For an investor, the ability to analyze the market situation to assess financial risks and get the most out of investments is critical. This requires careful analysis of interest rates, including for government bonds. First of all, it is necessary to remind that bonds traditionally mean securities issued by the company or the state for receiving money from investors, guaranteeing the predicted income at the expected time. In other words, bonds allow the issuer to save significantly on bank loans by receiving investors’ money at a reduced rate.
If one looks at Bloomberg’s information, one will find a large number of government ten-year bond rates, depending on the country. For example, for the U.S., the interest yield is 0.56: this means that within ten years, the investor will receive in addition to coupons 0.56 percent of the invested amount (“Rates & bonds,” 2020). For comparison, the interest rate yield of the Hong Kong dollar for the ten years is 0.15. This number is equivalent to an investor receiving 0.15 percent of the amount invested over the period. So, it is necessary to calculate what investment will be more effective for the past decade.
For a more detailed study of which government to buy bonds from, calculations must be made. It is assumed that the initial investment amount is 100,000 US dollars. In other words, by investing $100,000 in U.S. bonds, the investor expects to receive 0.56 percent. Simple interest can be calculated using the following formula.:
This means that in ten years, an investor out of $100,000 invested can only earn $5,600. On the other hand, the current conversion rate between the Hong Kong dollar and the US dollar is 1:0.13 (“XE currency converter,” 2020). Consequently, American $100,000 turns into Asian $775,051.04: if an entrepreneur going to invest this money in Asian bonds, the total yield will be as follows:
It means that the investor will be able to get $11,625.77 net profit during the time passed. If the reverse conversion is done, 786,676.81 HKD will turn into 101,500.00 USD. This calculation guarantees that the investor will pay less for the foreign bond account because the interest rate is lower substantially.
Evaluating the advantages and projected benefits while choosing a bank for investment plays an important role for the investor. It is worth understanding that regardless of the country, each of the international banks is actually a market where an entrepreneur can participate for their benefit. Nevertheless, the everyday practice has repeatedly demonstrated that along with an increase in income during the investment period, the overall performance may fall, as the rate may be negative. This phenomenon justifies the need for an in-depth study of bank offers for investors.
The third bank, BNP Paribas, was chosen from this list, which is one of the largest French financial conglomerates both in the country and on the international economic scene. Predictability and income security are further confirmed by the bank’s systematic and large scale, as there is little chance that such a large firm will go bankrupt. In terms of total assets, this bank is second only to Deutsch Bank in Germany and HSBC Holding in the USA, with a total of 2,539.1 assets. Meanwhile, it is a bank with a long history, which began more than 170 years ago, when the founders of BNP were engaged in the sale of non-ferrous metals and agricultural resources. The company’s modern slogan suggests that it is a bank for a changing world, which leads to the conclusion that the actions taken by the bank are timely and prompt.
On the official website, in the section dedicated to the call to become a shareholder, the bank tells its readers about the potential economic growth opportunities that can be achieved with investments. In particular, shareholders get unique access to the support center, meeting materials, and whole transaction stories, reduced preferential brokerage fees to 0.20%, and zero deposit payments. In addition, BNP Paribas offers clients an assisted investment offering a range of actions and forecasts that can be used by the investor. Other preferential bank offers include mutual funds, systematic investment plans, ETF, annuity plan, and, unquestionably, insurance of the client’s assets. Moreover, the bank’s official website offers customers the use of an online calculator to evaluate the profitability of their investments (“Investment calculator and share price,” 2020). Thus, in just four days from August 1, 2020, when buying five shares for a total of 170.93 €, the investor would receive an additional 6.47 €, which shows a return of +3.79%. These advantages, along with the seemingly high efficiency, allow to conclude that using BNP Paribas for investment is reasonable.
References
Investment calculator and share price. (2020). BNP Paribas.
Rates & bonds. ((2020). Bloomberg.
XE currency converter. (2020). XE.