanation and illustration of the essential mechanisms behind the concept of money multiplier and intensively the manner monetary authorities can control its size and influence money supply in the economy.... The monetary base or the high powered money is the summation of the currency in supply in addition to the banking system's reserves....
6 Pages (1500 words) Report

The Structure and Role of the Financial System

hellip; In order to discuss the link between the financial system and the real economy, the paper will first discuss the structure and role of the financial system and then later the link between the two.... However, it appears that most economists are in agreement that a link exists between the financial system and the real economy (Burton & Brown 2009, p317).... On the other hand, the financial system mainly focuses on either circulating funds around to enable people buy goods and services or assist people exchange ownership of resources vital for production purposes....
8 Pages (2000 words) Essay

International Business

Name: Tutor: Course: Date: University: Floating exchange rate system A floating exchange rate system, also called a flexible rate system, refers to an rate exchange system in which forces of supply and demand determines currency value and, therefore, it fluctuates depending with supply and demand.... hellip; In a floating exchange rate system, the market forces determine the rates without intervention by the governments....
3 Pages (750 words) Essay

Need of Federal Reserve for the US - Justification

This could be understood from the roles and responsibilities of the Federal Reserve system and the implication on the US financial and economic system in absence of its role.... The Federal Reserve was established in 1913 with the need of a central financial system in the economy of US.... The central banking system was set up under a situation of continuous financial panics in the economy of US.... The overall financial stability of the economy of US is the responsibility of the Federal Reserve System....
5 Pages (1250 words) Essay

Money, Banking and Finance

The various financial markets would offer bonds and other long term instruments that would be offering a variety of interest or the rates of return (Kettell, 2001, pp.... Money, Banking & Finance Contents Contents 2 Introduction 3 Interest Rates 3 Yield Curve 4 Risk and Its effects 6 Pure Expectation Hypothesis 7 Liquidity preference theory 8 Preferred Habitat Hypothesis 8 Conclusion 9 References 10 Introduction Rates of interest are considered to be the price that is paid for a period of time for the usage of a sum of money....
7 Pages (1750 words) Essay

Industrial Structure of Banking

Fourth, the relationships between the banks and the financial markets have also proven important determinants of the financial stability of the economy.... When these banks want to make loans to the investors, they value these financial assets whereby the valuation and pricing of these financial assets are the main determinants of the financial stability of the economy.... When prices are high, the banks are willing to lend more in the economy and this leads to the financial crisis in the economy since there is more money chasing few assets in the economy....
7 Pages (1750 words) Essay

Money and Banking

The financial system and the economy: Principles of Money and Banking.... The terminologies gained in the Money and Banking Money and Banking The ECO320 Money and Banking revolved around basic cash flow concepts and building blocks of an economy.... Banking is a platform that links the borrower and lenders in an economy.... The money and banking concepts will also assist me in the day-to-day life as I engage in financial transactions....
1 Pages (250 words) Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us