Write a 2 page essay on What you think of the subprime crisis and how it impacts todays economy.

In obvious circumstances, the lenders mortgaged the loan security to other investors in various esoteric combinations. The adverse effects of the subprime crisis lead to hike in interest rates, which forces the Fed to raise rates to combat inflation, which has to be incurred by the common man. Economies of developing countries classified as emerging markets, are still seen by developed country fund managers as risky propositions. So the flight to safety will see some funds pull out of developing countries. This could lead to a stock markets slide in these economies, loss of confidence and slowdown of the real economy. The other source of disruption is construction-led slowdown in the US. This could hit developing economies that export a lot to the US.

The subprime crisis also places downward pressure on economic growth, because fewer or more expensive loans decrease investment by businesses and consumer spending, which drive the economy. A separate but related dynamic is the downturn in the housing market, where a surplus inventory of homes has resulted in a significant decline in new home construction and housing prices in many areas. This also places downward pressure on growth.

Crisis has caused panic in financial markets and encouraged investors to take their money out of risky mortgage bonds and shaky equities and put it into commodities as “stores of value”. Most of the recent increases in global food prices have been the result of speculation and the collapse in the value of the US dollar which is now at Indian Rupees 38.62 per dollar. This crisis has an immense effect on the national stock markets, where the fluctuations in the market prices and shares of the corporations do create an element of doubt in the stakeholders mind and thus leading to kiosk among them. The market value chips down and which tends the financial institutions to come forward and ask for their loans

MOD5

GS Fishing is considering two mutually exclusive investments. The projects’ expected net cash flows are as follows: Expected Net Cash Flows Time Project A Project B 0 ($375) ($575) 1 ($300) $190 2 ($200) $190 3 ($100) $190 4 $600 $190 5 $600 $190 6 $926 $190 7 ($200) $0 Answer the following questions: If each project’s cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice?Construct NPV profiles for Projects A and B.What is each project’s IRR?What is the crossover rate, and what is its significance? Your paper should meet the following requirements: Be approximately 2 pages in length, not including the cover page and reference page.Follow the CSU-Global Guide to Writing and APA (Links to an external site.)Links to an external site.. Each paper should include an introduction, a body with at least two fully developed paragraphs, and a conclusion.Support your answers with the readings from Module 5 and at least one scholarly journal article. The CSU-Global Library is a great place to find resources.Be clear and well written, concise, and logical, using excellent grammar and style techniques. You are being graded in part on the quality of your writing. If you need assistance with your writing style, start with Tools for Effective Writing at the CSU-Global Library, accessible from the library’s homepage.