FIN3201 GROUP ASSIGNMENT (20%) Question 1 (18 marks) Nilai Sdn Bhd wishes to accumulate funds to provide a retirement annuity for its vice president of research‚ Dorcas Lee. Miss Lee‚ by contract‚ will retire at the end of exactly 12 years. Upon retirement‚ she is entitled to receive an annual end-of-year payment of RM42‚000 for exactly 20 years. If she dies prior to the end of the 20-year period‚ the annual payments will pass to her heirs. During the 12-year “accumulation period‚” Nilai wishes
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to determine the value of TECO Energy’s securities (common stock‚ preferred stock and bonds) and then conduct a seminar to explain the process to the firm’s customers. To do this‚ Laura first reviewed the Value Line Investment Survey data and examined TECO’s latest Annual Report‚ especially Note E of its Consolidated Financial Statements (lists TECO’s long-term debt obligations‚ including its first-mortgage bonds‚ installment contracts and term loans‚ See Table 1). Table 1: Partial Long-term Debt
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WSBl Summary Cliff Addis‚ the best bond salesperson on Wall Street who has never failed‚ persuaded his best customer‚ Louise Patterson‚ to buy the bonds of the company whose value diminished by 3% 2 days later. Trying to becalm Louise‚ Cliff lied saying that the bonds would turn round and he would gain profit. When Cliff came home‚ he read in a newspaper that the Wisconsin Credit bank is close to bankruptcy‚ but he perceived this message as “a golden investment opportunity”. Problem Mr.Addis
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Investment After-inflation return Emerging stock market stocks 11.5% Small-company U.S. stocks 9.0% European and Asian stocks 8.2% S&P 500 Index (large U.S. stocks) 7.2% Art 4.0% Residential real estate 2.8% U.S. Corporate bonds 0.9% Long-term U.S. government bonds 0.4% Silver -0.3% (a) If you invest $10‚000 each year for the next 30 years in small-company stocks how much would you retire with (before taxes)? (b) Suppose you wanted to retire with enough to buy a 1‚000 acre spread in the
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The main sources of finance for many companies are external sources of funds that carry financial liabilities. These may be sub-divided into two. Firstly‚ there are non-marketable debt such as bank loans and marketable debt such as corporate bonds. All other things being equal‚ debt finance should be cheaper for a corporation than the other main form of long-term finance‚ equity. This is because debt finances tends to come with a definite obligation that
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you can get in normal conditions in the sale thereof‚ the intrinsic value is when you divide the net assets in shares payable. What is the difference between the par value of a bond and the market value of a bond? The par value of a bond issued to entities so they can carry out their activities in the market but these bonds win or lose value depending on the prevailing interest rate at the time to give them‚ the fulfillment of the commitment not to pay them. Explain the difference between the bond’s
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= Liabilities + Equity Date Cash Bond Payable Interest Payable Interest Expense +300‚000 +300‚000 (a) Jan 1 -12‚000 -12‚000* (b) July 1 +12‚000 -12‚000 (C) Dec 31 *(R$300‚000 X 8% X 1/2) = 12‚000 E 10-10 (a) 1. Assets = Liabilities + Equity Date Cash Bond Payable Discount on B/P +485‚000 +500‚000 -15‚000 2. Semiannual interest payments ($20‚000* X 10) $200‚000 Plus: bond discount 15‚000 Total cost of
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SHOULD RETAIL INVESTORS INVEST IN INDEX TRACKER FUNDS RATHER THAN ACTIVELY MANAGED FUNDS? Introduction: This essay sets out to know which type of investment fund is better for a retail investor. By this‚ we will consider the meaning and operations of an index tracker fund‚ as well as that of the actively managed funds. Furthermore‚ identify the advantages of index tracker funds over actively managed funds and draw conclusions in relation to the topic above. What is an index? An index is
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following factors would increase the likelihood that a company would call its outstanding bonds at this time? (a) The yield to maturity on the company’s outstanding bonds increases due to a weakening of the firm’s financial situation. (b) A provision in the bond indenture lowers the call price on specific dates‚ and yesterday was one of those dates. (c) The flotation costs associated with issuing new bonds rise. (d) The firm’s CFO believes that interest rates are likely to decline in the future
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assumptions (if any). Please type your answers. 1. Use the following corporate bond price quote information to answer the questions that follow. Assume the company makes semi-annual coupon payments and also assume the bond matures on today’s date (May 28) in its maturity year. Note that price is expressed in percentage of par value. Company XYZ Inc. Coupon 7.000 Maturity May. 28‚ 2017 Price 97.667 Yield a. How much would this bond cost you to buy today if its par value is $1000? b. What is the bond’s
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