REQUIREMENTS 1 AND 2 according to salary explorer 2022’s website, the average salary for male financial jobs in viet nam is 18,800,000vnd per month

BAFI3184: Corporate Finance Semester 3, 2021 UNIT CODE UNIT NAME LECTURER CAMPUS CLASS DATE AND TIME STUDENT ID STUDENT NAME ASSIGNMENT NAME WORD LIMIT WORD COUNT ASSIGNMENT DUE DATE BAFI3184 Corporate Finance Man Pham Duy SGS campus Wednesday, 3pm S3872107 Le Dat Hoang Thanh Assignment one (20%) 1500 words 1550/1500 Sunday, 3rd April 2022, 23:59 pm Assignment Cover Page REQUIREMENTS AND According to salary explorer 2022’s website, the average salary for male financial jobs in Viet Nam is 18,800,000vnd per month However, with to years of experience, the salary is increased by 32% Thus it should be 24,816,000vnd per month Therefore, I would like to choose this standard to set for my beginning salary for the scenario which is myself at 25 years old with years of experience in the financial industry INCOME Pre-retirement Husband Post-retirement - 24.816.000,00 Interest Income 79.232,47 2.000.000 Dividends 41.360,00 3.000.000 - Gifts Received (Childrens Tet) li xi - Wife Net rental income 5.000.000,00 Transfer From Savings Average 30.000.000 - - 35.000.000 29.936.592,47 Table Incomes of Pre-retirement and Post-retirement Pre and Post - Retirement Incomes 40,000,000.00 35,000,000.00 30,000,000.00 25,000,000.00 20,000,000.00 15,000,000.00 10,000,000.00 5,000,000.00 0.00 Hu an sb d r te In es om nc tI e Di Gi en vid R fs ds d ve ei ec hil (C dr )l et T s en Pre-retirement ix i W e if Ne en tr l ta i om nc e Tr rF fe s an Post-retirement Figure Incomes of Pre-retirement and Post-retirement ro m S in av gs er Av ag e Pre-retirement 8.416.278 Post-retirement - Home Expenses Daily Living 2.100.000 4.762.500 3.224.167 6.066.667 1.124.167 1.304.167 Transportation Health Insurance 3.516.667 656.667 333.333 10.516.667 1.865.000 5.200.000 7.000.000 1.208.333 4.866.667 Education Charity/Gifts 72.727 583.333 181.818 3.000.000 109.091 2.416.667 Entertainment Vacation 1.075.833 766.667 4.575.833 26.550.000 3.500.000 25.783.333 35.000 500.000 35.000 500.000 - Savings Expense SUBSCRIPTIONS MISCELLANEOUS OBLIGATIONS Total 1.663.200 23.982.205 61.715.152 Table Expenses of Pre-retirement and Post-retirement Changes (4.762.500) (1.663.200) 41.386.724 Pre and Post - retirement expenses 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 S i av s ng E en xp se m Ho e p Ex se en s i Da l ng ivi L y Tr sp an o t rta io n a He l th su In e nc E t ca du Pre-retirement io n a Ch r s if /G y it r te En ta i nm t en t ca Va S n io S UB I CR P ON TI I M Post-retirement Figure Expenses of Pre-retirement and Post-retirement S EL SC N LA U EO S OB LI ON TI A G S t To al Pre-retirement Post-retirement Savings Expense 35% 0% Daily Living 20% 10% Transportation 15% 17% Home Expenses 9% 5% OBLIGATIONS 7% 0% Entertainment 4% 7% Vacation 3% 43% Health 3% 3% Charity/Gifts 2% 5% Insurance 1% 8% Education 0% 0,3% MISCELLANEOUS 0% 0,1% SUBSCRIPTIONS 0% Table Percentages accounting on expenses of Pre-retirement and Post-retirement 1% Pre-retirement expenses 1.01% 2.02% 3.03% 3.03% 4.04% 7.07% 35.35% 9.09% 15.15% Savings Expense Daily Living Transportation Home Expenses OBLIGATIONS Entertainment Vacation Health Charity/Gifs Insurance Education MISCELLANEOUS SUBSCRIPTIONS 20.20% Figure Pie chart displays the percentages accounting on expenses of Pre-retirement Post-retirement expenses Savings Expense Entertainment Education Daily Living Vacation MISCELLANEOUS 8.05% Transportation Health SUBSCRIPTIONS 0.10% 1.01% 0.30% Home Expenses Charity/Gifs OBLIGATIONS Insurance 10.06% 5.03% 3.02% 17.10% 5.03% 7.04% 43.26% Figure Pie chart displays the percentages accounting on expenses of post-retirement As a single person, after-tax compensation accounts for 83% percent of my pre-retirement income Rent and interest payments are among the others After retirement, there are different sources of income most are from rental income, dividends and interest Daily living expenses cost a lot during the pre-retirement and post-retirement stages, with 20 percent and percent, respectively In both