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From an investment point of view, bonds are generally considered to be safer investments than stocks. They are generally low risk low return investments, unlike stocks. As an investor in bonds, you would lend money to the issuer of the bonds. It is important to understand what bonds are and how they work as investment vehicles. Suppose a friend of yours is looking to invest $5,000 such that it will provide current income and increase the diversification of his assets. He has heard a lot about corporate bonds but wants to learn more before purchasing them. Fill in the blanks in the following conversation to give your friend the appropriate information regarding corporate bonds.   FRIEND: Can you explain to me the basics of how investing in a corporate bond will increase my current income?   YOU: Under a standard bond agreement, if you were to purchase a 10-year, $5,000 corporate bond with a 9% coupon, you would receive _______________in interest each year, and at the end of…

From an investment point of view, bonds are generally considered to be safer investments than stocks. They are generally low risk low return investments, unlike stocks. As an investor in bonds, you would lend money to the issuer of the bonds. It is important to understand what bonds are and how they work as investment vehicles. Suppose a friend of yours is looking to invest $5,000 such that it will provide current income and increase the diversification of his assets. He has heard a lot about corporate bonds but wants to learn more before purchasing them. Fill in the blanks in the following conversation to give your friend the appropriate information regarding corporate bonds.   FRIEND: Can you explain to me the basics of how investing in a corporate bond will increase my current income?   YOU: Under a standard bond agreement, if you were to purchase a 10-year, $5,000 corporate bond with a 9% coupon, you would receive   in interest each year, and at the end of the 10-year…

A financial planner who claims to have a superior method for picking stocks is attempting to lure one of your clients away from you. He claims the best way to find the value of a stock is to divide EBITDA by the risk-free bond rate. He is urging your client to invest in Jeitu Inc. The planner says that Jeitu’s EBITDA of $1,580 million divided by the long-term government bond rate of 7% equals a total value of $22,571.4 million. With 318 million shares outstanding, Jeitu’s value per share using this method is $70.98.  Jeitu’s shares currently trade at $36.50.   a. Provide your client with an alternative estimate of value based on a two-stage FCFE valuation approach. Use the following assumptions: • Net income is currently $600 million. Net income will grow by 20% annually for the next three years. • The net investment in operating assets (capital expenditures less depreciation plus investment in working capital) will be $1,150 million next year and grow at 15% for the following two…

As the economy goes through highs and lows, investors with stock in various companies can face significant risk, and significant benefits. How do you see the stock market affecting your own investing plans in the future? What types of risks do investors take? Do you have any companies you follow thru their stock prices?

True or false 1.The free cash flow to equity will always be higher than the net income of the firm, because depreciation is added back. 2.Susan is expecting the economy to worsen over the next few years, perhaps falling into a recession. Investing in the construction industry should be part of Susan’s strategy.  3. Preference shares combine the fixed income features of bonds with the same price appreciation potential as ordinary shares.  4. Identify any one behavioural bias in each of the following statements: a) Mary writes the following letter to an investment columnist: “I invested quite a bit of money (R26 000) in Intel stock. Of course, like most technological stocks, it has been struggling, and on paper I am in trouble. Do you think it will ever reach the R80 that I paid for it? I really hate to cash it in for such a big loss and I don’t trust it enough to buy it at the low price (R8) it is now trading for. I feel like the company shows promise, but I am certainly not astute in…

You own stocks in an oil palm plantation company, and you read in the financial press that a recent bond offering has raised the firm’s debt-equity ratio from 30 percent to 55 percent. Discuss the effect of this change on the variability of the firm’s net income stream. Discuss how this change would affect your required rate of return on the common stock of the company. Provide your justification(s) to support your views in the answer space provided.

1. Cost of money Everyone uses money, and it is important to understand what factors affect the cost of money. Consider the following scenario: A friend comes to you and asks you to invest in his business instead of investing in Treasury bonds. You think he has a good business model, so you tell him you are willing to invest as long as the expected return on the investment is at least four times the return you would have received on the Treasury bonds.   Determine which of these fundamental factors is affecting the cost of money in the scenario described: Risk   Inflation   Time preferences for consumption

You are an investor who currently has a debt-equity ratio of 3:1. However you are planning to switch to a company which is completely equity financed. Your shares are currently worth $35,000.00, which you would use to finance shares purchase in the new firm.  If you wish to retain the same earning, how many dollars worth of shares will you need in the new company. Provide workings

6.  Bonds and stocks are two financial products. Prepare a briefing note on these two financial products that are the core offerings of a financial market. Provide a comparison of these products. What characteristics of bonds and stocks explain the valuation strategy of each of these financial products? How will you adapt the growth stages model to value stocks (i) in the very long run; and (ii) for a company with no history of dividend payments. Prepare a briefing note for your brokerage.

