Domestic international Money

Project description
1. The coursework will take the form of one essay for which you are offered a choice of titles below:

a. ‘Rational individuals should only hold non-interest-bearing money for transactions purposes.’ Explain and discuss.

b. Explain why the monetary approach to exchange rate determination is more useful in assessing countries’ relative monetary policies than in explaining short-run exchange rate behaviour.

Word limit: 2500 words (+/- 10%)

Submission deadline: Friday 11th April, 2014 (the last day before the Easter vacation)

use diagrams and examples
choose one of the questions which is easier for u

Name
Instructor
Course
13 April 2014
Question A
Rational Individuals should only hold non-interest bearing money for transaction purposes.
Investment Benefits
Althoughmoney is not themostsignificantthing in life, sometimesit is of need. Theissue on theway of spendingmoney is sometimes a very challenging task. There are individualswho are greatmoney spenders (Kaplan & Zingales) while others knowhow to spend their moneycarefully. In life, there are differentways that lead to theneedfor one to spendmoney (Khattak &Rouphail). Someindividuals are not big spenders andtheycare on howtheyspend their moneybecause of variousreasons like when one is not workingand in thatcase (Lamont 95) theparents are the provider. In thiscase, one will savethemoney their parentsprovideforthefuture (Pine & Tart 13). Savingmoneyforthefuture is very importantfornooneknowswhentheneedfor its use would arise (Khattak & Rouphail). Variouspeoplehavedifferentways of spendingmoney, there are thosewhospendmajority of their money on food, shoes, makeups, (Lamont 100) clothesandsuchthings, butall along they should considerlookingforsupplies as well as discounts as it is a prettymethod of savingmoney (Globerman 50). Somepeopledo not buy a lot of thingsbutratherpreferusing their money in travelling andalso in going out with their pals as well as their families (Pine and Tart 13), discoveringnewplacesoruse their money on doinginterestingthings since materialthings can stand with for a momentbutmemoriesdolastforever (Khattak & Rouphail)
Before an individual commence on a journey to buildwealthandalsofindfinancialindependence, it is of (Pine & Tart 13) importance to have an understanding of some basics. Among thekeys to understanding is themeaning of the two related, butindependentterms, that is, savingandinvesting (Kaplan & Zingales). These two terms should never be confused at anygiventime. Rationalindividuals might find themselves having a dozen of realestatesfor rental propertiesbutthesamepersonfindsitdifficult to complete his billsifhedid not considerbalancingthe two acts between foundations of success. It is always of helpif a new investor starts by understandingthedifference between investing andsaving.
Thetermsavingrefers to theact of puttingcoldorhardcashseparatelyandthenputtingit in extremelysecure (Kaplan & Zingales), andliquidaccountsorsecurities. Theterm “liquid” meansthatthecash can be accessedorsold in a veryshortperiod of timeor at most in a fewdays (Khattak & Rouphail). This may consist savingaccounts, FDIC insured, short-term certificates of deposit, checkingaccounts as well as theUS Treasury Bills (Lamont 123). This can as wellcomprise FDIC protectedcashmarketaccountsbutmarketfunds should not be inclusive as theyare not insured. Themainaimfortheseresources should be investmentconservation, having a secondarygoal of keepingpace with inflation, ifneed be (Khattak & Rouphail).
On thehand, Investing refers to theprocess of usingmoneyorrathercapital to purchase an asset that an individualthinks (Pine & Tart 13) will lead to an acceptableandsafereturn over a particularperiod of time, making one richer with every passing year (Pine & Tart 13). Investments may consist of anything arising from infrequent wines to goldcoins, from a smallbusiness to acceptableart, amusingbooks to stocks, (Lamont 83-109) realestate, mutualfunds, antiques, bonds, just to list a few.Investment may as wellincludepatents, trademarks (Pine &Tart 13), songrights, patents, oranyotherintellectualproperty. Thefollowing are factorsthatrationalindividualsneed to examineforthere to be a success (Lamont 99).
Fundamentaldocuments:
Astrategyorstructure that arrangetheroute of businessorganizationmodificationgreatgradeplans (Lamont 105) forcoming up with thatstrategymanagementoutlineconfirmed by businessandskilledstrategieskeyskillsrequiredforlocatinginstruction, thestrategymanagementforbusinessconcern, managementfor Information Systems strategy, as well as a workspace managementandstrategy.Astrategicplanenables an establishment to conducttheir task to thebest of their ability (Lamont 106).
The Board is accountableforthestrategicallyroutine of theentity of thepublic. Thisowns up approvaland re-examining of thepublicentitiesintendedapproach, apparently incoming a longtermphysicalpolicy (Pine & Tart 13) andcoming up with an annuallybusinessplan alongside themeasurableandmanageableobjectivesandalsomilestones (Khattak & Rouphail).
Strategicplanningsometimesdemandstheentitykeyshareholders from thepublic. Thestrategicplan ought to obtain a strategicadministration as well as vision in response to completeexaminationenvironment (Lamont 85), logicalthinkingandmakesurethat all themembers of thebusiness are working towards a similargoal. Theboard should be transparentwhenconducting their activities (Khattak & Rouphail).

