...investors to benefit from a portfolio manager’s expertise, and from diversification capabilities due to a large portfolio. Mutual funds can provide dividends or capital gain distributions to investors. In addition, investors also benefit from share price appreciation; they may be able to sell the shares at a higher price then what they paid. 2. Open- versus Closed-End Funds How do open-end mutual funds differ from closed-end funds? ANSWER: Shares of open-end mutual funds can be sold back to the sponsoring investment company, whereas shares of closed-end mutual funds cannot. 3. Load versus No-Load Mutual Funds Explain the difference between load and no-load mutual funds. ANSWER: Load mutual funds require a fee to help pay for marketing commissions. No-load mutual funds do not require such a fee. 4. Use of Funds Like mutual funds, commercial banks and stock-owned savings institutions sell shares, but the proceeds received by mutual funds are used in a different way. Explain. ANSWER: Shares issued by commercial banks and savings institutions are used to obtain capital, which may be used to finance their fixed assets such as land and buildings. Shares issued by mutual funds are used to obtain funds, which are invested in the mutual funds portfolio. 5. Risk of Treasury Bond Funds Support or refute the following statement: Investors can avoid all types of risk by purchasing a mutual fund that contains only Treasury bonds. ANSWER: A mutual fund containing Treasury bonds is susceptible...
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...my sincere gratitude to everyone who supported me throughout the course of this PGDM project. I am thankful for their aspiring guidance, invaluably constructive criticism and honest advice during the project work. I express my warm thanks to Prof. Priti Samant, my project guide who provided me with critical insights on this project and helped me make this a success. I would also like to acknowledge the help of all my friends and respondents who enabled me to conduct this research project. Thank You All!! Table of Contents Chapter 1 Introduction 1 Chapter 2 Literature Review 4 Chapter 3 Types of Investment Options 9 Chapter 4 Analysis & Findings 43 Chapter 5 Conclusion...
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...Confidential Financial Investment Opportunities Prepared for: Ms. Joey Lai (Lecturer) Financial Investment Opportunities Banking Academy, Hanoi BTEC HND in Business (Finance) Prepared by: BBQ CLASS: F06B 1 Confidential Table of Contents INTRODUCTION .......................................................................................................................... 3 1.1 Assess the risk tolerance/attitudes of individual investors to risk when evaluating the suitability of investments. ............................................................................................................... 4 1.1.1: Low risk ............................................................................................................................ 4 1.1.2: Mid risk ............................................................................................................................. 5 1.1.3: High risk ........................................................................................................................... 5 1.2 Evaluate a range of investments available from banks, building societies, insurance companies and national savings. ..................................................................................................... 7 1.2.1: Bank .................................................................................................................................. 7 1.2.1: Building society .......................................................
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...concept of leverage seems simple: borrowing money at a low cost and using it to seek higher returns on an investment. Leverage as it applies to a closed-end fund is more complex, and the landscape in which leverage operates has changed dramatically in the past few years. This makes it important for financial advisors and investors to refresh their understanding of leverage and leveraged closed-end funds. LIKE ARCHIMEDES’ LEVER, leverage in an investment offers the opportunity to effectively magnify one’s initial input. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Why are so many closed-end funds leveraged? A closed-end fund is a publicly-traded entity that invests in a variety of securities, such as stocks and bonds. A closed-end fund raises capital by selling a fixed number of shares at one time through an initial public offering (IPO). Once the initial capital is raised, the fund is “closed” and no longer directly offers its shares for sale. Instead, following its IPO, the fund’s shares trade on a secondary market, such as the NYSE or the NASDAQ. Unlike a typical mutual fund, closed-end fund shares are neither created nor redeemed depending upon investor activity, and thus have no impact on management of the underlying assets in the funds portfolio. This means the fund is better able to maintain a steady asset base.1 Because regulations limit the ratio of a fund’s leverage to its total assets, this expected relatively steady asset base makes...
