First complete the textbook reading for this module. Then, in your initial post, compare and contrast collateralized debt obligations (CDOs) and structured investment vehicles (SIVs). Consider these elements of CDOs and SIVs in your post:
Strategic objectives
Structure
Operations
Purpose
Issuance
Impact on investment markets
Overview: For the final project, you will respond to the following scenario:
Imagine you are the chief financial officer (CFO) of the Fortune 500 company you chose in Module One (JPMorgan Chase & Co., AT&T, or Qualcomm). Given the positive macroeconomic trends, including improvements in labor market conditions, the Federal Reserve recently increased the federal funds rate.
With the continued improvement in economic outlook, the Federal Reserve is poised to increase the federal funds rate again in the near future. The Fed believes that with the gradual increase in monetary policy, the economic activities and labor market will strengthen and inflation will remain consistent.
As the CFO of your company, you must analyze and evaluate the likely impacts of the aforementioned Federal Reserve monetary policy actions to the wider economy (and specifically, to capital markets), as well as the resulting implications for your firm.
Based on your assessment, you will put forth various recommendations to the company’s board for improving their financial position while safeguarding against corporate risk.
Prompt: This milestone will help you complete Section IV of the final project by analyzing the provided scenario.
Your work must address these critical elements:
IV. Analysis of the Scenario
A. Interpret the macroeconomic events described in the scenario to determine their likely impacts to capital market conditions. Cite specific evidence and principles discussed in the course that support your claims.
B. Draw connections between your analysis of the events and the more specific likely impacts to your own firm and their strategic objectives. Cite specific evidence and principles discussed in the course that support your claims.
C. Assess the potential for the macroeconomic events to pose financial risks to your firm.
i. First accurately identify the risks. For example, how might your firm be negatively impacted by fluctuations in the money supply?
Provide a specific example to illustrate each identified risk.
ii. Then measure (i.e., quantify) the risks using appropriate financial tools. For example, consider calculating your firm’s debt-to-capital ratio, debt/equity ratio, interest coverage ratio and their degree of combined leverage.
