Central Bank Monetary Policies (Case Study Sample)

Instructions:

Writing instructions
this is a financial paper ( finance and Banking services )
* Include personal views as a finance student
* write as points answering each question, Not as an essay.
*Include financial news from Bloomberg, Financial Times, or any financial news
* please please don't be descriptive and show argument or opinion on each quastion
please read the "Assignment" file for all the instructors
the other files are related to the subjects in the part one of the assignment
• Insurance operations
• Pension fund operations
• Mutual fund operations
• Commercial bank operations
Please follow those points
1- detailed knowledge and understanding of material, of well-established principles of area(s) of study, and of the way in which those principles have been developed.
2- Excellent arguments, strong analysis and critical reflection. Good application and analysis of findings/concepts carried out in line with theoretical premises
3- Insightful and critical analysis of data; good ability to deal with complex issues bot systematically and creatively, making sound judgments. Strong quantitative and qualitative insights.
4- Critical interpretation of implications with evidence of originality in the recommendation; the recommendation shown is insightful and practical and developed from your experience and module content and great insights are generated.
5- Clearly structured and lucidly expressed. Make consistently good use of appropriate academic conventions and academic honesty Evidence of further research. Excellent range and quality of references to support analysis.
6- Mutual funds and financial database website https://www.morningstar.co.uk/uk/funds/default.aspx
7- Please build an argument and critically discuss each point (don’t be descriptive )
ASSESSMENT DESCRIPTION
Coursework This comprehensive project enables you to apply numerous concepts regarding banking and financial services discussed throughout the module and apply them directly to real- world situation. (3,000 words)
TASK 1 (1,800 words) 60 marks
A diversified financial conglomerate has four units (subsidiaries), with each unit focussing on its own specialisation:
• Insurance operations
• Pension fund operations
• Mutual fund operations
• Commercial bank operations
As a financial analyst for the conglomerate’s holding company in the U.K., you have been asked to assess all of the units and to indicate how each unit will be affected as economic conditions change. You are a “Central Bank watcher” who constantly monitors any actions taken by the Central Bank to revise monetary policy. The Central Bank is scheduled to meet in one week to assess economic conditions and set monetary policy.
The last time the Monetary Policy Committee met, it decided to raise interest rates. At that time economic growth was very strong, and inflation was relatively high. Since the last meeting, economic growth has weakened, and the unemployment rate will likely rise by one percentage point over the quarter.
Some economists are concerned about the possibility of a recession. Yet some industries are experiencing high growth, and inflation is higher this year than in the previous five years. Although you will consider the economists’ opinions, you plan to make your own assessment of the Central Bank’s future policy.
Answer these questions:
1. Given the circumstances, is the Central Bank likely to adjust its monetary policy? If so, what would you expect? (10 marks)
2. Recently, the Central Bank has allowed the money supply to expand beyond its long- term target range. Does this affect your expectation of what the Central Bank will decide at its upcoming meeting? ( 10 maeks )
3. Suppose the Central Bank has just learned that the Treasury will need to borrow a larger amount of funds than originally expected. Explain how this information may affect the degree to which the Central Bank changes its monetary policy. ( 10 marks )
4. You believe that if the Central Bank does not revise its monetary policy, the economy will continue to decline. If the Central Bank stimulates the economy at this point, you believe that stocks would outperform bonds. Based on this information do you think the company should switch their bond holdings to stocks? Consider the typical sources and uses of funds at each unit of the company. Explain how your recommendation will affect each unit’s performance. ( 20 marks )
5. What is your forecast of how recent, existing or potential regulations will affect each unit’s performance? ( 10 marks )

source..

