Nick is nearing retirement and is looking to purchase a mutual fund that will provide a relatively safe investment as well as regular income payments.Among mutual funds with an income objective, Nick can either buy shares inwhich invest in CDs, governmentsecurities, and short-term obligations issued by corporations, or he can invest infor a slightly higher current incomereturn and the potential for capital appreciation as well.Within the category of bond funds are even more specific options. Nick decides to buy shares in a fund that invests in Treasury issues maturing inmore than ten years, known asbonds. He is also collecting income from shares he already owns in afund, a type of fund that invests in securities issued by agencies such as Fannie Mae and Freddie MacGrowth ObjectiveKaren is a 32-year-old woman with two children who owns her own home and has a substantial retirement account. She recently received aninheritance from her uncle and is looking to invest in a mutual fund that invests in stocks with market capitalization of more than $10 billion. Shedecides to purchaseshares.Growth and Income ObjectiveCarlos is a 25-year-old engineer who plans to invest $500 from each monthly paycheck in a mutual fund. He is interested in a fund that balancescurrent income and capital gains, but with an emphasis on capital gains, so be buys, $2,000 worth ofshares. Hewould also like to put some money into a fund that divides investments wisely among different types of asset classes; therefore, he purchasesshares as well,One feature common to all of the above mutual funds is the beneficiary designation, Based on the characteristics of the investors above, this featurewould be of most interest to

To invest your money, mutual fund shares are divided into many types. These can be classified as…

