BỘ GIÁO DỤC VÀ ĐẠO TẠO ĐẠI HỌC UEH TRƯỜNG KINH DOANH BÀI TẬP INVESTMENT MÔN HOẠCH ĐỊNH TÀI CHÍNH CÁ NHÂN GIẢNG VIÊN HƯỚNG DẪN TS NGUYỄN THỊ HỒNG NHUNG MÃ LỚP HỌC PHẦN 23D1BAN50601303 HỌ VÀ TÊN SINH VI[.]
BỘ GIÁO DỤC VÀ ĐẠO TẠO ĐẠI HỌC UEH TRƯỜNG KINH DOANH BÀI TẬP INVESTMENT MƠN HOẠCH ĐỊNH TÀI CHÍNH CÁ NHÂN GIẢNG VIÊN HƯỚNG DẪN: TS NGUYỄN THỊ HỒNG NHUNG MÃ LỚP HỌC PHẦN: 23D1BAN50601303 HỌ VÀ TÊN SINH VIÊN: NGƠ THỊ HỒNG ĐIỆP – 31201020163 TP Hồ Chí Minh, ngày 28 tháng 04 năm 2023 CHAPTER 13 “INVESTMENT FUNDAMENTAL” Calculating Rate of Return Assume that at the beginning of the year, you purchase an investment for $4,400 that pays $30 annual income Also assume that the investment’s value has increased to $4,550 at the end of the year (Obj 2) a What is the rate of return for this investment? Rate of return = = Increase∨decrease∈value+ Annual income Original investment ( $ 4,550−$ 4,400 )+ $ 30 $ 4,400 ≈ 0.041 ≈ 4.10 percent b Is the rate of return a positive or negative number? The rate of return is a positive number (4.10 percent) Calculating Rate of Return Assume that at the beginning of the year, you purchase an investment for $7,000 that pays $100 annual income Also assume the investment’s value has decreased to $6,600 by the end of the year (Obj 2) a What is the rate of return for this investment? Rate of return = = Increase∨decrease∈value+ Annual income Original investment ( $ 6,600−$ 7,000 ) +$ 100 $ 7,000 ≈ 0.043 ≈ 4.29 percent b Is the rate of return a positive or negative number? The rate of return is a negative number (4.29 percent) Determining Interest Assume that you purchased a corporate bond with a face value of $1,000 The interest rate is percent What is the dollar amount of annual interest you will receive each year? (Obj 2) The dollar amount of annual interest = Face value × Interest rate = $1,000 × 5% = $50 Determining Interest Three years ago you purchased a Heinz corporate bond that pays 6.50 percent annual interest The face value of the bond is $1,000 What is the total dollar amount of interest that you received from your bond investment over the three-year period? (Obj.2) The dollar amount of annual interest = Face value × Interest rate = $1,000 × 6.50% = $65 The total dollar amount of the three-year period = $65 × = $195 10 Determining Interest Jackie Martin purchased three $1,000 corporate bonds issued by J C Penney The bonds pay 7.10 percent and mature in 2037 What is the total dollar amount of interest Jackie will receive for her three bonds each year? (Obj 2) The dollar amount of annual interest = Face value × Interest rate = $1,000 × 7.10% = $71 11 Determining Interest and Approximate Bond Value Assume that three years ago, you purchased a corporate bond that pays 9.25 percent The purchase price was $1,000 Also assume that three years after your bond investment, comparable bonds are paying 8.25 percent (Obj 2) a What is the annual dollar amount of interest that you receive from your bond investment? The dollar amount of annual interest = Face value × Interest rate = $1,000 × 9.25% = $92.5 b Assuming that comparable bonds are paying 8.25 percent, what is the approximate dollar price for which you could sell your bond? Approximate market value = = Dollar amount of annual interest Comparable interest rate $ 92.5 ≈ $1,121 8.25 % c In your own words, explain why your bond increased or decreased in value In this case, the comparable bonds are now paying 8.25 percent, which is lower than the coupon rate of 9.25 percent on your bond As a result, your bond is paying a higher interest rate than what is available in the current market This makes your bond more attractive to investors, which increases its demand and, in turn, increases its value In other words, your bond increased in value because its coupon rate is higher than the current market interest rate, making it a more attractive investment Conversely, if the market interest rates had increased above 9.25 percent, the value of your bond would have decreased, as investors would prefer to invest in newly issued bonds paying a higher interest rate 12 Determining Interest and Approximate Bond Value Eight years ago, Burt Brownlee purchased a U.S government bond that pays 4.2 percent interest The face value of the bond was $1,000 (Obj 2) a What is the dollar amount of annual interest that Burt received from his bond investment each year? The dollar amount of annual interest = Face value × Interest rate = $1,000 × 4.2% = $42 b Assume that comparable bonds are now paying 4.5 percent What is the approximate dollar price for which Burt could sell his bond? Approximate market value = = Dollar amount of annual interest Comparable interest rate $ 42 ≈ $933 4.5 % c In your own words, explain why Burt’s bond increased or decreased in value In this case, when the comparable bonds started paying a higher interest rate of 4.5 percent, Burt's bond became less attractive to investors, because it was paying a lower interest rate This caused the demand for Burt's bond to decrease, and as a result, the value of his bond also decreased In other words, Burt's bond decreased in value because its coupon rate is lower than the current market interest rate, making it a less attractive investment 13 Using Asset Allocation to Diversify Risk Assume you are 59 years old, want to retire in years, and currently have an investment portfolio valued at $550,000 invested in technology stocks After talking with friends and relatives, you have decided that you have “too many eggs in one basket.” Based on this information, use the asset allocation method described in this chapter and the table below to diversify your investment portfolio Then answer the questions below (Obj 3) Percentage You Would Like in This Category Investment Alternative Large-cap stocks Midcap stocks Small-cap stocks Foreign stocks Government bonds Corporate bonds Cash Other investments (specify type) 12% 10% 7% 10% 25% 16% 20% 100% a What are the advantages of asset allocation? The advantages of asset allocation: - Get higher returns: Investing in different asset classes can yield higher returns than usual as investors are exposed to more investment opportunities, increasing their chances of profiting from different market segments - Diversification: Asset allocation spreads investments across different asset classes to reduce the risk that asset classes tend to behave differently under different conditions, so, if one asset underperforms, another can pull back, helping to balance the portfolio's performance - Risk management: Asset allocation helps manage the entire risk of an investment portfolio by being based on an investor's risk tolerance and investment goals This ensures that the investor is not taking on more risk than they feel is acceptable - Create discipline and focus: Asset allocation encourages investors to stay disciplined and focused on their goals by regularly reviewing and adjusting their assets b How could the time your investments have to work for you and your age affect your asset allocation? Once you hit a certain age limit, time inevitably shortens and you need to adjust your asset allocation to minimize risk and preserve your assets For losses in your portfolio, you need more time to recover them A young investor will be able to allocate more to multiple asset classes as they have more time to weather losses and achieve higher returns In contrast, an investor nearing retirement cannot allocate more and must be more cautious to preserve his assets With the situation of the problem, assume you are 59 years old, want to retire in years, you need to review your investment portfolio, weigh investment decisions and allocate assets to reduce the risk of the portfolio It is associated with a decrease in exposure to technology stocks and an increase in investments in bonds, cash or other less volatile assets This helps diversify your portfolio and protects your wealth until you retire 14 Developing a Financial Plan Assume you are single and have graduated from college Your monthly take-home pay is $2,500, and your monthly expenses total $2,300, leaving you with a monthly surplus of $200 Develop a personal plan of action for investing using the steps listed in Exhibit 13-6 (Obj 3) Establish your investment goals My investment goals are retirement and home purchase Determine the amount of money you need to obtain your goals The amount of money I need to obtain my goals are: Retirement = $1,500,000 Home purchase = $150,000 Specify the amount of money you currently have available to fund your investments Currently I have $200 available for investment List different investments that you want to evaluate IRA and mutual Funds Evaluate (a ) the risk factor and ( b ) the potential return for all investments For IRA’s and Mutual Funds, I am able to take medium to high risk investments due to the amount of time I have until I reach retirement Since I have several decades before I reach retirement these investments are potentially beneficial as far as the return I will receive Reduce possible investments to a reasonable number Home purchase = $65,000 Choose at least two different investments I will choose two different investments which are IRA and mutual funds Continue to evaluate your investment program Which would involve making changes as changes occur in my income Such as increase pay or obtaining a second job