QUESTION ONE Define and contrast stocks and bonds. What are the advantages of owning preferred stock? What are the advan
Posted: Thu Apr 28, 2022 1:28 pm
QUESTION ONE Define and contrast stocks and bonds. What are the
advantages of owning preferred stock? What are the advantages of
owning common stock? 1.1 (10 marks) QUESTION TWO SA Reserve Bank
likely to keep interest rates on hold in September based on
moderate inflation and strong rand By Ed Stoddard• 19 September
2021 The South African Reserve Bank will almost certainly keep
interest rates unchanged when its Monetary Policy Committee meets
on 23 September. The economy this quarter is widely believed to be
contracting, unemployment is sky-high, inflation is moderate and
the rand is strong. The South African Reserve Bank (SARB) will
almost certainly keep interest rates unchanged when its Monetary
Policy Committee (MPC) meets on 23 September. The economy this
quarter is widely believed to be contracting, unemployment is
sky-high, inflation is moderate and the rand is strong. “The SARB
needs to avoid interest rate hikes this year, even if monetary
policy is extremely accommodative, as the economy is still
fragile,” Investec chief economist Annabel Bishop was quoted as
saying by Finder. com, a global financial comparison platform. A
panel of economists surveyed by Finder.com found that 97% expected
the SARB to hold its key repo rate unmoved at 3.5%, which
translates into a prime commercial rate of 7.0%. The repo rate is
at an historic low and prime is at its lowest in more than five
decades after the central bank slashed rates by 300 basis points
last year, in response to the economic collapse triggered by the
lockdowns, domestic and global, to contain the Covid-19 pandemic’s
lethal march. Analysts widely expect the next move to be up, but
the timing remains up in the air. Some economists think the SARB’s
MPC should hold off as long as possible, given underlying economic
weaknesses. “Even next year interest rate hikes should be held off
as long as possible, hopefully until 2023,” said Bishop. The
reasons to hold at the moment are many. The economy only expanded
1.2% in the second quarter (Q2) – which may have been an
overstatement because June’s mining data was a thumb-suck on the
high side owing to the Department of Mineral Resources and Energy’s
tardy delivery of the data to Statistics South Africa. Output
remains well below pre-pandemic levels after 2020’s massive 7.0%
economic contraction. And in a significant setback, the economy is
probably contracting this quarter, not least because of the wave of
looting and violent unrest in July that was unleashed after the
jailing of former president Jacob Zuma. At the last MPC in July,
the SARB kept its 2021 GDP growth forecast unchanged at 4.2%, but
Governor Lesetja Kganyago said it had planned to revise it higher –
until the looting spree erupted. As the costs of the mayhem trickle
in with July economic data releases, it will be of more than
passing interest to see what the central bank’s growth forecast for
the year is now when the MPC statement is unveiled on 23 September.
The latest indicator showed that retail trade sales in July fell
11.1% month-on-month from June, the biggest monthly fall since the
sector cratered in April last year. That gives a clear sense of the
economic damage wrought by the outbreak of lawlessness, which
killed more than 300 people. Other datasets that will have the
MPC’s full attention include the Q2 employment figures, which
showed the jobless rate hit a record high of 34.4%, or 44.4% if
discouraged job seekers are included. One imagines the Q3 numbers
will be even worse, which will signal that poverty, hunger, and
inequality are all on the rise, further undermining an already
frayed social fabric. Small wonder that inflation pressures remain
moderate. In July, CPI slowed to 4.6% – the middle of the SARB’s 3%
to 6% target range – from 4.9% in June and 5.2% in May. To top it
all off, the rand remains resilient, underpinned by record current
account and trade surpluses, which are largely the product of
red-hot commodity prices. Against this backdrop, some may ask why
the SARB is not cutting again. The SARB needs to avoid interest
rate hikes this year, even if monetary policy is extremely
accommodative, as the economy is still fragile. Given the
importance of the SARB on the economy of South Africa, you are
required to write an essay that depicts the main objectives
associated with the SARB in general as well as the objectives of
monetary policy set by the reserve bank. In addition, discuss the
objectives of a government for setting financial regulations.