There are timeswhenthe Boards decidethatdue to someavailablematerial in thebusinessplan, may be thought to be of commercialgrade. Onlythe corporal determinedmanagement should be put (Lamont 102) intoeffectiveness. Theboardregularly brushes-up andalsoupdates its plans. Relevantlegislationrequiresentities of thepublic in order to achieveastrategicplan.
Thekeyfeatures of thestrategicmanagement consist
1. Thecapability to overextend chancesandretort to externalchanges by takingcontinuingplanned (Lamont 83) choicesmechanismforthe answerableness to thecitizenavailable in themeetingfor their firsttime, andalsothe midpoint in achievingplanaims as fortheorderedoutlinefor managing risk (Khattak & Rouphail).
There are variousreasons as to as to whyrationalindividuals (Khattak & Rouphail) save their money. Below are someexamples.
1. Savefor Emergency Funds
Unexpected expenses happen unexpectedly and, therefore, it is necessary to set aside emergency fund in order to cover for the expenses when they occur.Suchunexpectedexpensesincludesuddenjobloss, unexpectedcarrepairoryouremergency appendectomy (Khattak &Rouphail). Preferably one is advised to have an emergencyfund that amounts to around (Globerman 52) three to six months of their expenses. In addition to keepingasideemergencyfundone, alsorequires to ensurethattheyhave a goodandplannedinsurance in place to aid them endurethe unpredicted financial dealings in yourlife (Pollin & Heintz ).
2. Save for Retirement
Anothersignificantreasonforsavingmoney is forretirementpurposes. Arationalperson should (Lamont 109) startsavingearlier as itmakes one save less in thefuture. When one reachestheretiringage, they are able to enjoy their savings as they can as wellstartbusinesses with thesavedcash (Lamont 88).
3. Save for a Down Payment for a House
Thethirdreason as to why a rationalperson should savecash is forbuying a houseusingthedownpayment. Thenegotiatingpowerproceedsfartherwhen an individual has a noteworthydownpayment towards his home. One is able toreceivegoodinterestratesthusbeingable to affordbiggerhomes. Depend on individualcircumstances, one is able todeterminehowmuchthey can save towards this.
4. Save for Vacations and Other Luxury Items
The fourth reason as to why one savescash is to havefun. An individual can savecashfor a tour of Europe orthe Caribbean cruise (Pollin & Heintz). In addition, one can saveforpleasure as buyinglargeticketitems like a newboator Play station 3 (Pine & Tart 13).
5. Save for a New Car
Anotherreasonwhy an individual should save is to be at a point of purchasing a car with thatcash. Thisenables one to be free from thebudget of a carpayment. (Pine &Tart
6. Save for Sinking Funds
The sixth reason is for a person to set up their sinkingfunds. This is themoneythat an individualsetsasideforrepairingorforimprovingpossessionssuch as cars, home, etc. Thisplanninghelpsindividuals to stopinterfering with their emergencyfundwhentheneedarises as on theissue of fixing a carorrenovating a house (Pollin & Heintz).
7. Your Education
Thelastbut not leastreasonforsavingcash is for an individual’s futureeducation. Everyyeara lot ofpeoplegoback to school in orderearn their doctorate ormastersdegrees (Lamont 102). In addition, a rationalperson should startsavingfor their child’s education as soon as possible (Pollin & Heintz). Thisreducestherisks of thechild not gettingthebestlearningfacilitiesespeciallywhentheparentslose their jobs (Pine & Tart 13).
Personal Development as a rationalperson “Strategic Manager”
One should be capable of identifying their personalskills in order to attainstrategicambitions.
As a rationalperson, it is of importance to checkdeliberateassociation of thebusinessorganizationand its adjustment go-getting nesses. As a result of changingdirection, anassumption should be made on businessscheme as well as visualization forthesucceeding (Lamont 100).
Investmentbanking
Theextremelycompetitiveand action-oriented world of investmentbankingappears as a larger-than-life placewherefortunesare made anddeals are carried out. Investmentbankincludesthough (Kaplan & Zingales) itis not restricted in bringing a recognizedbusiness into thebusiness. Thisonlyimpliespickingthecompany with theabilitiesrather than resources of increasing as well as raisingcash through other stakeholders (Kaplan & Zingales). For on to gethiredtheyneedgoodpeopleandalsogoodcommunicationskills as well as highlyanalyticalskillsandhighcapability in order to synthesizeandhighinventiveskill. Valuingthecompany, business accounting andexperience in modeling are among thekeyfactors that are required (Kaplan and Zingales).
Accounting
If a rationalpersondoes not have a profoundbackground in accounting, butthey are firm in thefield of Mathematics, thentheindividualshave an advantage since they can pickitveryfast once they are in thejob. Mathematicsoffers a goodedgeespecially to thosewho not haveexperience in accounting.
