question 2

aske As a financial planner, one of your tasks is to prescribe the allocation of available funds across the money market securities, bonds, and mortgages. Your philosophy is to take positions in securities that will benefit most from your forecasted changes in economic changes. As a result of recent events in Malaysia, you expect that in the next month foreign investors will reduce their investment in Malaysian Treasury securities and shift most of their funds into other countries' securities. You expect that this shift in funds will persist for at least a few years. You believe that this single event will have a major effect on the economic factors in Malaysia, such as interest rates, exchange rates and economic growth in the next month. Because the prices of securities in Malaysia are affected by these economic factors, you must determine how to revise your prescribed allocation of funds across securities. You are required to answer the following: 1. How will Malaysian interest rates be directly affected by the event (holding other factors equal)? (Mishalini) (1) - Malaysia Interest Rate- Malaysia Economy Forecast \& Outlook ifocus-economics com) - (2) - NA 2. How will economic growth in Malaysia be affected by the event? How might this influence the values of securities? (Eswaran)