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Investment and Rate

 Investment and Rate Composition

1 . Assume you discover a treasure torso of RM10 billion in cash a. Is this a genuine or economic asset?

Answer:

Yes. 12 billion funds is the economic asset. This is because financial assets only get hold of its value from a contractual arrangement of what represents. In contrast, real asset itself provides the physical worth. b. Is society virtually any richer intended for the breakthrough?

Solution:

No . В The reason is , the cash would not contribute to the fruitful capacity in the economy. c. Are you wealthier?

Response:

Certainly. You would become wealthier with RM10 billion cash.

d. Is anyone most detrimental off resulting from the breakthrough?

Answer:

Yes. The world as a whole is worse off. This is because funds is the financial asset and it becomes is known as a liability with the government upon the time you found the money. So , the taxpayers will have to make up for the us government liability. installment payments on your The average charge of return on investment in huge stocks offers outpaced that on investments in T-Bills by about 8% as 1926 in US. So why, then, does anyone invest in T-Bills? Answer:

This is because T-bill is regarded as a risk free property as it is backed with the government. Therefore , it has lowest volatility when compared with stocks. Also this is a reason that folks tend to buy T-bills rather than stocks. several. You see an advertisement to get a book that claims showing how you can make RM1 mil with no risk and without having money straight down. Will you purchase the book? For what reason? Answer:

No . It really is impossible to generate RM1million with no risk and with no funds down. The reason is , only an individual who takes risk would be compensated with go back. Even T-bills which is supported by the government also offers low risk and it is difficult to make RM1million without having risk by any means. 4. You are bullish on Telekom stock. The current market price can be RM50 every share, in addition to RM5, 000 of your own obtain. You get an additional RM5, 000 out of your broker in an interest rate of 8% annually and invest RM10, 000 in the share. a. and what will be your rate of returning if the selling price of Telekom stock goes up by 10% during the next year? (ignore dividend) Answer:

Return: 10, 000 times 10%= RM 1, 000

Fascination to Pay out: 5, 1000 x 8%= RM 400

Total Return: RM1, 000- RM400= RM600

Rate of Return = [600/5, 000] x totally

sama dengan 12%

b. How far does the cost of Telekom stock needs to have fall for you to get a perimeter call if your maintenance margin is 30% of the value of the short position? Response:

RM10, 000/50 sama dengan 200 shares

Let P end up being the share price,

Value of Share= 200P

Value = 200P-5000

|Margin=Equity/Current Market Value of shorted reliability |

(200P-5000)/200P =0. 30

1-0. 40 =5000/200P

200P =7142. 86

P sama dengan RM thirty-five. 71 (Price When Margin Call Occurs)

a few. The make up of the Fingroup Fund portfolio is as employs: |Stock |Shares |Price (RM) |

|A |200, 000 |35 |

|B |300, 000 |40 |

|C |400, 000 |20 |

|D |600, 000 |25 |

The pay for has not took out any money, but its built up management payment with the portfolio manager at the moment totals RM30, 000. You will find 4 , 000, 000 shares exceptional. What is the net asset benefit of the account? Answer:

Step 1 : Their market value of Asset= [(200, 000 Times RM35)+(300, 500 X RM40)+(400, 000 By RM20)+(600, 000 X RM25) =RM42, 1000, 000

Step 2: Liabilities= RM 40, 000; Stocks Outstanding= four, 000, 000 Step 3: Net Asset Worth of the Account (NAV)=

(Market Value of Advantage –Liabilities)/ Stocks Outstanding

= (RM42, 000, 000-RM30, 000)/ 5, 000, 1000

sama dengan RM10. 49

six. You are considering the selection between trading RM50, 1000 in a conventional 1-year bank FD offering an interest rate of 5% and a 1 yr " Inflation-Plus” FD giving 1 . 5% per year in addition to the rate of inflation. a. Which is the safer expense?

Solution:

one year " Pumpiing –Plus” FD is the less dangerous investment because it guarantees the purchasing benefits of the expenditure. As true rate means the nominal rate without the inflation level, so one year " Inflation –Plus” FD provides a genuine rate of 1. 5% regardless of inflation rate. b. That provides the...

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