...Lesson 13: Investing in Mutual Funds What is a mutual fund? * A mutual fund is a professionally managed pool of money invested in stocks, bonds and other securities. * By purchasing mutual funds, small investors can easily diversify their investments and enjoy the benefits of professional management. * Investors own units or shares in the fund and benefit proportionately from any increase in value and/or income earned by the investments owned by the fund. The Reasons Investors Choose Mutual Funds | Mutual funds have grown in importance in Canada over the last twenty-five years. As of February 2008, there were 2,038 mutual funds with a total worth of nearly $679 billion – up from only $3.5 billion in 1981.The two major reasons investors choose mutual funds are: 1. Professional management - although there is no guarantee that the fund will outperform the market. 2. Diversification - by asset class (i.e. by holding a mix of stocks, bonds and money market investments) or within each asset class (i.e. by holding a variety of securities within each class). The risk of mutual funds arises from the risks associated with the investments they hold. * For example, a bond fund will be subject to interest rate risk – as interest rates rise, the value of the bonds owned by the fund will decline. | Mutual Funds With and Without Loads A load is a sales commission. In a load fund, the investor pays a commission every time he or she buys units (front-end load)...
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...FINC-UB.0030 Problem Set#1 Cindy Laude 1 USD GBP EUR 2 USD/GBP USD/EUR 1000 USD = Bid 1.64 1.29 1000 USD 1.66 USD/GBP USD 1.00 0.61 0.77 MoWe 9:30-10:45 a.m. GBP 1.65 1.00 0.79 Ask 1.66 1.31 x EUR GBP x 1.29 USD EUR EUR 1.30 1.27 1.00 EUR/GBP = 1.29 The lowest price st which you can buy GBP is 1.29 EUR that do not permit arbitrage. 1000 USD = 1000 USD GBP x 1.31 USD/EUR EUR GBP/EUR = 0.79 EUR/GBP = 1.27 The highest price at which you can sell GBP is 1.27 EUR that do not permit arbitrage. 3 30-day forward [rices 1.64 + 1/100 = 1.65 + 2/100 = Cash Flows (AQR) Time 0 x 1.66 USD GBP 1.65 (bid) 1.67 (ask) Spot market --> 100,000 GBP x 1.65 USD/GBP = 165,000 USD (cash inflow) cash outflow = 100,000 GBP Forward --> 100,000 GBP x 1.67 USD/GBP = 167,000 USD (cash outflow) cash inflow = 100,000 GBP Spot market --> 100,000 GBP x 1.65 USD/GBP = 165,000 USD (cash outflow) cash inflow = 100,000 GBP Forward --> 100,000 GBP x 1.67 USD/GBP = 167,000 USD (cash inflow) cash outflow = 100,000 GBP After 30 days Citi Time 0 After 30 days 4b) Mean -0.03% -0.07% Standard Deviation 2.95% 2.96% Skewness -0.046905551 -0.231396557 Kurtosis 2.254143213 2.215545959 Var 0.00086984 0.000874908 c) The normal distribution has a skewness of zero and kurtosis of 3. Therefore, the changes in the USD/GBP appear to be approximately normally distributed with skewness close to 0 (-0.047 and -0.23) and kurtosis close to 3 (2.25 and 2.21). d) Annualized volatility = (in USD/GBP) (12^0.5) x mean...
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...------------------------------------------------- QUESTIONNAIRE PURPOSE: To gather knowledge about the practical implications of concepts that we learnt. GOALS: To build up understanding of strategic management with practical orientation OBJECTIVES: To visit your company and learn about strategic management practices in your organization and prepare a research report based on study. DATE: - April 10, 2015 VISIT NO: ONE NAME OF RESPONDENT: MR.Taufiq Yousuf DEPARTMENT: HR DESIGNATION OF RESPONDENT: CFO 1. Was the company’s mission statement was changed in the previous years? Yes 2. If yes, what were the reasons for change in mission statements? Because of changing demands of business world including the policies of government are the indicators that our company consider to revise mission statement 3. What were the benefits of changing mission? It enables us to articulate the goals of existing programs it always in able us to response according to the environmental changes and complexities. 4. Who you involve in making mission statements? we have a writing group who identify the company’s primary customer and their values ,our goals and results……members include CFO ,board chairman and additional members who represents different parts of organization but it is always depends whether group needs are involvement of other...
