The Hamptons Home of a Famed Socialite Hits the Market

?Before there was Paris Hilton, there was Consuelo Vanderbilt Balsan ? a Gilded Age heiress and socialite, re-nowned for her beauty and wealth. Now Ms. Balsan?s onetime Hamptons home is slated to hit the market priced at $28 million with Tim Davis of the Corcoran Group.

Located on Ox Pasture Road in Southampton, the shingle-style home was built around 1900 and is known as ?Gardenside? or ?Cara-Mia?. Ms. Balsan, the great-granddaughter of railroad magnate Cornelius Vanderbilt, owned the house until her death in 1964.

According to public records, the estate is owned by Robert G. Goldstein, executive vice president and president of global gaming operations at Las Vegas Sands Corp, and his wife Sheryl, who purchased the house in 2007 for $17.4 million.? (The Wall Street Journal, August 1, 2014, M2)

In your initial response to the topic you have to answer all 5 questions.

You are expected to make your own contribution in a main topic as well as respond with value added comments to at least two of your classmates as well as to your instructor.

Calculate the annual compound growth rate of the house price during the period when the house was owned by Robert G. Goldstein (since 2007). (Round the number of years to the whole number). Please show your work.

Assume that the growth rate you calculated in question #1 remains the same for the next 20 years. Calculate the price of the house in 20 years.Please show your work.

Assume the growth rate that you calculated in #1 prevailed since 1900. Calculate the price of the house in 1900.Please show your work.

Assume the growth rate that you calculated in #1 prevailed since 1900. Which price was paid for the house in 1964?Please show your work.

You were using the time value of money concept to answer the question #3. Think about the time line for that problem. What is the time point 0 in that problem? Please explain your answer.

If you would like to show your work for all calculations on an attached Excel spreadsheet and just include your answers in the post, that is acceptable.

