Each member should find out the fund he/she can build utilizing the investment streams explained below.
(Assume 1 year = 12 months = 52 weeks = 365 days).
Investor 2: You have two streams (2A and 2B) available for investment, they are as follows:
Investment stream 2A: Currently you have $80,000 of savings available for investment. There is a 10 years investment project available. If you invest your money in this project, it will go through 4 following phases. At the end of phase 1, 2 and 3 the fund will automatically be rolled over to the next phase for investment. You will receive the proceeds at the end of phase 4. The investment phases are as follows:
Phase 1: The first 3 years your investment will earn 12% return p.a. compounding quarterly.
Phase 2: The following 2 years your investment will earn 8% return p.a. as per simple interest method.
Phase 3: The following 2 years your investment will earn 14% return p.a. compounding semi-annually.
Phase 4: The final 3 years your investment will earn 9% return p.a. compounding annually.
Investment stream 2B: You are also able to make an additional investment for 3 years. This 3 years will match with the last 3 years of the 10 years investment project that you have in Investment stream A. Investment in stream B is $6,000 at the beginning of each month, will earn 6% p.a. return compounding monthly.
For ques 2 just do for INVESTOR 2.
In 2015 you are looking for a financial security to invest in. You have been given a dataset on the price movements of 4 securities over 2009 to 2014 as shown in the following table. Each member should find out the risk and return of investing in one of the securities.
|
Years
|
Investor 1
|
Investor 2
|
Investor 3
|
Investor 4
|
|
|
Security Price 1
|
Security Price 2
|
Security Price 3
|
Security Price 4
|
|
2009
|
$100.00
|
$150.00
|
$140.00
|
$165.00
|
|
2010
|
$132.00
|
$181.50
|
$175.00
|
$193.05
|
|
2011
|
$165.00
|
$223.25
|
$190.75
|
$225.87
|
|
2012
|
$202.95
|
$279.06
|
$234.62
|
$250.71
|
|
2013
|
$225.27
|
$354.40
|
$319.09
|
$280.80
|
|
2014
|
$283.85
|
$460.72
|
$386.09
|
$334.15
|
Summary Table 2: Problem 2 (a) Calculation
After you have completed your calculations, you need to copy the following table into your assignment to answer this part of this question
|
Calculation
|
Investor 1
|
Investor 2
|
Investor 3
|
Investor 4
|
|
|
Security 1
|
Security 2
|
Security 3
|
Security 4
|
|
What is the average return?
|
%
|
%
|
%
|
%
|
|
Assign ranking position (1 to 4) in term of return
|
|
|
|
|
|
What is the value of risk?
|
%
|
%
|
%
|
%
|
|
Assign ranking position (1 to 4) in term of risk
|
|
|
|
|
|
Write the range of returns under ±1σ
|
% to %
|
% to %
|
% to %
|
% to %
|
|
NB: This table should not be restructured or remodelled, you should only fill out the cells
|
Problem 2 (b) Decision making
(i). Situtation-1: The securities are Independent to your group here. Would each of the group member invest in his/her security? Give your decision by selecting either Yes or No in the following table.
|
Decision
|
Investor 1
|
Investor 2
|
Investor 3
|
Investor 4
|
|
|
Security 1
|
Security 2
|
Security 3
|
Security 4
|
|
What is the average return?
|
%
|
%
|
%
|
%
|
|
What is the value of risk?
|
%
|
%
|
%
|
%
|
|
Would you invest?
|
Yes/No
|
Yes/No
|
Yes/No
|
Yes/No
|
|
NB: This table should not be restructured or remodelled, you should only fill out the cells
|
(i). Situtation-2: The securities are Mutually exclusive to your group here. Which security should you select for investment? Give your decision by selecting either Yes or No in the following table.
|
Decision
|
Investor 1
|
Investor 2
|
Investor 3
|
Investor 4
|
|
|
Security 1
|
Security 2
|
Security 3
|
Security 4
|
|
What is the average return?
|
%
|
%
|
%
|
%
|
|
What is the value of risk?
|
%
|
%
|
%
|
%
|
|
(*)
|
|
|
|
|
|
Which project to select?
|
Yes/No
|
Yes/No
|
Yes/No
|
Yes/No
|
|
NB: This table should not be restructured or remodelled, you should only fill out the cells, however there is one exception here that if you need you can add additional information in (*) marked row.
|