Answered: Nick is nearing retirement and is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Frank Meyers, CFA, is a fixed-income portfolio manager for a large pension fund. A member of the Investment Committee, Fred Spice, is very interested in learning about the management of fixed-income portfolios. Spice has approached Meyers with several questions.Meyers decides to illustrate fixed-income trading strategies to Spice using a fixed-rate bond and note. Both bonds have semiannual coupon periods. Unless otherwise stated, all interest rate changes are parallel. The characteristics of these securities are shown in the following table. He also considers a 9-year floating-rate bond (floater) that pays a floating rate semiannually and is currently yielding 5%. Characteristics of Fixed-Rate Bond and Fixed-Rate Note Fixed-Rate Bond Fixed-Rate Note Price 107.18 100.00 Yield to maturity 5.00% 5.00% Time to maturity (years) 18 8 Modified duration (years) 6.9848 3.5851 Spice asks Meyers to quantify price changes from changes in interest rates. To illustrate, Meyers…
In the context of the different categories of investors, match each sentence to the correct category of investor. * Conservative Moderate conservative Moderate Moderate aggressive Aggressive This investor is looking to invest for the long-term with a specific goal in mind (for example, college savings, retirement, etc.). Investor who does not want to lose any capital and counts on the investment revenues to pay for day to day living expenses. This investor is willing to take on more risk to realize higher returns, being able to accept higher downside risk than the market, but expects to be substantially compensated when markets go up. Similar to Conservative, but this investor wants to participate a little more in market changes although wants maximum protection. This investor is willing to accept large fluctuations in portfolio returns to produce returns substantially above the market in the long-term, usually having an extremely long-term horizon so that she/he can…
Henrietta Marston plans to retire in the year 2050. She is considering a fund that will be more risk-oriented now and become increasingly conservative as she approaches retirement. Which of the following funds would you recommend to her? A) Regional fund B) Equity income fund OC) Sector fund OD) Fund of funds E) Life-cycle fund
A year and half ago, Max purchased 5,000 shares in a mutual fund called Epic Inc. for $15.75/share. Due to COVID-19, the stock was an epic failure and Max decided to sell 3,000 shares on November 30, 2021, when the share price was at $9.55/share. His investment broker counselled him not to sell as the fund was a back-end loaded fund. Year funds are redeemed/sold Deferred sales charge Within the first year 6% In the second year 5% In the third year 4% In the fourth year 3% In the fifth year 2% In the sixth year 1% After the sixth year 0% a) What is the amount that Max will receive for the sale of these shares (ignore income taxes)?| Calculate the amount that Max will receive: b) Knowing that capital losses are applied against capital gains, what would be the overall taxes payable if Max sold shares in another company called Save The Day Inc. which resulted in a capital gain in 2021 of $50,000 and the shares in point a)? Max is a resident of Quebec and in the highest tax bracket. See…
Frank Meyers, CFA, is a fixed-income portfolio manager for a large pension fund. A member of the Investment Committee, Fred Spice, is very interested in learning about the management of fixed-income portfolios. Spice has approached Meyers with several questions. Meyers decides to illustrate fixed-income trading strategies to Spice using a fixed-rate bond and note. Both the bond and note have semiannual coupon periods. Unless otherwise stated, all interest rate changes are parallel. The characteristics of these securities are shown in the following table. He also considers a 9-year floating-rate bond (floater) that pays a floating rate semiannually and is currently yielding 5%. Characteristics of Fixed-Rate Bond and Fixed-Rate Note Fixed-Rate Fixed-Rate Note Bond 107.18 5.00% 9 100.00 5.00% 4 6.9848 3.5851 Price Yield to maturity Time to maturity (years) Modified duration (years) Spice asks Meyers to quantify price changes from changes in interest rates. To illustrate, Meyers computes…
The following tutorial questions serve as practice questions on TVM and Bond Valuation. (Show Working) 1. Your grandfather left an inheritance for you of $100,000. However you can only drawdown on the investment as follows: Years 1 – 3 $15,000 each year Year 4 to 6 $10,000 each year Year 7 $25,000 Interest on the fund is 5%. a. What is the present worth of this inheritance? b. Due to high liquidity interest rate have dropped to 4%. What will be the impact on the present worth of this inheritance as a consequence of the market change?
You are considering investing in one of several mutual funds. All the funds under consideration have various combinations of front-end and back-end loads and/or 12b-1 fees. The longer you plan on remaining in the fund you choose, the more likely you will prefer a fund with a rather than (a)__ everything else equal. a) 12b-1 fee; back-end load b) front-end load; 12b-1 fee c) 12b-1 fee; front-end load d) front-end load; back-end load e) 12b-1 fee; no load charge
Lyle considers himself a gambler. He likes to do research on individual stocks, market sectors, and stock market in general, and he likes to buy and sell based on breaking news. Lyle primarily invests in individual stocks and industry-specific mutual funds (i.e., healthcare mutual funds of manufacturing mutual funds). He rarely buys EFT's. What specific advantage of EFT's over mutual fund is Lyle missing out on? Diversified portfolio. Low expense ratios. Ability to buy and sell at anytime during the trading day. Both low expense ratios and the ability to buy and sell at anytime during the trading day.
Investor Matt has $661,000 to invest in a CD and a mutual fund. The CD yields 7.3% and the mutual fund yields an average of 7.7%. The mutual fund requires a minimum investment of $20,000, and Matt requires that at least 4 times as much money be invested in the CD as in the mutual fund. You must invest in order to maximize his return. What is the maximum return? Enter 0 if no investment can be made satisfying the requirements. $ . Round to the nearest cent.
An investor has $80,000 to invest in Certificates of Deposit (CD) and a mutual fund. The CD yields 7% and the mutual fund yields 8%. The mutual fund requires a minimum investment of $8,000 and the investor requires at least twice as much should be invested in CDs as in the mutual fund. How much should be invested in each to maximize the return? What is the maximum return? Show your work and explanations setting this problem up. Variables should clearly be defined. Show all your work.
Hedge Funds have become an increasingly popular investment options over the past 15 years, with managers making bold statements about the benefits of investingwith hedge funds. List the three main benefits that are claimed to arise when investing in a hedge fund. Do you believe that these benefits exist?
Which of the following best describes an index mutual fund? Mutual fund manager based on preset ratio of stocks and bonds. Mutual fund manage based on a person's anticipated year of retirement. Passively managed fund design to mimic a specific market. Mutual fund that attempts to earn rates of return that exceed the return of the market.

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