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...amount of risks that can be taken and the income and tax structure. Investments on the basis of duration could be classified as: Short-Term, Medium Term or Long Term . * Short Term Investment: Investments made by an individual or organisation that will expire within one year. Commonly, these accounts contain stocks and bonds that are considered highly liquid assets. Example- Investing money for going in a vacation within a year, investing in company’s yearly inventories. * Medium term: An intermediate duration asset holding period or investment horizon. The exact time period to be considered as medium term depends on the investor's personal choices, as well as on the asset class under consideration. Bonds that have a maturity period of between 5 to 10 years are considered to be intermediate -term bonds In the fixed-income market. Example – Investing money for buying a house in 5 years, investing in machineries which will last for 5 years. * Long Term Investments: The account on the asset side of the balance sheet of any company which represents the investments that the company intends to hold for more than ten year. It includes real estate, stocks, bonds and cash. Example – Investing money in retirement scheme benefits, investing in long term assets of factories. Measurement of duration: * Effective duration can be defined as the percentage change in security’s price that results from a change in yield of 100 basis points. e.g. - The price of a bond with an effective...
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...future sacrifices of economic benefits arising from present obligations that are not payable within a year or the operating cycle of the company, whichever is longer. Long term debt is a way to finance and gain capital when the company cash flow is minimal. To name a few types of long term debt: bonds payable, notes payable, mortgages payable, pension liabilities, and lease liabilities. This assignment will define basic terms such as long-term debt, bonds, mortgage, and capital leases. In addition answer questions in reference to the ABC Company journal entries, postretirement and note disclosure. A bond arises from a contract known as a bond indenture. A bond is a form of a long term promissory note that is regulated under the federal securities law or state laws. Typically, a bond represents a promise to pay. Bonds are a unique way to raise capital for organizational needs. Bonds are accounted for in a similar to notes payable with the exception that bonds are normally issued to different lenders. These lenders, also known as investors, may sell their bonds to another investor prior to their maturity. There are several types of bonds, however, the more common forms of bonds are secured and unsecured bonds. Secured bonds are backed by the borrower’s collateral, thus meaning no tangible property or any other kind of product is attached to that debt. A well-known example of a secured bond is a mortgage. As for the unsecured bonds, there is no collateral required...
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...Business Financing and the Capital Structure Joelann Rousell Principles of Finance May 31, 2015 Financial planning involves decisions related to finance, financial requirements of the company. Financial manager has to determine the needs of the funds and available sources for those funds. Financial planning is deciding in advance the funds required for future actions. There are several steps involved in the process of financial planning. These steps are described as follows:- 1. Estimation of fund requirement:-Amount of capital required is determined at this step and in determining the capital need projected statement has to be drawn. Capital is of fixed and fluctuating nature and we need both fixed as well as fluctuating capital to run business. Fixed capital is required for fixed assets, investment in intangible assets and fluctuating capital is required to maintain stock and inventory of the company which is required to carry on operating activities. 2. Determining the sources of funds available:-To finance the above requirement what sources are available with the company has to be determined. Various sources are available like bank loans, raising money through shares, securities, or debt and equity. 3. Choosing the best source of finance:-There are various sources available to the company but according the paying capacity and nature of the company we have to choose the available source. 4. Forecasting the availability of funds or company’s earning capacity:-Next...
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...Stocks Stocks are a form of ownership; they represent interest in a company's development. Typically, investors are given no guarantees about returns of the beginning venture. Truth be told, the productivity of the venture depends completely after rising stock cost, which, at the most key level, relates specifically to the execution and development (expanding benefits) of the company. Advantages of Investing in Stocks Stocks offer gainful returns back with constrained losses. When you put resources into stocks, you have the capability of profiting than you would with different types of investments, for example, fixed rate bonds and certificate of deposits, on the grounds that stocks participates specifically in the development of the economy and as time goes on have truly beat whatever other type of investment. However, any potential losses are constrained to the measure of your starting venture, not at all like different manifestations of investment that are utilized, for example, land where you could owe more than your original up front installment. In this respect, shareholders have constrained risk for the activities of the organization's administration in light of the fact that shareholders are detached investors that just participates in the capital gains and profits of the organization. Stocks additionally offer a lot of liquidity on the grounds that they can be sold at their market value and changed over to money whenever on the stock trade. Ultimately, stocks...
