Question

1. The Chief Financial Advisor for Caribbean Investment Solutions Limited is aware that a government’s fiscal policies will certainly impact his investment choices. Conduct an assessment of how the recent actions by the government to pursue an expansionary fiscal policy will impact his product selection and asset allocation strategy. Consideration should be also be given on the product choices for retirement planning. Support your view with the use of three scholarly sources.

2. You have observed that Central Bank’s in the region have been lowering interest rate in an attempt to generate increased economic activity. How will this reduction in interest rates impact your investment choices and decisions? Particular focus should be on your selection of insurance products?

Answer 1

answer 2 :

Answer 1

Expansionary fiscal policy is always a boon to the economy since it stimulates the economy which leads to  increased investments. Its a potent tool which reduces taxes , increases government spendings.It gives price stability and it push more demand for the consumer goods.

stimulated economy always encourage investors to invest in stock market therefore good returns are expected in a good economy.Basket of retirement plans are purely based on long term investments, such as PFs,Bonds, mutual funds,insurance and equities.Retirement plans should be also diversified since horizon is for long term.

As investments are always subject to market risk but expansionary fiscal policy always acts a boon to economy as it stimulate the business class to invest more , it gives consumer an opportunity to buy and surely investors to invest more.

answer 2

Lower interest rates attract more business investments because borrowing becomes cheaper.However it may not affect on my investment choice especially when the investment are done in stock market, if the economy is doing good , government policies are good enough with strong financial system of the country hence till the time compaines are performing then certainly there will no such impact on investments.

but if the investments are done on bonds or fixed deposits then certainly lower interest rates will not be encouraging since returns will be low thus it may discourage the investors like us to invest in those instruments. however lower interest rates also makes insurance products less attractive,resulting in lower sales.

life Insurance product is my selection of investment and interest rate change do not affect on my investment as i will be getting sum assured to my beneficiary .