advantages of owning preferred stock? What are the advantages of
owning common stock? 1.1 (10 marks) QUESTION TWO SA Reserve Bank
likely to keep interest rates on hold in September based on
moderate inflation and strong rand By Ed Stoddard• 19 September
2021 The South African Reserve Bank will almost certainly keep
interest rates unchanged when its Monetary Policy Committee meets
on 23 September. The economy this quarter is widely believed to be
contracting, unemployment is sky-high, inflation is moderate and
the rand is strong. The South African Reserve Bank (SARB) will
almost certainly keep interest rates unchanged when its Monetary
Policy Committee (MPC) meets on 23 September. The economy this
quarter is widely believed to be contracting, unemployment is
sky-high, inflation is moderate and the rand is strong. “The SARB
needs to avoid interest rate hikes this year, even if monetary
policy is extremely accommodative, as the economy is still
fragile,” Investec chief economist Annabel Bishop was quoted as
saying by Finder. com, a global financial comparison platform. A
panel of economists surveyed by Finder.com found that 97% expected
the SARB to hold its key repo rate unmoved at 3.5%, which
translates into a prime commercial rate of 7.0%. The repo rate is
at an historic low and prime is at its lowest in more than five
decades after the central bank slashed rates by 300 basis points
last year, in response to the economic collapse triggered by the
lockdowns, domestic and global, to contain the Covid-19 pandemic’s
lethal march. Analysts widely expect the next move to be up, but
the timing remains up in the air. Some economists think the SARB’s
MPC should hold off as long as possible, given underlying economic
weaknesses. “Even next year interest rate hikes should be held off
as long as possible, hopefully until 2023,” said Bishop. The
reasons to hold at the moment are many. The economy only expanded
1.2% in the second quarter (Q2) – which may have been an
overstatement because June’s mining data was a thumb-suck on the
high side owing to the Department of Mineral Resources and Energy’s
tardy delivery of the data to Statistics South Africa. Output
remains well below pre-pandemic levels after 2020’s massive 7.0%
economic contraction. And in a significant setback, the economy is
probably contracting this quarter, not least because of the wave of
looting and violent unrest in July that was unleashed after the
jailing of former president Jacob Zuma. At the last MPC in July,
the SARB kept its 2021 GDP growth forecast unchanged at 4.2%, but
Governor Lesetja Kganyago said it had planned to revise it higher –
until the looting spree erupted. As the costs of the mayhem trickle
in with July economic data releases, it will be of more than
passing interest to see what the central bank’s growth forecast for
the year is now when the MPC statement is unveiled on 23 September.
The latest indicator showed that retail trade sales in July fell
11.1% month-on-month from June, the biggest monthly fall since the
sector cratered in April last year. That gives a clear sense of the
economic damage wrought by the outbreak of lawlessness, which
killed more than 300 people. Other datasets that will have the
MPC’s full attention include the Q2 employment figures, which
showed the jobless rate hit a record high of 34.4%, or 44.4% if
discouraged job seekers are included. One imagines the Q3 numbers
will be even worse, which will signal that poverty, hunger, and
inequality are all on the rise, further undermining an already
frayed social fabric. Small wonder that inflation pressures remain
moderate. In July, CPI slowed to 4.6% – the middle of the SARB’s 3%
to 6% target range – from 4.9% in June and 5.2% in May. To top it
all off, the rand remains resilient, underpinned by record current
account and trade surpluses, which are largely the product of
red-hot commodity prices. Against this backdrop, some may ask why
the SARB is not cutting again. The SARB needs to avoid interest
rate hikes this year, even if monetary policy is extremely
accommodative, as the economy is still fragile. Given the
importance of the SARB on the economy of South Africa, you are
required to write an essay that depicts the main objectives
associated with the SARB in general as well as the objectives of
monetary policy set by the reserve bank. In addition, discuss the
objectives of a government for setting financial regulations.