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...in knowing the risk and awareness about the investment for long or short term. It is for all people such as NRIs, self-employed, professionals, etc. Number of observers has focused on the objectivity of individual assets portfolios between risky and riskless assets. Awareness about the risk involved in portfolio has major implications for accumulating wealth. While making investment professionals have long been aware of the risk importance to growth of long-term investment but individuals or ordinary investors may not sound aware. Earlier in India, people are more conscious about the future so they are not wish to take more risk hence they are risk-averse individuals. Risk averse individuals are more likely to limit their investments to relatively safe assets portfolios like savings accounts, government bonds. However now-a-days people earning a lot and their awareness about the risk involved in investment portfolios has increased hence they are taking calculative risk while making investment. Individuals’ attitude about financial risk taking in response to changes in general economic condition has changing apart from innate demographic, economic and behavioural factors. The employed personnel especially information technology (IT) professionals have a greater propensity to save and invest because of their high earning power. The employed force is also motivated by the investment behaviour of their colleagues in their work place. They are supposed to be risk adverse, safety...
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...International Project Finance Globalization, large scale production and chains of multinationals have become very common in today’s world. Due to this, any business that has to survive and compete with others on a global level has to come up with new and innovative projects to give it an edge above its competitors. Here, we are not talking about projects on a small or medium scale. We are talking about huge multimillion dollar investments in a large scale project as only then can a business make its mark on the world economy. The main cause of people hesitating to do such huge projects is that they do not have enough financial back up to go through with plans involving such huge investments. Since, in the end, every brilliant project plan is dependent on the finance required to carry it through, financing of such a project becomes the primary concern of any planner. The financing must be done prudently so that the best of the financial instrument can be used while the negatives avoided as far as possible. Every financial instrument is applicable for certain projects. Choosing such instrument should be the focus of any project since the project will only remain on paper and never be carried out unless there is financial aid. In the present day, there are many unique financial law solutions for funding large scale projects. Following are some of them described in brief: * Project Finance Loans: Project Finance is a kind of loan structure wherein the repayment is dependent...
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...Financing Proposal WU Shizhi 1155068485 Company background Property Holdings Ltd is a real estate owner and developer. The group is one of the largest property developers in China. It develops and sells residential properties. It also operates in hotel and commercial properties industry. Agile has land in Hainan, Shanghai, Nanjing, Changzhou, Chengdu, Xi’an, Chongqing, Shenyang, Tianjing, Guangzhou, Foshan, Zhongshan, Huizhou and Heyuan. Ownership structure 62% stock shares of the company are held by Top Coast Investment Ltd whose major shore holder is the family of the founder of Agile. The second largest shareholder JP Morgan Chase & Co holds 4.38%. Dimensional Fund Advisors Ltd and Blackrock hold 1.18% and 1.16% shares, respectively. The estimated public float is between 30% and 35%. Capital Structure The total assets account for RMB 124,367 million. The company owns short-term borrowings and long-term borrowings RMB 16,363 million and RMB 26,203 million. The shareholders’ equity is RMB 33,851 million. The company’s total debt accounts for 34.2% of total assets. Its net debt/total equity is 72.4% and debt/common stock is 125.8%. Benchmark against the comparables There are lots of property companies in China or listed companies in Hong Kong. However, the most comparable companies should be property companies operating in mainland China but list in Hong Kong. Thus, the eligible comparable companies are Country Garden, Evergrande, Longfor, China Aoyuan...
