Compose a 4 page report. illustrate relevant financial numbers and explain the significance of this data.

Compose a 4-6 page report,
double-spaced, on the following topic. Be sure to illustrate your report with
relevant financial numbers and data, and to explain the significance of this
data.
BACKGROUND INFORMATION: During the
Carter administration, long-term US Treasury yields exceeded 15%, and
short-term T-Bills yielded near 20%. After Reagan’s inauguration, interest
rates began to fall as Fed Chairman Volcker’s restrictive monetary policy
succeeded in containing inflation. Over the past 25 years, US rates have
steadily declined: T-Bills are hovering under 1% and the long bond is yielding
about 4%.
Lately, though, rising oil prices
have incited inflationary forces. China and other developing nations have
increased their consumption for oil, metals, materials, and food. Thus, both
foreign and domestic factors have spurred demand and are contributing to rising
prices on a global scale. In addition to
this commodity-induced inflation, US consumers are faced with rising costs for
essential services such as healthcare and education.
The Chairman of the Federal
Reserve, Ben Bernanke, is faced with a dilemma. Should the Fed increase rates
to contain inflation; or, should the Fed keep rates very low to spur the US
economy which is beset by a collapse in home values, an extensive banking
crisis, and a faltering stock market?
YOUR ASSIGNMENT: Given this economic background… Compose a
4-6 page report, double-spaced, on the following topic: If the Fed decides to
raise interest rates next year, what effect would rising rates have upon the
following: (1) Consumer financing for big-ticket items such as autos and homes;
(2) the present and future values of annuities; (3) the NPV calculation; (4)
the WACC; (5) corporate earnings ?
Be sure to illustrate your report
with relevant financial numbers. Hint: for topic (3), above, one approach you
might adopt is to cite the NPV calculation from previous case problems, then to
contrast it against a new calculation performed with a higher interest
rate. Cite the numeric effect upon the NPV,
and then explain its rationale and its significance. This is the kind of “numeric
illustration” that you should provide for each of the five topic sections.
References:
Cornett, M. M., Adair, T. A., Jr., & Nofsinger, J.
(2014). Finance (2nd ed.). New York: McGraw-Hill/Irwin.