periods, saving is encouraged because unforeseen events may occur Education costs are also prohibitively expensive for the advancement of one's life and profession After retirement, however, this keep unchanged Vacations are limited at a young age because employment consumes all of one's time However, three vacations each year after retirement costs a lot of money Since retiring, I've increased my giving back to the community by a factor of two Due to the importance of health care and preservation, health-care costs are on the rise The expense of transportation is also highered Other expenses, on the other hand, are mostly have a lot of changes Month Jan Monthly expenses in Pre- & Post-retirement periods (VND) Incomes Expenses Replacement Income required 150.880.000 35.000.000 ₫ ₫ 115.880.000 ₫ 38.715.000 Feb 35.000.000 ₫ ₫ 3.715.000 ₫ 33.215.000 Mar 35.000.000 ₫ ₫ - 1.785.000 ₫ - 1.240.000 ₫ - 2.435.000 ₫ 33.760.000 Apr 35.000.000 ₫ ₫ 32.565.000 May 35.000.000 ₫ ₫ 36.310.000 Jun 35.000.000 ₫ ₫ 1.310.000 ₫ 142.288.000 Jul 35.000.000 ₫ ₫ 107.288.000 ₫ 33.140.000 Aug 35.000.000 ₫ ₫ - 1.860.000 ₫ - 1.937.000 ₫ - 1.256.000 ₫ - 2.462.000 ₫ 33.063.000 Sep 35.000.000 ₫ ₫ 33.744.000 Oct 35.000.000 ₫ ₫ 32.538.000 Nov 35.000.000 ₫ ₫ 140.582.000 Dec 35.000.000 ₫ ₫ 105.582.000 ₫ 740.800.000 Total Average 420.000.000 ₫ ₫ 35.000.000 ₫ 61.733.333 ₫ 320.800.000 ₫ 26.733.333 ₫ Table Post-Retirement Incomes and Expenses Summary Because post-retirement income is insufficient to cover expenses (Table 4), a monthly replacement income must be set aside to cover post-retirement expenses: “Replacement Income required” = Total monthly expenses – income currently Thus, a 26,733,333 VNDreplacement income must be deposited monthly to sufficiently fund retirement budget plan REQUIREMENT An annuity-due cash flow is used to collect 26,733,333 VND at the beginning of each month since the 65th birthday PV= PMT + PMT x PV= PMT + PMT x 26,733,333 + 26,733,333 x = 2,946,308,849 To reach planned retirement, 2,946,208,839 VND must be accumulated by the 65th birthday Where: PMT is the monthly income requirement for post-retirement income (VND/month) r (%) annual rate of return, compound yearly n number of year (80 – 65 = 15) REQUIREMENT I intended to generate a long-term investment during my pre-retirement years With couple of years of financial experience, an investment yielding an average of 8.95 percent is expected Although extremely undesirable risks are possible, the volatility is manageable in comparison to the broader equities market Additionally, for long-term investments, the profits from successful periods may somewhat cover losses As a result, my Investor Profile is classified as Moderately Aggressive, according to table and figure Ave Annual Return Standard deviation (%) MODERATIVEL (%) (2000-2017) Y AGRESSIVE (Measure of risk*) Large Capitalisation Common Stocks Small Capitalisation 8,95% 17,75% 45% Common Stocks International Common Stocks Corporate Bonds (long-term) Government Bonds (long- 10,33% 8,13% 6,20% 22,43% 15,94% 7,03% 15% 20% 5% term) 4,00% 1,80% 5% Treasury Bills (short-term) 0,70% 0,70% 5% Cash 0,00% 5% Table Post-Retirement Incomes and Expenses Summary WARR = x + x + x + x x + x + x = 0.45 x 0.0895 + 0.15 x 0.1033 + 0.2 x 0.0813 + 0.05 x 0.062 + 0.05 x 0.04 + 0.05 x 0.007 + 0.05 x = 0.07748 = 7.748% My long-term investment is predicted to produce a modest 7.748 percent annual Weighted Average Rate of Return, which will enable me to spend comfortably after retirement MODERATE AGRESSIVE 5.00% 5.00% 5.00% 5.00% 45.00% 20.00% Large Capitalisation Common Stocks Small Capitalisation Common Stocks International Common Stocks Corporate Bonds (long-term) Government Bonds (long-term) Treasury Bills (short-term) Cash 15.00% Figure Pie chart displays the distribution of investments PMT = = = 907,556 VND Where: PMT is the monthly contribution required to amass the funds necessary to retire at the age of 65 (VND/Month) FV is the money saved from 25th to 65th birthdays to begin spending at 67th birthday, which equals the calculated cash required at 67th birthday's start (VND) r (%/year) is the