Investors are on "Fed watch," and Smithfield is urged to consider the other options for its pork business. Those and more are what's in business news Monday.
Futures point to strong gains this morning following a rally in Japan overnight. There's also new hope that Fed Chairman Ben Bernanke will soothe investor jitters about when and how the central bank might begin to cut back on the stimulus program that's been a major factor in the market rally over the past year. Bernanke holds a news briefing Wednesday afternoon.
The Dow industrials fell 1.2 percent last week. That's the third loss in the past three week, but the Dow is still up 15 percent so far this year. The S&P 500 dropped 1 percent and the Nasdaq lost more than 1 percent.
A challenge to China's biggest-ever takeover of an American company: An investment fund has taken a big stake in Smithfield Foods and is pressuring the company to sell itself off in parts, rather than go ahead with a $4.7 billion all-in-one sale. Smithfield is the nation's largest pork producer.
The new Superman movie, "Man of Steel," had the kind of opening Time Warner was hoping for, putting it in position for summer blockbuster status. Reports say the company is already working on a sequel and expects this to become a major franchise series.
Dreamworks Animation has agreed to produce a number of original TV series for Netflix. The shows will focus on characters from past Dreamworks' movies, including "Shrek" and "The Croods."
Forest products giant Weyerhaeuser is paying $2.6 billion to buy a big plot of timberland in Washington State. It also plans to sell its homebuilding unit.
Lowe's has offered to buy the West Coast hardware store chain Orchard Supply, which filed for bankruptcy protection today.
And General Motors is recalling 231,000 SUVs from model years 2006 and 2007. The vehicles could catch fire because of an electrical shortage. There have been 58 reports of fire so far.
-Produced by Drew Trachtenberg
86 Percent of Americans Can't Ace This Simple Personal Finance Quiz. Can You?
Market Minute: Waiting for Bernanke on Stimulus Wrap-Up
A. More than $102
B. Exactly $102
C. Less than $102
A. More than $102
You’ll have more than $102 at the end of five years because your interest will compound over time. In other words, you earn interest on the money you save and on the interest your savings earned in prior years. Here’s how the math works. A savings account with $100 and a 2 percent annual interest rate would earn $2 in interest for an ending balance of $102 by the end of the first year. Applying the same 2 percent interest rate, the $102 would earn $2.04 in the second year for an ending balance of $104.04 at the end of that year. Continuing in this same pattern, the savings account would grow to $110.41 by the end of the fifth year.
Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same or less than today?
The reason you have less is inflation. Inflation is the rate at which the price of goods and services rises. If the annual inflation rate is 2 percent but the savings account only earns 1 percent, the cost of goods and services has outpaced the buying power of the money in the savings account that year. Put another way, your buying power has not kept up with inflation.
True or false: A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage but the total interest over the life of the loan will be less.
Assuming the same interest rate for both loans, you will pay less in interest over the life of a 15-year loan than you would with a 30-year loan because you repay the principal at a faster rate. This also explains why the monthly payment for a 15-year loan is higher. Let’s say you get a 30-year mortgage at 6 percent on a $150,000 home. You will pay $899 a month in principal and interest charges. Over 30 years, you will pay $173,757 in interest alone. But a 15-year mortgage at the same rate will cost you less. You will pay $1,266 each month but only $77,841 in total interest—nearly $100,000 less.
C. Stay the same
D. There's no relationship to bond price and interest rates.
When interest rates rise, bond prices fall. And when interest rates fall, bond prices rise. This is because as interest rates go up, newer bonds come to market paying higher interest yields than older bonds already in the hands of investors, making the older bonds worth less.
In general, investing in a stock mutual fund is less risky than investing in a single stock because mutual funds offer a way to diversify. Diversification means spreading your risk by spreading your investments. With a single stock, all your eggs are in one basket. If the price falls when you sell, you lose money. With a mutual fund that invests in the stocks of dozens (or even hundreds) of companies, you lower the chances that a price decline for any single stock will impact your return. Diversification generally may result in a more consistent performance in different market conditions.