The Investments Fund sells Class A shares with a front-end load of 6% and Class C shares with 12b-1 fees of 0.75% annually as well as back-end load fees that start at 5% and fall by 1% for each full year the investor holds the portfolio (until the fifth year). Assume that you have $1,000 to invest and the portfolio rate of return net of operating expenses is 12% annually. Required: a-1. If you invest in each fund and sell after 4 years, how much will you receive from each sale? a-2. Are Class A or Class C shares the better choice for you? b-1. If you invest in each fund and sell after 14 years, how much will you receive from each sale? b-2. Are Class A or Class C shares the better choice for you?

The Investments Fund sells Class A shares with a front-end load of 6% and Class C shares with 12b-1 fees of 0.75% annually as well as back-end load fees that start at 5% and fall by 1% for each full year the investor holds the portfolio (until the fifth year). Assume that you have $1,000 to invest and the portfolio rate of return net of operating expenses is 12% annually. Required: a-1. If you invest in each fund and sell after 4 years, how much will you receive from each sale? a-2. Are Class A or Class C shares the better choice for you? b-1. If you invest in each fund and sell after 14 years, how much will you receive from each sale? b-2. Are Class A or Class C shares the better choice for you?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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1. You are selected as an analysis to manage a fixed income portfolio for a client in particular a corporate bond. You are considering a 3-year floating rate note with 1 year benchmark rate of 2.88%. It is priced at 685 of 1000 par value. Your analysis tells you probability of default is approximately 40%. If the issue survives over the next three years due to the industry it is in. The probability of default for each year is 9% and a volatility of 12%. What is the price of the bond?
1. A 5-year, annual-paying sinking-fund bond is priced at $ 102.66. Assuming intermittent principal payments are immaterial, is it over, under, or fairly valued given the term structure of 1.5%, 1.75%, 2%, 2.25%, 2.5% and coupons of 3.2%, 3%, 2.8%, 2.6%, and 2.4% for the 5 years? A. Over-valued B. Under-valued C. Fairly-valued D. Not enough information
An open-end fund has a net asset value of $16.70 per share. It is sold with a front-end load of 3%. Required: What is the offering price? Note: Round your answer to 2 decimal places.
The nominal rate of return is % earned by an investor in a bond that was purchased for $951, has an annual coupon of 9%, and was sold at the end of the year for $1020? Assume the face value of the bond is $1,000.
The Bissette LLC Fund is looking to buy bonds with a $1,000 face value, an 8% coupon, payable semiannually, and a maturity of 5 years. Currently, the bond sells at $880.00. What is the yield to maturity?
Question 1) 니01K 12.t where m=1+7 B(t) =d() 12 m-l a) Mutual fund is carning an APR of What monthly deposit d is needed for a balnce 'of 2million dollars in 40years? Show work.
Suppose you bougrt a bond with an arnual coupon of 12 percent one year ago for $1,100. The bond sells for 51 Tro tadey. Assuming a $1,000 race valuc, what was your total dollar return on this investment over the past year?
You are considering an investment in a mutual fund with a 5% load and an expense ratio of 0.75%. You can invest instead in a bank CD paying 3% interest. Required: a. If you plan to invest for 3 years, what annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Assume annual compounding of returns. b. What annual rate of return must the fund portfolio earn if you plan to invest for 6 years to be better off in the fund than in the CD? c. Now suppose that instead of a front-end load the fund assesses a 12b-1 fee of 0.50% per year. What annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Your client invests $2 million in a security that matures in 4 years and pays 7.5 percent annual interest rate compounded annually. Assuming no interim cash flows, which of the following will most likely be the value of the investment at maturity? $2.150 million. $2.600 million. $2.671 million.
A 3-year forward contract on Mathcorp shares is to be issued. The current share price is £4.50 and the last dividend which was paid was £0.20. It is assumed that dividends will be paid every quarter year to shareholders and are increasing at a rate of 1% per quarter in the first two years and by 1.5% per quarter in the final year. Assuming a continuously compounded risk-free rate of 5% p.a., calculate the forward price.
You are considering three investments: Bond that is selling in the market at $1,200. The bond has a $1,000 parvalue, pays interest at 14 percent, and is scheduled to mature in 12 years.For bonds of this risk class, you believe that a 12 percent rate of returnshould be required. Preferred stock ($100 par value) that sells for $80 and pays an annualdividend of $12. Your required rate of return for this stock is 14 percent. Common stock ($35 par value) that recently apaid a $3 dividend. The firm’sreturn on equity is 12.3%. The firm’s earning per share was $5.50 and itpaid $3.20 in dividends per share. The stock is selling for $25, and you thinka reasonable required rate of return for the stock is 20 percent. Required: a. Calculate the value of each security based on your required rate ofreturn. b. Which investment(s) should you accept? Why?

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