projected rate of return on long-term investments and savings n (year) is the total of year from the age 25 to 65 which is 65 – 25 = 40 year As a monthly deposit starting on the 25th birthday and continuing until the 65th birthday, an annuity payment of 907,556 VND each month is required to collect sufficient cash to retire at the age of 65 REQUIRMENT Table The association between Annual of return and risk Risk management is the process of identifying the hazards associated with an investment and then managing them optimally Risk management is critical since it can either mitigate or increase risk, depending on the investors' and portfolio managers' objectives (H Kent Baker and Greg Filbeck 2015) To compensate for increasing risk, higher rates of return are required In other words, the greater the danger, the greater the reward — and vice versa, the lesser the risk, the lesser the reward (Lumen n/d) The most frequently purchased investment items are stocks, bonds, and mutual funds (Investor.gov n/d) I would like to divide the investment to different periods which can display more accurate the willing of choice with more suitable scenario of investment’s psychology I The Beginning (age 25 – 45) As mentioned in Requirement (R4), with a young experience about years’ experience in the financial industry The ‘Moderate aggressive’ is my optimal choice due to the capability to suffer through risk However, an expectation of a high return is strongly existed in a long run investment Small-cap firms have the potential for rapid growth, which makes them attractive investments, even though their stocks may be more volatile and therefore represent more risks to investors (Anna-Louise Jackson, John Schmidt 2021) However, it has a high risk which up to 23.38% but it brings back more than 11% of profit That is why 15% of portfolio is spend for it The largest money of fund is invested in large capitalization common stocks (LCCS) because even if they are very new, large-cap corporations are likely to be well established and prominent in their respective industries This is because some companies go public and instantly achieve a market capitalization of more than $10 billion (Anna-Louise Jackson, John Schmidt 2021) Although, the risk assessment for this task is up to 18.70%, it still be an endurable investment in long-term with satisfied profit Besides, my 20% of investment fund would be in the international common stock (ICS) with 16.9% of acceptable risk The 20% others I would like to spread equally to Cash 5%, Government bonds 5%, Corporate Bonds 5%, Treasury bills % This could help me to have a stable backup which can against inflations, financial crisis (Charles Swab & Co., Inc 2021) WARR is 7.75% annually is expectedly feasible to spend comfortably on a retirement plan While losses are highly possible, net interest over a long run of time is still beneficial II The end (46 – 65) Ave Annual Return Standard deviation (%) Moderative (%) (2000-2017) (Measure of risk*) conservation Large Capitalisation Common Stocks Small Capitalisation Common 8,95% 17,75% 25% Stocks International Common Stocks Corporate Bonds (long-term) Government Bonds (long-term) 10,33% 8,13% 6,20% 4,00% 22,43% 15,94% 7,03% 1,80% 5% 10% 10% 20% Treasury Bills (short-term) Cash 0,70% 0,70% 0,00% Table The association between Annual of return and risk 10% 10% WARR = x + x + x + x x + x + x = 0.25 x 0.0895 + 0.05 x 0.1033 + 0.1 x 0.0813 + 0.1 x 0.062 + 0.1 x 0.04 + 0.2 x 0.007 + 0.1 x = 0.0506 = 5.06% In these stages, the portfolio now is shifted to lower risk management, due to the nearer of retirement Thus, the ‘Moderative conservation’ in this circumstance is the optimal choice The primary advantage of fixed income for investors is the reduced risk and potential for capital loss Fixed income, as comparison to equities, is far more stable and bears fewer risks due to its lower exposure to macroeconomic hazards (e.g., recessions, geopolitical risk) (Wall Street prep n/d) Thus, half of the fund is invested in the fixed income, 20% in the government bonds with 1.8% of risk, 10% in Corporate Bonds, Treasure Bills, Cash