UNIT TWO: WRITING ASSIGNMENT DIRECTIONS: Here is the Unit Two Writing Assignment

UNIT TWO: WRITING ASSIGNMENT

DIRECTIONS: Here is the Unit Two Writing Assignment. You should submit to your Unit Two
Writing Assignment to your Unit Two Writing Assignment Folder. Please submit your Unit Two
Writing Assignment in MS Word format with the following file name:
LastNameFirstInitial_Unit02_WritingAssignment.docx. For example, if you name is John
Smith, the file name of your Answer Sheet should be SmithJ_Unit02_WritingAssignment.docx.
Name: ________________________________
Your corporation Western Technology, Inc. wants to invest $100, 000 in a short
term security for one-year. It is your responsibility to research and recommend the best
investment vehicle for the company.
The current checking account of the corporation has an EAR of 0.1 percent. The
corporation is in the 33 percent federal marginal tax bracket and in a 6 percent state
marginal tax bracket. You expect inflation to be .5 percent this year. There are four short-
term investments that you are exploring.
A. CD with a 12-month maturity with an 1.88 percent APR that compounds
monthly
B. CD with a 12-month maturity with a 1.71 percent APR that compounds quarterly
C. A $50,000 Treasury bill with a maturity of one year that is with a market value of
$49,850 dollar discount from face value (market value). (You will be required to
purchase two Treasury bills.)
D. Money Market Account for one year with a 1.10 APR that compounds monthly.
When you communicate your rationale for your recommendation include the following:
1. Which of the short term investments is the best alternative?
2. Did taxes influence your decision?
3. Account for the difference between compounding and discounting
4. Explain which of the investment candidates are considered “riskless” and how
this impacted your decision making.
5. Describe the difference between a money market mutual fund and money
market instruments.