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...Tutorial 2: Exercise 2.4 • Relevant costing - a cost that varies with decisions, opportunity costs e.g. increase in expenses. Does not include sunk costs or future costs that don’t vary with the decision. • e.g. Minimum price for SJ Services Ltd: |Relevant costs |Irrelevant costs | |Opportunity costs |Future outlay costs |Sunk costs |Future outlay costs | |Selling study |Other expenses ($50,000) | |Specialised study costs | | |Total labour costs | |Rent | | |Weekly rental costs | |Depreciation | |* as long as you can justify the costs, and what it is, you’ll be fine. | Labour: Skilled ($12+$8)* x 27 hours = $540 Semi-skilled $7 x 14 hours = $98 Unskilled $7 x 20 hours = $140 Total costs = $778 Opportunity costs: - Other income (machine rent) = $175 - Sell study (you’re able to sell this in the future) = $250 Expenses: - Relevant cost increase (the increase in expenses) -$50 Total = $1,253 (minimum price...
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...Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In the aggregate supply relation, the current price level depends upon A) expected price level. B) monetary policy. C) fiscal policy. D) consumer confidence. E) all of the above 2) Based on the aggregate supply relation, an increase in current output will cause A) a shift of the aggregate supply curve. B) an increase in the current price level. C) a change in the expected price level this year. D) an increase in the expected price level and an upward shift of the AS curve. E) an increase in the markup over labor costs. 3) The aggregate demand curve will shift to the right when which of the following occurs? A) a reduction in the money supply B) a reduction in consumer confidence C) a rise in the price level D) a reduction in taxes E) a decrease in the price level 4) Assume the economy is initially operating at the natural level of output. Now suppose a budget is passed that calls for an increase in government spending. This increase in government spending will, in the short run, cause an increase in A) the interest rate. B) the price level. C) the nominal wage. D) all of the above E) none of the above 5) Assume the economy is initially operating at the natural level of output. Suppose that individuals decide to decrease their saving. We know that this decreased desire to save will be "neutral" in ...
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...CONCORDIA UNIVERSITY John Molson School of Business - Department of Finance Portfolio Management - FINA 411/2/A, C Course Outline – Fall 2014 Instructor: Dr. Abraham I. Brodt Office: MB 12.215 Tel: 848-2424-2997 Fax: 848-4500 E-mail: ABrodt@jmsb.concordia.ca [SUBJECT: FINA 411 …….] Classes: FINA 411/2A Mondays 11:45 - 14:30 [MB1.437] FINA 411/2C Wednesdays 11:45 - 14:30 [MB5.255] Office Hours: Mondays and Wednesdays 15:30 -- 16:30 [Please e-mail me first to confirm] and by appointment COURSE DESCRIPTION: This course focuses on modern investment theory and its application to the management of entire portfolios. It will consist of lectures, discussions of cases and articles, and video presentations. Topics include: a) construction of optimal asset portfolios using techniques such as the single index model, b) extensions of the capital asset pricing model: theory and tests; example, the zero-beta model, c) criteria for evaluation of investment performance, d) active vs. passive portfolio management, e) investment strategies. The Formula Growth Investment Centre Lab will be used to demonstrate the use of specialized investment software. Computer exercises are assigned to illustrate the application of the theory. Prerequisites: FINA 380 or 385; FINA 390 or 395. LEARNING OBJECTIVES To understand the theory and practice of Portfolio Management for Individuals and Institutions, e.g. Endowments, Mutual Funds, Pension Plans, etc. ...