Content:

Case Study
Student Name
University
Course
Professor Name
Date
Outline
1 Case Study
1 Task 1
* Question 1
* The central bank is likely to maintain a low-interest rate for cash to be accessible to domestic and foreign investors.
* Bank rate reductions are beneficial to banks' balance sheets and their capacity to lend (Freriks & Kakes, 2021).
* Question Two
* When the money supply is high, the currency will likely lose its value
* An increase in the money supply of an economy may be both dangerous and helpful (Davis, 2019).
Question Three
* . When a government borrows money, interest rates fall, making borrowing more difficult for other countries (Kim, 2017).
* If the Federal Reserve believes that a country's borrowing is becoming excessive, it raises interest rates to prevent overborrowing, among other adverse effects.
* Question Four
* The central bank's involvement can lead to government bonds being more expensive than private company equities
* This situation can result in better performance for stocks and shares due to less crowding out (Rasche, 2019).
Question Five
* Changes in the bank rates will affect insurance operations by changing the cost of loans.
* Prevalence of changes in the bank rates on Pension fund operations will lead to changes in the cost of borrowing.
* Task 2
Q1. Insurance Companies
* Part 1
* The firm's insurance companies are significant suppliers of medical, dental, disability, life, and accident insurance and associated goods and services
* From 2017 to 2021, the company's revenue performance was $41.6 billion in 2017, 48.7billion dollars in 2018, $153.6 billion in 2019, $160.4 in 2020, and $174.1 (Cigna, 2022)
* The company uses its cash flow to purchase back shares of its stock and pay dividends
* Part 2
(a)
* Cigna experienced higher growth of revenue from 2017 to 2021
* The firm has been a leader in developing innovative distribution and marketing strategies
(b)
* If one insurance firm decides to charge younger drivers the same rates as older drivers, the premium for older drivers must be raised while the bonus for younger drivers must be reduced
* The company may strive mandate all drivers subscribe to insurance thereby remitting increased premiums (Moore & Morris, 2021).
* Adults will exit the insurance market if the government agrees, and insurance firms are authorized to continue operating if they can charge a high enough price to both adults and adolescents.
c)
* Insurance companies are often involved in hedging their risks; they try to protect themselves from potential financial losses by buying insurance against those risks.
* As climate change worsens, this could increase premiums for policies that cover natural disasters like floods and hurricanes.
Task 1
Question One
Central bank monetary policies have the potential to influence macroeconomic factors. The interest rate, open market operations, a deposit of commodities, and credit regulation are some of the prevailing monetary policies. The bank's criteria for raising the interest have an impact on the economy (Basten & Mariathasan, 2020). As corporations increase their price to remain profitable, the rising interest rates. This situation also reduces the capacity for people to borrow money for investments and business ventures. The central bank is likely to maintain a low-interest rate for cash to be accessible to domestic and foreign investors.
Increasing the economy's long-term performance by lowering interest rates may encourage corporations to invest in capital goods. The move can see people spend more on home improvements or consumer goods such as automobiles and other transportation. Low-interest rates also enhance the ability of a company's assets to appreciate. Individuals end up having more money than they need when the money supply increases. The extra balances of the customers' accounts enable them to purchase more goods and services and assets such as homes or business shares.
When all other factors are constant, an increase in demand for consumer assets increases the value of the assets. Bank rate reductions are beneficial to banks' balance sheets and their capacity to lend (Freriks & Kakes, 2021). Many banks, even the biggest, were undercapitalized following the financial crisis. This situation limited the bank's capacity to provide loans throughout the early years of the economic recovery. Interest rates should be lowered by the central bank, in my view, to stave off the worst impacts of the current recession.

Question Two
The money supply is defined as the total quantity of cash held by the general population at any particular point in time. Growth in the country's monetary supply can restrain a country's economic development (Bigio, 2019). The central bank plays an essential role in the country's money supply (Cole, 2020). When the money supply is high, the currency will likely lose its value. An increase in the money supply of an economy may be both dangerous and helpful (Davis, 2019). Reduced interest rates often result in a rise in the availability of money, which leads to more investment and more money in the hands of consumers
Under increased money supply, businesses tend to increase production while also obtaining extra raw materials. The increased production and availability of materials increase the demand for labor a business activities increase (Chai, 2017). If the money supply shrinks or the pace of growth of the money supply slows, the opposite may occur. The central bank should re-evaluate the consequences of enabling the money supply to exceed its limits and the best way to control it (Dedola et al., 2018). During the

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Central Bank Monetary Policies (Case Study Sample)

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