A friend of yours owns a company that is about to get a large government contract.  He tells you this inside information about the contract and also mentions that it should make the company's stock price increase dramatically.  If you invest based on this inside information, then you are implicitly saying that stock markets are inefficient in which context?   Question 5 options:   weak form efficient market theory   semi-strong form efficient market theory   strong form efficient market theory

Drag the tiles to the table. Each tile can be used more than once. Determine the most likely action that an investor will take for each scenario. 10,000 Price per Share ($) 5,000 buy 1997 hold sell Select the correct answer. ● A. ● B. Scenario An investor is waiting until it is clearer whether a stock will do well after a purchase. An investor thinks that a particular stock is not performing and worries the price of the shares may drop in the future. An investor doesn't own a particular stock but is considering adding it to her portfolio depending on how well it does in the near future. An investor who tracks market trends notices that a bull market is starting. Based on this stock price model, what is the best prediction of what the price will do next? 1998 1999 Time (years) start increasing keep decreasing C. hold value D. no way to predict 2000 Drag each tile to the correct box. Reset 2001 Next Action

which is the correct answer and why? I think it's c. Relative to a passive investor who holds securities for a long time, all of the following statements about an active investor who frequently buys and sells securities are correct EXCEPT ____. Group of answer choices  a. The active investor must pay greater total annual commission to security brokers b. The active investor must pay greater total annual tax to the government c. The active investor must earn greater net annual investment return, where net return is defines as return net of various transaction costs, fees and taxes d. The active investor must pay greater total annual bid-ask spread to security dealers

Mark buys a financial asset from the DBA. This financial asset is an instrument of short term borrowing. He hasbought it because he doesn’t want to take risk and wants an assured return. This instrument is promissory note. It ishighly liquid. The instrument is also known as zero coupon bonds. On this instrument it is written T-91. Based onthe above case study, answer the following:a. Which financial asset is indicated in the above case?b. On whose behalf does the DBA issue this instrument?c. Why is this instrument called as the zero coupon bond?d. What does T-91 denote here?e. What is the minimum amount for which this instrument bond?

Assume that you are a portfolio manager for a large insurance company. The majority of the moneyyou manage is from retired school teachers who depend on the income you earn on their investments. You have invested a significant amount of money in the bonds of a large corporation andhave just received news released by the company’s president explaining that it is unable to meetits current interest obligations because of deteriorating business operations related to increasedinternational competition. The president has a recovery plan that will take at least two years. During that time, the company will not be able to pay interest on the bonds and, she admits, if the plandoes not work, bondholders will probably lose more than half of their money. As a creditor, youcan force the company into immediate bankruptcy and probably get back at least 90 percent of thebondholders’ money. You also know that your decision will cause at least 10,000 people to losetheir jobs if the company ceases…

Which of the following statements is CORRECT? Select one: O When JP Morgan is hired as an underwriter to help its client issuing stock, the bank will issue its own stock or bond to raise the money to purchase its client's stock. O The NYSE operates as an auction market, whereas NASDAQ is an example of a dealer market. O Money market mutual funds usually invest their money in a well-diversified portfolio of liquid common stocks. O Money markets are markets for long-term debt and common stocks. O A liquid security is a security whose value is derived from the price of some other "underlying" asset.

Acting as a financial adviser one of your duties is to create a balance of stocks and bonds that are tailored to the risk tolerance of your client. This means, some people want riskier balance with the goal of making more money, while others will take a lower risk to be safer with their investments. Your client has informed you that they have a desired average risk of 3.672 and have $7758.69 to invest in your suggested stocks and bonds. They also want triple the number of shares of MAT compared to BUS. You have selected: Stock MAT which has a risk of 3.2 and costs $36.74 per share. Stock BUS which has a risk of 8 and costs $46.35 per share. Bond SAFE which has a risk of 1.6 and a cost of $37.8 per share. You have determined you should buy shares of MAT, shares of BUS, and shares of SAFE.

Wall Street performs a sort of financial alchemy" enabling the individual to benefit from institutions lending money to them, according to Adam Davidson, cofounder of NPR's "Planet Money." Individuals can Invest small amounts of their money in a 401(k), pooling their capital and spreading the risk. Saved If you invested in Fidelity New Millennium, FMILX, how much would you pay for 80 shares if the 52-week high is $32.26, the 52-week low is $26.38, and the NAV IS $31.88? Note: Round your answer to the nearest cent. Amount paid KA N

1) You want to invest your money in the safest way possible (i.e., your only objective is minimizing the likelihood of losses). Which instrument of the ones listed below should you choose for your investment? (Choose just one.) a) AAA-rated corporate bond b) BBB-rated corporate bond c) Treasury bill d) Convertible bond e) Broad-based market index f) Stock in a low-volatility firm g) Well-diversified portfolio consisting of stocks, bonds, and real estate h) Cook county bond Focus MacBook Pro

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