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...The Chinese University of Hong Kong CUHK Business School FINA3070 Corporate Finance: Theory and Practice First Term 2014 – 2015 Name: Student ID: Lecture: FINA 3070A (Wed) / FINA 3070B (Tue) DO NOT TAKE AWAY Midterm Quiz (Two Hours Closed Book) 24 October 2014 (Friday), 6:45 pm – 8:45 pm Instructions: 1. Please answer all questions in the answer book. Any answers written on this question paper will not be graded. 2. There are 4 questions and the total mark of this midterm is 90. 3. You are allowed to bring ONE A4 formula sheet. 1 Question 1 (25 Marks) (a) In a world with no taxes, no transaction costs, and no costs of financial distress, is the following statement true, false, or uncertain? If a firm issues equity to repurchase some of its debt, the price per share of the firm’s stock will rise because the shares are less risky. Explain. (10 marks) (b) Do you agree or disagree with the following statement? A firm’s shareholders will never want the firm to invest in projects with negative net present values. Why? (10 marks) (c) When managers are better informed than outside investors, the pecking order theory predicts that there would be a price drop at equity issue announcement. How would you suggest the managers to minimize the adverse effect if they must issue equity? (5 marks) 2 Question 2 (30 Marks) Jason is the CEO of CU Café. Jason is considering opening a new café. He has examined the potential for the company’s expansion...
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...FINA-527-Assignment- Chapter 4 2) Margin Requirement 40%, Margin Account Deposit $50,000, Price per Share $35 Let’s assume ‘’Y’’ be total investment, and ‘’x’’ number of shares a) .4Y =$50,000, Y = $50,000/.4 =$125,000 $35x =$125,000, X =$125,000/$35 = 3571 shares b) (i) if stock price rises to $45/share, Total profit (loss) = $45*3571 -$125,000 =$35,695 (ii) if stock price falls to $25/share, total profit(loss) =$25*3571-$125,000 =($35,725) c) Maintenance margin = (number of shares* price per share)-($125,000-$50,000)/ number of shares*price per share .3 = (3571 *price per share) -$75,000/3571*price per share Price per share =$30 7) Rate of return = selling price –cost/ cost, ($36-$24)/$24 =50% If buy at $28, ($36-$28)/$28 =29% Price didn’t go below $20 Chapter 5 1) Stock Number of shares T T+1 A 1,000,000 $60 $80 B 10,000,000 $20 $35 C 30,000,000 $18 $25 total $98 $140 $98/3 =32.66 $140/3=46.66 a) Percentage change =46.66-32.66/32.66 =42.87% stock Number of shares Value at period T Value at period T+1 A 1,000,000 $60*1,000,000=$60,000,000 $80*1,000,000=$80,000,000 B 10,000,000 $20*10,000,000=$200,000,000 $35*10,000,000=$350,000,000 C 30,000,000 $18*30,000,000=$540,000,000 $25*30,000,000=$750,000,000 Total =$800,000,000 =$1,180...
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...FINA 465: Commercial Bank Practice and Policy Spring 2013 MW 2:30 – 3:45 Section 001 BA 401 MW 4:00 – 5:15 Section 002 BA 401 Professor: Dr. Allen N. Berger Office: Room 452, Moore School of Business Phone: (803) 576-8440 Email: aberger@moore.sc.edu Office Hours: MW 10:00 AM – 11:00 AM and 5:30 PM– 6:30 PM; and by appointment Extra office hours will be available before each of the three tests. Course Overview: This course is structured around the theme of risk management in banking. You will examine how banking institutions generate earnings and the nature of risks assumed in their operations. The focus of the subject matter is risk management. Topics to be covered: Why are financial intermediaries special? the role of depository institutions; financial crisis; risk of financial intermediation including interest rate risk, credit risk, off-balance sheet risk, liquidity risk; management of risks including liquid asset management and liability management, deposit insurance and other liability guarantees, capital adequacy, product and geographic diversification, and loan sales. The objective of this course is to provide the student with the conceptual framework necessary to analyze and comprehend the current problems confronting managers of commercial banks and other depository institutions. The course materials do not dwell on the development of financial theories. It is assumed that the student comprehends the basic theoretical concepts...