with 7.03%, 0.7%, 0% of risk The 25% of portfolio is spent in Large Capitalisation Common Stocks to gain a sufficient profit with acceptable risk 17.75% The others 15% are in Small Capitalisation Common Stocks (SCCS) and ICS to expect a well return With 5.06% WARR the profit is not high, but it brings the attitude of comfortable III Financial crisis If there is a repetitive event as financial crises before, ‘moderative conservation’ still be a best option to ensure Small-cap equities pose a significant risk to investors during economic recession Thus, only large-cap equities are purchased, albeit at a 15% discount Another 5% is allocated to overseas equity, with the hope that the international markets are unaffected by local ones The majority of 50% and 30% are allocated to fixed income securities and cash investments, respectively, due to their long-term low volatility As a result, a WARR of 5.06 percent may be feasible REQUIREMENT Economic, events and unforeseen political, all have the potential to affect financial markets As a result, an investor's prompt recognition and evaluation of their influence on his or her personal financial plan is critical Although the financial market is difficult to forecast, particularly during times of global crisis, reference effects can be deduced from the past A Economic – Great regression 2007 - 2009 The Great Recession began in the United States in 2007–08 and quickly spread to other countries The financial crisis, marked by a sharp decline in liquidity in global financial markets, began in 2007 as a result of the collapse of the US housing bubble (Brian Duignan n/d) Banks and other investors in the United States and overseas increased their borrowing in the run-up to the GFC in order to grow their lending and acquire MBS securities Borrowing money to acquire an item raises potential profits but also potential losses (a process known as growing leverage) As a result of their excessive borrowing, banks and investors suffered huge losses as property prices began to collapse (RBA n/d) The investment outcomes could potentially develop with significantly higher returns as a result of the consequences of money-easing policy Additionally, a Moderately Aggressive, or even an Aggressive Allocation plan with a higher share of equity market exposure may be worth considering for greater success B Politic – Crisis in Venezuela Venezuela is amid a political crisis under President Nicolás Maduro's authoritarian administration, who looks to have been consolidating authority over the political opposition in recent months Venezuela's political dilemma is rooted in an economic disaster (Rebecca M Nelson 2018) Venezuela, with its illogical system of currency controls, is by far Latin America's most dysfunctional economy This year, inflation is predicted to exceed 1600% (Nathaniel Parish Flannery 2017) Individuals and businesses in Venezuela are unable to exchange foreign money through the conventional exchange market (banks, exchange bureaus, etc.) Rather than that, customers must go through a bureaucratic process at an official institution in which they are instructed to apply for limited amounts of currency for personal or business needs, with no assurance of success (Yohama Caraballo-Arias, M.D., Jesús Madrid, and Marcial C Barrios 2018) Due to the substantial reliance on equities and fixed income markets in my portfolio, any political shocks might easily wipe out my investing and saving efforts through significant losses Thus, it is critical for me to immediately acknowledge and revise my investment plan in order to conserve cash and avoid losses, particularly during political situations Figure Real GDP Growth, International Monetary Fund (2019) C COVID 19 crisis Global economic activity has come to a halt as the world takes severe measures to contain the spread of COVID-19, which has wide-ranging ramifications for the investment management business Globally, aggressive fiscal and monetary policy responses, along with key containment measures, have had a significant economic impact, but liquidity remains limited, and the profit outlook is bleak (Cary Stier 2020) Raised uncertainty has increased the risk associated with many financial investments that financial investors have projected Due to widespread ambiguity, risk perception in the financial markets results in volatility in their decision-making process (Wang, Zhang, Ahmed, Muhammed, 2021) Through a multitude of pathways, this financial crisis then resulted in a decline in demand and a recession: higher risk premiums, credit rationing, financial and real estate wealth effects, and uncertainty (figure 7) Figure Changes in main stock market index due to Covid 19 – pandemic Although the crisis of Covid 19 saw to be critically impact the stock market, I still keep contribute my portfolio as ‘Moderative Conservation’, This may impacted my ICS, SCCS, LCCS, however 50% of my investment still be safe and endure my financial situation REQUIREMENT *References Salary explorer 2022, “Accounting and Finance Average Salaries in Vietnam 2022”, Salary explorer, viewed 29th March 2022, H Kent Baker and Greg Filbeck 2015, “Investment Risk Management”, Oxford Scholarship online, viewed at 2nd April 2022, Lumen n/d, “Risk and Return”, Lumen Learning, viewed 2nd April 2022, < https://courses.lumenlearning.com/boundless-finance/chapter/risk-and-return/> Investor.gov n/d, “Risk and Return”, Investor.gov, viewed 2nd April 2022, < https://www.investor.gov/additional-resources/information/youth/teachers-classroomresources/risk-and-return> Anna-Louise Jackson, John Schmidt 2021, “Investing Basics: Small-Cap Stocks”, Forbes, viewed 2nd April 2022, < https://www.forbes.com/advisor/investing/small-cap-stocks/> Anna-Louise Jackson, John Schmidt 2021, “Investing Basics: Large-Cap Stocks”, Forbes, viewed 2nd April 2022, < https://www.forbes.com/advisor/investing/large-cap-stocks/> Charles Swab & Co., Inc 2021, Why Invest in Fixed Income? & Co., Inc., viewed November 2021, Wall street prep n/d, ‘Fixed income’, Wall Street prep, viewed 2nd April 2022, < https://www.wallstreetprep.com/knowledge/fixed-income/> Brian Duignan n/d, ‘Great Regression’, Britannica, viewed 2nd April 2022, < https://www.britannica.com/topic/great-recession> RBA n/d, ‘The Global Financial Crisis’, Reserve of Bank in Australia, viewed 3rd April 2022, < https://www.rba.gov.au/education/resources/explainers/the-global-financial-crisis.html> Rebecca M Nelson 2018, ‘Venezuela’s Economic Crisis: Issues for Congress’, Congressional research service, viewed 3rd April 2022, < https://sgp.fas.org/crs/row/R45072.pdf> Nathaniel Parish Flannery 2017, ‘Venezuela's Economic Crisis’, Forbes, viewed 3rd April 2022, < https://www.forbes.com/sites/forbesagencycouncil/2022/04/01/how-to-get-ahead-ofaccount-based-marketings-impact-on-agencies/?sh=724a2ad4464a> Yohama Caraballo-Arias, M.D., Jesús Madrid, and Marcial C Barrios 2018, ‘Working in Venezuela: How the Crisis has Affected the Labor Conditions’, Ann Glob Health, viewed 3rd April 2022, < https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6748246/> Cary Stier 2020, ‘COVID-19’s impact on the investment management sector’, Deloitte, viewed 3rd April 2022, https://www2.deloitte.com/global/en/pages/about-deloitte/articles/covid-19/covid-19impact-on-the-investment-management-sector.html Wang, Zhang, Ahmed, Muhammed, 2021, ‘Impact of investment behaviour on financial markets during COVID-19: a case of UK’, Taylor Francis Online, viewed 3rd April 2022, https://www.tandfonline.com/doi/citedby/10.1080/1331677X.2021.1939089? scroll=top&needAccess=true ... my investment still be safe and endure my financial situation REQUIREMENT *References Salary explorer 20 22, “Accounting and Finance Average Salaries in Vietnam 20 22? ??, Salary explorer, viewed 29 th... https://www.forbes.com/advisor/investing/small-cap-stocks/> Anna-Louise Jackson, John Schmidt 20 21 , “Investing Basics: Large-Cap Stocks”, Forbes, viewed 2nd April 20 22, < https://www.forbes.com/advisor/investing/large-cap-stocks/>... regression 20 07 - 20 09 The Great Recession began in the United States in 20 07–08 and quickly spread to other countries The financial crisis, marked by a sharp decline in liquidity in global financial