Kate R.

Galanida
BSA 3.1A

04 Activity 2

INTERPRETING FINANCIAL NEWS

Answer:

1. “Money markets are not used to get rich, but to avoid being poor.”

 Yes, government, commercial banks, and the other participants use money
markets to preserve economic stability and prosperity in their nations. They
choose it since it is less expensive than banks. They also used it for
unexpected expenses, such as covering some payments due to misaligned cash
inflows and withdrawals. Those characteristics will not make them wealthy
because money markets are mainly up of short-term debt securities, which
means lower profits and lower chance over a shorter period.

2. “Until conditions are more favorable, investors are staying on the sidelines.”

 Yes, when that economy gets better, investors are more able to invest in
money market securities because it gives a chance to earn more or obtain a
bigger payout. Furthermore, if an investor is in a favorable state, it implies
that they are risk-free, that they may expect a future return, but there is no risk
of default.

3. “My portfolio is overinvested in stocks because of the low money market rates.”

 Yes, if interest rates on mutual funds are very low, you might invest more in
stocks as an investor. Because the interest rate regulates the sum of funds that
can be made by the investor. Many people will be interested in taking
advantage of low borrowing costs, and as a result, entrepreneurs will be able
to grow and expand more quickly, higher dividends. At the same time, the risk
to the investor or company will be lessened.