Corporate Finance
Corporate financing is verydifferent from accounting as itonlyrelates to financingandvaluationdecisions (Lamont 102). Themajorrole of accounting is creatingstatements that outlinethecompany’s historicalfinancialhealthformanagement, as well as investors. Theaim of corporate finance is to relatetheoutcomes of thesestatements to an assessmentdesignso as to achievevalueforthecompany (Lamont 106).
Modeling
Eachmodel has a function. Forexample, Industrial engineersapplyproductionlinemodels in order to explainpossiblefutureholdups in theproductionprocesscentered on thevariations (Kaplan & Zingales) in particular variables. In finance, thesemodels are used to explainthingssuch as theflow of thecompany’s projectedcash, company’s valueorthecompany’s projectedfinancingrequirements. Whatbrings about a difference between goodanalystsandstars is theformation of tightmodels (Globerman 53).
Most of theinvestmentbankerswho are highlysuccessfulbegan as juniorbrokersfor a recognized firm. Investmentbankersneeddistribution in order to sell out their deals (Richardson 160). Thebankers’ salesmen, as well as their retailbrokers, offertherequireddistribution. In addition, bankersalsorequireresearchanalystssothatthey can attractcompaniesandalsoclients Globerman 55). Boththesalesandtheresearchteamgettied up actively to theinvestingpublic through eithermanagingmoneyorofferinginvestmentadvice (Richardson 78). However, the Investment bankers are excluded from theteam of investingpublic. Theyoperateandlive in verytight (Kaplan & Zingales), safeenvironment of privateinformation. Communication (Kaplan & Zingales) come about only with theclientcompanies (Pollin & Heintz ). Firma has authorizedestablishment of Chinese walls to enablethecompany to reserveprivacy with thecustomers of investmentbankersand (Globerman 45) also to discouragethepublic in receivingsensitiveinformationconcerningthebusiness (Kaplan & Zingales).
Basically, thebankerknows everything concerningtheinvestmentbankingdeals andthey are supposed to keeptheinformationconfidentialandprivate. Forsecuritypurposes, thedepartments of corporate finance are alwayssituated on differentfloors in the firm (Lamont 85) which are wellsecured with hidden camera surveillance, laser passcards, etc.
All Individual wealthholderstry their best to avoidmakingcapitallosses. This is a basic behavioral assumptions (Richardson 175) that is madeconcerningmoneydemand (Pollin & Heintz). Anotherassumption is thatalllossesandgains in thesimplifiedmodelhighly depend on theexpectedrates of interests. Iftheinterestratesfall, thenthecapitalmarketvalue will increasefor assets such as bonds andifthe interest ratesgoup, the capital market value will fallfor assets such as bonds (Richardson 67).
Individualwealthholders may alsoembracerealmoneyequilibriums, which do not allowbondsandinterest. In reality, there are as well assets that doearn a return, stockshares, bondsandtimedeposits. (Richardson 134)
Iftheeconomy experiences a fall in realinterestrates than theindividual bondholders will need to havemorerealcashbalances, as well as fewerbonds. Theindividuals (Richardson 136) will alsorequire to (Kaplan & Zingales) sell out their bonds, generatecapitalgainsandfinallygethold of themoney. Decreasingrates of interestimplythatmoney is verycheap to holdmeaningthatit has a lesserchancecost (Kaplan & Zingales).
2. Iftherates of interest in theeconomygoup, thenthepersonwhoholdsthebonds will need to purchasebonds, (Pine & Tart 13) which are becomingcheaper, andalso has lessrealcashbalances; there is a rise of holdingcash in theopportunitycost (Lamont 83-109).
If there is a morecomplicateddesign which has with varioustypes of assets that earn a return (Lamont 100), thentheindividuals will changetheportfolio of holding of thewealthand not necessarilyonlythecash versus bondschoice. If there is a structurechange in therate of interestrate, individuals may need to change their wealth about from stocks to thebondsthen to themutualfunds to thesavingsaccountsandfinally to therealbalances (Richardson 180).
In classicalmodelssuch as the fisher, therate of interest in themarket is determinedfor loanable funds (Kaplan & Zingales), forexample, at thecomingtogether of thesavings as well as theinvestmentfunctions. Savingsdoes not necessarily depend on therate of theinterestso (Globerman 48), thecomingtogether of thedemandandsupplyformoneydeterminesthe rate of interest (Richardson 180).
Modern Monetary Theory
In Keynes theoryhearguesthat there are three why an individual should holdmoney
1. Speculative motive – this is holding of money to act as a wealth asset
2. Precautionary motive
3. Transaction motives
The liquidity inclinationpurposearticulatesthatthemoneymarket depends on boththeinterestrateandthe level of real GDP.
Below is a linearfunctiongraph, which expressesmoney as realbalances.

