Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link above. This homework assignment is worth 20 points.
- Briefly differentiate between a commercial bank and a consumer finance company. What is the most significant difference between these two?
- Identify one of the significant risks finance companies face. Why is this risk important to monitor?
- Select one factor that affects cash flows for a finance company valuation. Why is this factor significant for its operations?
- Select one factor that affects the required rate of return for investors in finance companies. Why is this factor significant for investors?
- Speculate on why you think a finance company is in a better position to offer credit cards than a commercial bank.
- What is Net Asset Value (NAV) per share and what is the basic means used to determine its value?
- Identify one expense of a mutual fund and briefly explain why management charges this fee. Why might investors be concerned with this fee?
- In what way does a change in the risk-free rate affect a bond mutual fund?
- Based on your understanding of mutual funds, would you favor a mutual fund of mutual funds or not? Why?
- Briefly differentiate an exchange-traded fund from a mutual fund. Which would you select and why?