The Hamptons Home of a Famed Socialite Hits the Market \"Before there was Paris Hilton, there was Consuelo Vanderbilt Balsan - a Gilded Age heiress and socialite, re-nowned for her beauty and wealth. Now Ms. Balsan's onetime Hamptons home is slated to hit the market priced at $28 million with Tim Davis of the Corcoran Group. Located on Ox Pasture Road in Southampton, the shingle-style home was built around 1900 and is known as \"Gardenside\" or \"Cara-Mia\". Ms. Balsan, the great-granddaughter of railroad magnate Cornelius Vanderbilt, owned the house until her death in 1964. According to public records, the estate is owned by Robert G. Goldstein, executive vice president and president of global gaming operations at Las Vegas Sands Corp, and his wife Sheryl, who purchased the house in 2007 for $17.4 million.\" (The Wall Street Journal, August 1, 2014, M2) In your initial response to the topic you have to answer all 5 questions. You are expected to make your own contribution in a main topic as well as respond with value added comments to at least two of your classmates as well as to your instructor. 1. Calculate the annual compound growth rate of the house price during the period when the house was owned by Robert G. Goldstein (since 2007). (Round the number of years to the whole number). Please show your work. 2. Assume that the growth rate you calculated in question #1 remains the same for the next 20 years. Calculate the price of the house in 20 years.Please show your work. 3. Assume the growth rate that you calculated in #1 prevailed since 1900. Calculate the price of the house in 1900.Please show your work. 4. Assume the growth rate that you calculated in #1 prevailed since 1900. Which price was paid for the house in 1964?Please show your work. 5. You were using the time value of money concept to answer the question #3. Think about the time line for that problem. What is the time point 0 in that problem? Please explain your answer. If you would like to show your work for all calculations on an attached Excel spreadsheet and just include your answers in the post, that is acceptable. Name Instructor Course Date Interest rates set to rise The trend for the past 35 years on interest rates has been the lowering but now the sensitivity of bonds and stocks are implying something different. As world banks, lower the interest rate down to zero to try and stabilize their economies this is having a negative impact on their economies and it proves that this is not the best monetary policy to enforce. Given an instance of the economic crunch of 2008 and the current state of world economies then the fact remains is the pendulum will shift on the end that supports rise in interest rates. What world banks chose to do to their economies by lowering the interest rates has had a negative impact on the world economy. What happened with the lowering of interest rates is the increased spending and the impact was that there was no economic growth at all. If there is no growth in the economy companies decided to remain safe by buying back shares and preserving their money. With the stabilizing in economy the returns from capital investment will rise and the result is the strengthening of the currency which in turn leads to the rise in the interest rates so that there is a balance in the economy. What Ratner is implying is that companies protect themselves from the current risks without foreseeing the future risks. As companies continue to hold on cash and limit cash flow they end up devaluing their assets and this may lead to instances of inflation in the economy. The rates of inflation are expected to sky rocket in the future which in turn will lead to interest rates rising sharply within short periods. References Ratner, Jonathan. "These Fund Managers Have Their Eye On The Interest Rate Pendulum".Financial Post. N.p., 2017. Web. 18 Jan. 2017. 1. 2. IBM Bond has a maturity date of 12 February 2024. Last Price represents the last traded price of the trading session Day Change represents the change from the previous closing price. Bid and Bid size represents the buy order price and volume pending, this is applicable during the trading sessions. Ask and Ask size represents the Sell order price and volume pending, this is applicable during the trading sessions. High and Low represents the highest price and the lowest price during the trading session. Volume represents the traded volume during the day. Open is the opening price i.e. price when the market opened for trading Bid Yield and Ask Yield represent the yield basis on applicable bid and ask price Previous Close is the closing price of previous trading date Previous Close date is last trading date Coupon Rate is the coupon attached to the bond. Maturity date is the date when the bond's principal will be repaid and bond will be cancelled. Issue type is the category of bond. CUSIP is the ninedigit, alphanumeric CUSIP numbers that are used to identify securities. 3 Assuming a face value of $1000, its last traded price is 107.54% X 1000 = $1075.4 4. Assuming annual coupons, the coupon payment every year will be 3.625% X 1000 = $36.25 5. The current yield is (36.25 / 1075.4) X 100 = 3.37% 6. The short-coming of current yield is that it only considers the periodic income component and not the appreciation or depreciation in price. 7. Considering residual maturity as 8 years (N); the YTM is the discount rate which equals the present value of coupon payments ($36.25) and principal payment ($1000) to the current price of $1075.4 The YTM is 2.57% The shortcoming of YTM is that it assumes that the bond will be held till maturity and all coupon payments will be re-invested at YTM. 8. A) If the bonds are callable, the risk for investors will increase. This will mean a higher level of compensation (return). So YTM will increase and price will decrease. B) If the bonds are subordinated, the risk for investors will increase. This will mean a higher level of compensation (return). So YTM will increase and price will decrease. C) A better rating will reduce the YTM and increase the price. A worse rating will have the opposite effect. Name Instructor Course Date Interest rates set to rise The trend for the past 35 years on interest rates has been the lowering but now the sensitivity of bonds and stocks are implying something different. As world banks, lower the interest rate down to zero to try and stabilize their economies this is having a negative impact on their economies and it proves that this is not the best monetary policy to enforce. Given an instance of the economic crunch of 2008 and the current state of world economies then the fact remains is the pendulum will shift on the end that supports rise in interest rates. What world banks chose to do to their economies by lowering the interest rates has had a negative impact on the world economy. What happened with the lowering of interest rates is the increased spending and the impact was that there was no economic growth at all. If there is no growth in the economy companies decided to remain safe by buying back shares and preserving their money. With the stabilizing in economy the returns from capital investment will rise and the result is the strengthening of the currency which in turn leads to the rise in the interest rates so that there is a balance in the economy. What Ratner is implying is that companies protect themselves from the current risks without foreseeing the future risks. As companies continue to hold on cash and limit cash flow they end up devaluing their assets and this may lead to instances of inflation in the economy. The rates of inflation are expected to sky rocket in the future which in turn will lead to interest rates rising sharply within short periods. References Ratner, Jonathan. "These Fund Managers Have Their Eye On The Interest Rate Pendulum".Financial Post. N.p., 2017. Web. 18 Jan. 2017. 1. 2. IBM Bond has a maturity date of 12 February 2024. Last Price represents the last traded price of the trading session Day Change represents the change from the previous closing price. Bid and Bid size represents the buy order price and volume pending, this is applicable during the trading sessions. Ask and Ask size represents the Sell order price and volume pending, this is applicable during the trading sessions. High and Low represents the highest price and the lowest price during the trading session. Volume represents the traded volume during the day. Open is the opening price i.e. price when the market opened for trading Bid Yield and Ask Yield represent the yield basis on applicable bid and ask price Previous Close is the closing price of previous trading date Previous Close date is last trading date Coupon Rate is the coupon attached to the bond. Maturity date is the date when the bond's principal will be repaid and bond will be cancelled. Issue type is the category of bond. CUSIP is the ninedigit, alphanumeric CUSIP numbers that are used to identify securities. 3 Assuming a face value of $1000, its last traded price is 107.54% X 1000 = $1075.4 4. Assuming annual coupons, the coupon payment every year will be 3.625% X 1000 = $36.25 5. The current yield is (36.25 / 1075.4) X 100 = 3.37% 6. The short-coming of current yield is that it only considers the periodic income component and not the appreciation or depreciation in price. 7. Considering residual maturity as 8 years (N); the YTM is the discount rate which equals the present value of coupon payments ($36.25) and principal payment ($1000) to the current price of $1075.4 The YTM is 2.57% The shortcoming of YTM is that it assumes that the bond will be held till maturity and all coupon payments will be re-invested at YTM. 8. A) If the bonds are callable, the risk for investors will increase. This will mean a higher level of compensation (return). So YTM will increase and price will decrease. B) If the bonds are subordinated, the risk for investors will increase. This will mean a higher level of compensation (return). So YTM will increase and price will decrease. C) A better rating will reduce the YTM and increase the price. A worse rating will have the opposite effect