Securities and Finance Investments

Question: Describe about the Securities and Finance for Investments. Answer: Option A: 1: The main concern for the investment is providing for the living expenses of the investor. However, the current investment scope only provide investment for long-term, which might not be help fulfilling the living expenses of the investors. Thus, change in portfolio of the investor could eventually help in maximising return and provide enough scope to reduce her risks. Investment Amount Equity investment 350,000 Bonds mutual funds 85,000 Savings accounts 15,000 Total portfolio 450,000 The above table could be effectively used by the investors to initiate a portfolio, which might help in supporting her living expenses and provide return from investments. However, Gili et al. (2013) stated that during an economic crisis the overall return from investment is reduced, which might negatively affect investors investment capital. 3: Compounding discount rate 8% Particulars Bond A Bond B Amount paid 10000 200 Interest per year 1000 250 Year 3 4 Discounting rate 0.793832241 0.735029853 Discounted Amount 7938.32241 735.0298528 Return from bond 400 750 Income after 3 years 8338.32241 1485.029853 Valuation of Income -1661.67759 485.0298528 The above table mainly helps in evaluating the overall bond that scheme, which might provide the highest income for an investor. In addition, Bond B mainly helps in providing a higher return from investment in then Bond A. The discounted bond value could only help in identifying the ideal investment opportunity. The valuation of discounted cash flow mainly helps in depicting the actual return, which might be provided from a bond. Option B: 1: PVAN0 = PMT / (1 + r)n PVAN0 = ($1,000,000-$43.000) / (1+8%) 30 PVAN0 = $957,000 / (1+8%) 30 PVAN0 = $95,104 / 12 PVAN0 = $7925 per year With the help of above table, she to get return of 1,000,000 in 30 years term could save around $7925 per year. Moreover, the above formula of Present valuation could help in depicting the overall investment that might be needed to attain the overall sum at the time of retirement. Answer to question 2: Stock Portion of the portfolio Beta Weighted beta Stock A 0.1 0.21 (0.1 * 0.21) 0.021 Stock B 0.05 0.35 (0.05 * 0.35) 0.0175 Stock C 0.05 0.55 (0.05 * 0.55) 0.0275 Stock D 0.2 1.05 (0.2 * 1.05) 0.21 Stock E 0.3 1.87 (0.3 * 1.87) 0.561 Stock F 0.3 2.75 (0.3 * 2.75) 0.825 Portfolio Beta 1.662 The overall portfolio beta from the above table could be determined as 1.662. Stock Portion of the portfolio Beta Stock A 0.4 0.21 (0.4 * 0.21) 0.084 Stock B 0.25 0.35 (0.25 * 0.35) 0.0875 Stock C 0.15 0.55 (0.15 * 0.55) 0.0825 Stock D 0.2 1.05 (0.2 * 1.05) 0.21 Portfolio Beta 0.464 The exclusion of Stock E and Stock F could effectively decrease the overall portfolio beta from 1.662 to 0.464. The increase in exposure of Stock A, Stock B and Stock C could help in reducing the portfolio beta, which might help in maintaining return from investment. 3: With the help of hedging, diversification and counter trend trade could help in reducing the risk from declining prices of the particular stock. The initiation of short position could effectively help in reducing the declining price volatility. The diversification into new investment could help in reducing the risk and maintain the return from investment. Moreover, hedging value of the stock into index or current market could effectively help in compensating the decline in overall stock price and maintain the required investment capital. Answer to question 4: Asset allocation Weight Projected return Return contribution Domestic Mutual Fund 35% 12% 25% International Equity 65% 45% 35% Grand total 100% 75% The young investor to allocate its assets and generate higher return from investment could effectively use the above-depicted table. The increased exposure to International equities could effectively help the investors to generate a higher return from its investment. Moreover, investment in Americana mutual fund could also help in providing relevant reduced risk exposure to the portfolio. 5: The indication of a declining current ratio might portray a reduced inventory accumulation conducted by the company. In addition, a reduced declining current ratio might also indicate that the company has reduced its current assets or increased liabilities for the fiscal year. Moh'd and Omari (2013) argued that ration loses its friction if companies uses inflated amounted in their financial report. Moreover, a declining earning to sales ratio only indicates an increase in administrative or material cost incurred by the company. Thus, it could be concluded that overall liabilities and expenses of the company has mainly increased with its rising revenues. Shin et al. (2013) stated that investor with the help of ratios are able to determine the overall financial position of the company. Option C: (D) Regulations 404c requires that 401k investments offer participants choices that will enable exposure to diverse investments. Management should recognize that if four of the funds lost money, then plan may fail the 404c test (B) Broad diversification is a good idea, but practical limitations reduce the likelihood of consistently developing portfolios that can be placed on the efficient frontier. (A) Equity markets anticipate economic activity; they do not reflect current economic activity (D) Whereas conventional bonds may yield a negative return during a period of rising inflation, inflation-indexed Treasury securities sustain the investors purchasing power. (C) In-the-money puts and calls provide the potential to earn profits greater then profits earned by owing only the underlying assets. Option D: Bonds Return on Assets Discounts Expected Returns Stock Dividends Reference and Bibliography: Gili, M., Roca, M., Basu, S., McKee, M. and Stuckler, D., 2013. The mental health risks of economic crisis in Spain: evidence from primary care centres, 2006 and 2010.The European Journal of Public Health,23(1), pp.103-108. Mayo, H.B., 2013. Investments: an introduction. Cengage Learning. Moh'd M, A. and Omari, H.O., 2013. Performance efficiency of the Jordanian Islamic Banks using data envelopment analysis and financial ratios analysis.European Scientific Journal. Shin, H., Jeong, K.Y., Lacina, M. and Her, Y., 2013. Forecasting Changes in Profitability in the Oil and Gas Industry Using Ratios and Data Envelopment Analysis.