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...Chapter 6 Rate The Risk and Term Structure of Interest In the previous section, we have generalized our discussion of the influence of various factors on the behavior in interest rate by examining only a particular type of bonds: namely, the 1-year zero coupon bond. However, there are many types of bonds: bonds with different maturity, bonds issued by different parties (i.e. government vs. corporate), etc. As a result, there is a different interest rate for each type of bond. We will look at the behavior of interest rates of two groups of bonds: (1) Bonds with the same features but are issued by different agency. In other words, we want to look at the risk structure of interest rates. (2) Bonds issued by the same agency but have different term to maturity (i.e. life of the bond). In other words, we want to look at the term structure of interest rates. 1. Risk structure of interest rate As we have discussed in the previous section, the (relative) risk level of an asset affects its demands according to the theory of asset demand. The higher the relative risk level, the lower the demand of that asset. According to the theory of asset demand, this leads to an increase in interest rate. In other words, investors need to be compensated with a higher return (in the form of higher interest rate) in order to induce them to hold the assets. There are a number of factors that affect the risk level of a bond. In this section, we will focus on only 3 of them: default risk, liquidity, and tax...
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...to investors. Mutual funds also offer good investment opportunities to the investors. Like all investments, they also carry certain risks. The investors should compare the risks and expected yields after adjustment of tax on various instruments while taking investment decisions. The investors may seek advice from experts and consultants including agents and distributors of mutual funds schemes while making investment decisions. Types of investor In continuation of the lessons I’ve learned from Rich Dad Poor Dad author, Robert Kiyosaki, I will discuss today what he called “Types of Investors.” According to him, there are two main types of investors: Average Investors and Professional Investors. Average investors - buy packaged securities such as mutual funds, treasury bills, or real-estate-investment trusts. Professional investors - are more aggressive—they create investment opportunities or get in on the ground floor of new offerings, build businesses and marketing networks, assemble groups of financiers to fund deals too large for them to undertake alone, and pick the companies with the most promise for initial public offerings of stock. INVESTMENT AVENUES IN INDIA There are a large number of investment instruments available today. To make our lives easier we would classify or group them under 4 main types of investment avenues. We shall name and briefly describe them. Financial securities: These investment instruments are...
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...DuPont-guaranteed off-take agreement. At the end of this 35-year purchasing agreement, Conoco will transfer its shares to Maraven at no cost. The sponsors agreed to use 40% of equity (40%) and 60% of debt to finance the project’s $2.425 billion total cost. The financial advisors, Citicorp and Credit Suisse First Boston, used a multi-pronged financing strategy to raise debt from commercial banks, development agencies, and bond investors. In the end, the sponsors raised $450 million in bank finance and $1 billion in Rule 144A bonds, all of which was non-recourse to the sponsors following completion of the project. The decision to finance this deal on a project basis was actually a dual decision regarding both financial and organizational structure. Risks analysis The purpose of this paper is to analyze how the sponsors allocated both contractual and residual risk in the Petrozuata deal. There are four general categories of risk: precompletion risks, operating risks, sovereign risks, and financing risks, but in this paper I will talk just about the last two risks, as being principal part of my contribution to the group case analysis, so here I am going to present the information found that I used while...
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...Investment banking process for an Initial Public Offering: * The process of Initial Public Offering starts when a firm wants to raise its capital by selling or floating its securities. These securities can be in the forms of bonds or stocks or other types, which will be first sold to the public through primary market. The selling of securities to the market can only be called Initial Public Offering when it is the first time that the company sells its securities to the public. The process of IPO through investment bankers is as the following: * 1. Forming of underwriting syndicate: usually more than one investment bankers help the company issue its IPO. One investment banker is called underwriter than the group of investment bankers is called underwriting syndicates, in which each of them will help the client with some tasks regarding the IPO process. * 2. Terms of IPO: the underwriting syndicate will advise the client on the terms of the IPO. These terms will be incorporated into a preliminary registration statement, which will be submitted to the Securities and Exchange Commission. This form is called “red herring” which states that “the company is not attempting to sell the security before the registration is approved” (Bodie, Kane, & Marcus). The statement is called “prospectus” when it is finally approved by the SEC. * 3. Buying and reselling of securities: In a normal setting, the company will not sell its securities to the public directly. In fact,...
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