In your role as a financial advisor at Eagle Consulting, you are performing a complete financial analysis for Melinda Jacobsen, a successful business executive who is retiring in 10 years. A portion of this analysis covers the question of whether Ms. Jacobsen should refinance her home in order to provide additional funding for a long-term retirement investment.
Because “above and beyond” customer service is critical to the success of Eagle Consulting, in addition to providing a recommendation on possible refinancing options, you want to provide Ms. Jacobsen with some background information on the Federal Reserve and how it affects interest rates.
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Using the information about Melinda Jacobsen’s goals and the information you uncover during your research, you will write a recommendation document that explains the Federal Reserve, how the Federal Reserve affects interest rates, possible loan options, and a final recommendation for what loan she should choose.
To complete this assignment, do the following:
- Download and read the Eagle Consulting Info Sheet.
- Write a 3 page recommendation structured in three parts:
- Explanation of how the Federal Reserve impacts interest rates (1.5 pages)
- Explanation of loan options (1 page + Excel chart)Recommendation for a loan (.5 page)See below for details on each of the three parts.
Part 1: Federal Reserve’s Impact on Interest Rates
- Discuss how the Federal Reserve uses the following tools to impact interest rates and the economy:
- Open market operations
- Discount rate
- Reserve requirements
Part 2: Loan Options
- Research the current mortgage interest rates for a 10-year, 15-year, 20-year, and 30-year loan.
- In Excel, graph the interest rates using years as the X-axis and interest rates as the Y-axis.
- Using the graph, describe the following:
- Type of yield curve presented in the graph
- Relationship between interest rates and number of years to maturity
- Impact that risk and inflation has on the interest rates as the maturity date is lengthened
Part 3: Recommendation
- Make a recommendation to Ms. Jacobsen on what mortgage loan to take (10-year, 15-year, 20-year, or 30-year).
- Justify your recommendation.
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