Summer Class 2022

Good evening Miss!
I believe Miss Hani, that we are done with the group project. However, we are not that 100%
confident of the answers that we provided.
And we would also like to ask, when is the deadline on this project? And where to submit it?
I am very sorry to respond late in your message, I admit that it was my own
fault due to negligence. Thank you and God bless!
Activity 1: Overview of Financial Markets & Institutions
1. Explain in your words the role of financial institutions within financial

markets. (3-5 sentences only).
One of the roles of financial institutions within financial markets is to
2. Enumerate the three (3) main depository institutions and give one (1)
example for each.
3. Enumerate the different non depository institutions and cite at least

one (1) example for each.
Activity 2: Overview of Financial System (Insights)

Watch the video uploaded under the Content section, this video must be completely
viewed from start to end. WHEN COMPLETELY VIEWED, it is equivalent to one
perfectly scored assignment.
After watching the video, make a SUMMARY/INSIGHTS of the video you have just
viewed and submit this to through the LMS. (7-10 sentences only)
Activity 3: Overview of Financial Instruments (Insights)

1. Every student is required to submit an output which will be graded accordingly. For
midterm, the required output is to open an account with banks or any other financial
institutions. This shall be maintained up until Finals. This is for the students to appreciate
the significance of financial institutions in our economic system. (50 points)
2. Every student shall open an account with investagram. The details will be discussed later
during live interactions. (50 points)
MIDTERM OUTPUT
Enumerate and explain in your own words the four (4) types of bonds:
(3-5 sentences only per type)
Activity #1: Bonds (Finals)
1.Treasury bonds are the type of bonds that are merely usable in the
United State Government. Treasury bonds are considered as one of the
safest investments to buy because there is so little risk that you will lose
money, they don't usually pay a very high return. Its maturity will last more
than 20 years that are issued by the U.S. Federal government as
government debt securities.
2. Federal agency bonds are bonds mostly guaranteed by U.S. federal

agencies or government-sponsored enterprises. When it is issued by a
federal agency, it's with the full faith and credit of the U.S. government and
the government is committed to ensuring that investors receive interest
payments from the bonds, along with the return of the principal they
invested.That’s why, federal agency bonds are considered to have low
credit risk.
3. Municipal bonds are debt obligations issued by public entities that use
the loans to fund public works or projects. It can be structured in different
ways, with each variation offering different benefits, risks, and tax
treatments. The issuer promises to pay the investor interest over the term
of the bond usually twice a year and then return the par value to the
investor when the bond matures. Since, there are instances that municipal
bonds become taxable.
4. Corporate bonds are distinguished as debt obligations which are lent by
a company in order for it to raise capital. Those investors who buy
corporate bonds are lending money to the company issuing the bond. In
return, the company makes a legal commitment to pay interest on the
principal and mostly, to return the principal when the bond comes
due, or matures.
Activity #2: Bonds (Finals)
Read carefully the questions provided below and answer accordingly: (5-7 sentences only per
1. Explain the use of a sinking-fund provision. How can it reduce the
investor’s risk?
The essence of sinking-fund provision, in sinking funds which repay
borrowed bonds through periodic payments to a trustee who retires
part of the issue by purchasing the bonds in the open market. It is just
a pool of money set aside by a corporation to help repay previous
issues and keep it more financially stable as it sells bonds to
investors. Bonds issued with sinking funds are lower risk since they
are backed by the collateral in the fund, and therefore carry lower
yields. Paying debt off early through a sinking fund saves a company
interest expense and puts the company on firmer financial footing.
The sinking funds can also be used to finance the redemption of
callable bonds.
2. What are protective covenants? Why are they needed?

Protective covenants are a legal provision in an agreement or legal
instrument where one party promises to take. It is restricted from
taking certain actions or otherwise has certain obligations to protect
an interest of another party. An agreement that limits certain actions a
company may take during the term of the loan to protect the lender's
interests. Those protective covenants will abide by what is in the law
for the good. It may be helpful for an orderly way of the situation.
3. Explain the use of call provisions on bonds. How can a call provision
affect the price of a bond?
A call provision or a clause means an embedded option – in a bond
purchase contract that gives the bond’s issuer the right to redeem the
bond early, before its maturity date. It may also exist with preferred stock
shares but are most commonly associated with bonds.These are often
included in corporate or municipal bonds, unlike bonds issued by the
U.S. Bonds with such provisions are referred to as callable bonds.
Callable bonds usually offer higher yields than similar non-callable
bonds to compensate investors for the risk of the bond being redeemed
early, which will reduce the total amount of interest that bondholders
receive.
4. Explain the use of bond collateral and identify the common types of
collateral for bonds.
A collateral bond refers to an exchange or guarantee of a loan and act of
borrowing money with the borrower. Offering an asset or a property
as a security measure for the lender. If the borrower fails to pay the
debt on time, the lender acquires the asset or property that the
borrower put up as collateral. Many bonds come with collateral
attached to them. The collateral provides compensation to the lender
should the borrower fail in their financial obligation. The value of the
collateral either matches or exceeds the value of the bond, and it can
be a commercial building, a house, a vehicle, or any other valuable
property.question)
Activity #3: Mortgage Markets (Finals)

Read carefully the questions provided below and answer accordingly.
(3-5 sentences only)
1. How does the initial rate on adjustable rate mortgages (ARMs) differ
from the rate on fixed-rate mortgages? Why?
According to rocketmortage, adjustable-rate mortgages interest rate
changes after the fixed for the initial period and also expires. Typically
10-year loans, meaning you’ll pay back the money you borrowed over
10 years. Whereas, a fixed-rate mortgage has the same interest rate
throughout the life of the loan. The monthly payment of principal and
interest won’t change, even though overall payment can, depending
on how your taxes and homeowners insurance fluctuate. Basically, a
fixed-rate mortgage will never change its interest rate unlike the
ARM’s interest rate.
2. Explain how caps on ARMs can affect a financial institution’s

exposure to interest rate risk.
The cap on ARMs is to protect the borrowers but it can affect the lenders
of a financial institution because at times when the risk is too high
they cannot charge the borrower the right interest that compensates
for that because of that cap. The interest rate cap structure refers to
the provisions governing interest rate increases on the variable-rate
credit products. It is a limit on how high an interest rate can rise on
variable-rate debt and can be instituted across all types of variable
rate products.
3. Describe how mortgage-backed securities are used.

Mortgage-backed securities, MBS in short, are bonds secured by home
and other real estate loans. It is a debt security that is collateralized by a
mortgage or a collection of mortgages. They are created when a number
of these loans, usually with similar characteristics, are pooled together
for the guarantee.
FINAL OUTPUT

Summer Class 2022

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Good evening Miss!

Activity 1: Overview of Financial Markets & Institutions

1. Explain in your words the role of financial institutions within financial

One of the roles of financial institutions within financial markets is to

3. Enumerate the different non depository institutions and cite at least

Activity 2: Overview of Financial System (Insights)

Activity 3: Overview of Financial Instruments (Insights)

Activity #1: Bonds (Finals)

2. Federal agency bonds are bonds mostly guaranteed by U.S. federal

Activity #2: Bonds (Finals)

2. What are protective covenants? Why are they needed?

Activity #3: Mortgage Markets (Finals)

2. Explain how caps on ARMs can affect a financial institution’s

3. Describe how mortgage-backed securities are used.

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