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...PART I 1- Determine the year-to-year percentage annual growth in total net sales. Fiscal year 2008 2007 2006 2005 2004 Net sales $ 8,334 $ 6,141 $ 9,181 $ 11,933 $11,062 Growth change 35.71% -33.11% -23.06% 7.87% Growth change 2004: $11,062 2005: (11933-11062) * 100/11062 = 7.87% 2006: (9181-11933) * 100/11933 = -23.06% 2007: (6141-9181) * 100/9181 = -33.11% 2008: (8334-6141) * 100/6141 = 35.71 2- Based only on your answers to question #1, do you think the company achieved its sales goal of +10% annual revenue growth in 2009? Determine the target revenue figure, and explain why you do or do not feel that the company hit its target. Based on the year to year percentage annual growth rate, the company will not be able to reach their sales goal. The target revenue for 2009 most be $9167 in order to reach the 10% growth rate. PART II Sales $8,334.00 Cost of Sales $5,458.00 Gross Margin $2,876.00 Operating expenses: R & D $525.00 Selling, General, and Administrative $691.00 In‐process R & D ‐‐‐‐‐‐‐‐‐ Restructuring costs ‐‐‐‐‐‐‐‐‐ Total Operating Exp $1,216.00 Operating income $1,660.00 Total interest and other Income net $194.00 Income before provision for Income taxes $1,854.00 Provision for income Taxes (15%) $278.10 Net income $1,575.90 1. Use the Percentage Sales Method and a 25% increase in sales to forecast Micro Chip's Consolidated Statement of Operations for the period of September...
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...1. What is the appropriate level of working capital? Is working capital even needed? Argue your case in detail. The extreme view is that the optimal level of NWC is zero. This is based on the premise that working capital is an idle resource that provides little or no value to the stockholders. Research shows that there is a positive relationship between a reduction in working capital and stockholder wealth. However, is it possible for a firm to operate without any investment in working capital? It depends, probably not. Some investment in working capital acts as a shock absorber and reduces the firm’s risk and the cost of capital. 2. Describe the three motives for holding cash. Managers have a transactions motive to hold cash when expenses are unsynchronized with cash inflows. In this case cash provides a medium to fulfill payments in lieu of liquidating long-term assets. Thus, cash can reduce transaction costs and opportunity costs that stem from lost returns due to early liquidation. The transactions motive for holding cash is important for firms with unsynchronized cash inflows and outflows. Managers may hold cash for precautionary purposes because cash can buffer against unexpected contingencies or cash flow shortages; realized cash inflows may be less than expected. Precautionary cash holdings provide funding for purchases and repayment of debt, which are even more critical during tight credit periods when external capital is more difficult to acquire. Managers...
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...Running head: Holmen Final 1. Assume a monopsonistic labor market. Discuss the impact of the imposition of a binding mininmum wage. According to McKenzie and Lee (2010) minimum wages imposed at the state and federal level are examples of price floors; a price (or wage) below which a specified good (labor) cannot be sold. If congress imposes a binding minimum wage that is above the equilibrium it creates a surplus of workers. A minimum wage above the equilibrium (Ec) shifts the demand curve (demand for employment) to the left represented by Em. The effects of a binding minimum wage can be both positive and negative. Workers that already employed will receive the benefits of a hirer rate of pay. On the other hand, this creates a surplus of workers who have entered the market because of the higher opportunity cost. There is a chance that those workers in the market at the present time could be replaced by those with a higher opportunity cost (Em2). The impact of mandating minimum wages depends on the firms ability to adjust nonmoney conditions at work, or fringe benefits. Typically, the firm will reduce fringe benefits or increase work demands to offset the effects of a binding minimum wage. Workers may choose to leave the market if the value of the loss of fringe benefits and greater work demands exceeds the higher rate in pay. That being said, the impact of a binding minimum wage can make both the workers and the employers worse off. Monopsony and Minimum...