Source: Richardson, “Over-investment of free cash flow” (2006) page 170
[M1/P]D = demand for real money balances
= L(r,Y) = f*r – g*Y f>0, 0<g<1
Source: Richardson, “Over-investment of free cash flow” (2006)page 173

Source: Richardson, “Over-investment of free cash flow” (2006)page 176

Conclusion
A rational individual should never hold un-invested money as it may lead to poor usage through poor decision making leading to misuse of money. Investment has a lot of benefits in relation to the future of the individual in question. A rational individual should, therefore, choose wisely on what to invest into. When one invests into big businesses, they make significant profits and others may consider emulating them and thus acting like role models to many. Those who do not invest or do not take time to invest wisely, end up misusing their cash and the result is poverty when they reach their retirement age or when they lose their jobs.Most of theinvestmentbankerswho are highlysuccessfulbegan as juniorbrokersfor a recognized firm. Investmentbankersneeddistribution in order to sell out their deals.Therefore it is a very knowledgeable thing to note that any rational individual should hold money that he has planned for and is using at the moment he has them as the phrase ‘Rational Individuals should only hold non-interest bearing money for transaction purposes.’

Works cited
Globerman, Steven. “Foreign direct investment andspillover’efficiency benefits in Canadian manufacturing industries.” Canadian journal of economics, 12. 1 (1979): 42–56. Print.
Kaplan, Steven N and Luigi Zingales. “Do financing constraints explain why investment is correlated with cash flow?” (1995): Print.
Khattak, Asad J, Nagui Rouphail and Others. “Incident management assistance patrols: Assessment of investment benefits and costs.” (2005): Print.
Lamont, Owen. “Cash flow and investment: Evidence from internal capital markets.” The Journal of Finance, 52. 1 (1997): 83–109. Print.
Luenberger, David G. “Investment science.” OUP Catalogue, (1997): Print.
MacDougall, George Donald A. “THE BENEFITS AND COSTS OF PRIVATE INVESTMENT FROM ABROAD: A THEORETICAL APPROACH1.” Bulletin of the Oxford University Institute of Economics & Statistics 22.3 (1960): 189-211.
Pine, Rosemary and Kathryn Tart. “Return on investment: Benefits and challenges of a baccalaureate nurse residency program.” Nursing Economics, 25. 1 (2007): 13. Print.
Pollin, Robert, James Heintz and Heidi Garrett-Peltier. “The Economic Benefits of Investing in Clean Energy: How the economic stimulus program and new legislation can boost US economic growth and employment.” (2009): Print.
Richardson, Scott. “Over-investment of free cash flow.” Review of accounting studies, 11. 2-3 (2006): 159–189. Print.
Williams, H. C. W. L., and H. S. Lai. “Transport policy appraisal with equilibrium models II: model dependence of highway investment benefits.” Transportation Research Part B: Methodological 25.5 (1991): 281-292.

PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT 🙂