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...Problem 1: NPC is considering either to invest in a project for a new product immediately or 1 year later. If NPC invests in the project today, there will be 75% chance of good market acceptance of the product and 25% chance of bad market acceptance of the product. If market reaction to the new product is good, a cash inflow of $500 will be realized each year for the next 7 years. If market reaction to the new product is bad, a cash inflow of $25 will be realized each year for the next 7 years. However, if NPC chooses to wait for 1 year to obtain more information about market tastes, the company would know definitely about the market reaction and would then either proceed with the project or not invest in it at all. The initial cost of the project is $1,500 (million). a. Assuming that all cash flows are discounted at 10%, if NPC chooses to wait a year before proceeding, how much will this increase or decrease the project's expected NPV in today's dollars (i.e., at t = 0), relative to the NPV if it proceeds today? Problem 2: a. Garner-Wagner is considering investing in a project that requires an investment of $3,000,000. The project will generate a cash inflow of 500,000 per year for the next 5 years. The cost of capital is 10%. What is the project's net present value? b. If Garner-Wagner goes ahead with this project today, it will obtain knowledge that will give rise to additional opportunities 5 years from now (at t = 5). The company can decide at t...
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...Group ______________________ Instructions: Read each question carefully and then write down the answers in DETAIL. For problem-solving questions, please write down formulas, explanations, and numbers step by step. Solutions with the single last answer only will NOT be credited. Homework must be submitted via Blackboard before due date. Using the CAPM to solve for Question 1-2. 1. (10 points) A Corporation's stock had a required return of 11.75% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Then assume this year the market risk premium rises by 2%. The risk-free rate and the firm's beta remain unchanged. What is the company's new required rate of return? 2. (15 points) Assume portfolio A and portfolio B are both well-diversified portfolios. Portfolio A has an expected return of 12% and a beta of 1. Portfolio B has an expected return of 16.5% and a beta of 1.5. What must be the risk-free rate? 3. (25 Points) Pick one company you’re interested in (DO NOT PICK “MICROSOFT”) and then go to FINRA (http://finra-markets.morningstar.com/MarketData/Default.jsp) to locate the corporate bond information of your company. Find the following information of your corporate bonds (you can copy/paste from the web, or take a screenshot for graphs) a. (10 points) Download all currently traded corporate bonds of your company. (Note that some companies may have many active trading bonds and they are shown on multiple...
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...Financial Statement Analysis Individual and Group Project This is a two part assignment. The first part is a Financial Statement Analysis of the firm you have been covering for your group (to be completed individually by each student). Common-size and base-year your firm’s financial statements for the most recent 5 years. (If your firm doesn’t have this year or last year as its most recent available financial statement, do not use this firm. It may have gone out of business or been acquired.) Compute the common financial ratios shown in the PowerPoint slides posted for this project. Be sure to use DuPont Analysis to decompose ROA and ROE into profit margin, turnover, and leverage. Discuss your firm’s strengths and weaknesses relative to the other firms in your group with respect to leverage and coverage, profitability, liquidity and turnover, and market values. In particular, you should be trying to explain your firm’s relative market value ranking using the other ratios. For example, if your firm’s market value ratios tend to be higher than those of the other firms in your group, your firm might do a better job of using debt (some to boost ROE but still having good coverage), might be more profitable or have faster turnover, and might have reasonable but not excessively high liquidity. Note here that because leverage and liquidity have costs and benefits and because high profit margins tend to lead to low turnover and vice versa, having intermediate levels of these...
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