Finance Answers

A. You may not have heard of the Efficient market hypothesis, also known as EMH, but you have probably wondered why even the most experienced mutual fund portfolio managers and other professional investors often lose to the major market indexes such as the S&P 500 Index.

i. Provide a thorough explanation of an efficient market. (2 marks)

ii. Describe the three (3) forms of efficient market hypothesis. (9 marks)

iii. Does market efficiency mean you can randomly pick stocks from a stock exchange to form your portfolio? (4 marks)

iv. What does it mean by the price you pay for a stock is fair? (2marks)

B. Explain briefly the difference between a stock market and stock exchange giving an example in each case. (3 marks)

C. List and clearly explain five (5) risks management techniques available to mitigate risk in the Zambian financial markets. (5 marks)

QUESTION FOUR

A.Compare and contrast the Keynesian and Friedman's approach to money demand. [12 marks]

B. How would a decrease in the reserve requirement affect the (a) size of the money multiplier, (b) amount of excess reserves in the banking system, and (c) extent to which the system could expand the money supply through the creation of checkable deposits via loans? [6 marks]

C. Explain any FOUR (4) options available to the Bank of Zambia to increase the money supply? Explain how each works. [4marks]

D. Explain the THREE (3) main features of money. [3 marks]

[Total=25 marks]

Question three

A. Explain the credit channel for contractional monetary policy. Explain how a loose monetary policy affects the economy through this channel. [7 marks]

B.Discuss the criteria for a good international monetary system. [4 marks]

C.Explain the FOUR (4) major instruments traded in the money markets in Zambia.[4 marks]

D. Explain FOUR (4) objectives of monetary policy in Zambia. [4 marks]

E. Explain THREE (3) instruments of monetary policy used in Zambia. [6marks]

[Total=25 marks]

Explain the administrative efficiency of taxation with the inclusion of the tax avoidance, tax evasion, tax gap, tax morality. Further, discuss Flexibility

Amy and Mike, a married couple, are considering retirement; they are both aged 65 and supply the following information:

• They jointly own their home worth $820,000 and have no debt.  
• They have a car ($30,000), home contents ($20,000) and savings ($20,000).
• Amy’s superannuation is $260,000 (tax-free $52,000, balance from a taxed source).
• Mike’s superannuation is $180,000 (tax-free $36,000, balance from a taxed source).
• As ‘high growth’ investors, expected return on investments is 4.0% p.a. above the inflation rate (currently 3.0% p.a.).
• They WANT $44,000 p.a. after tax to meet their living costs.

a)     Explain how Amy and Mike could derive their cash flow for retirement.

a)     Discuss adequacy of capital for retirement and show calculations.

a)     Discuss Amy and Mike’s risk tolerance relative to the ‘draw-down’ phase.

AUSTRALIAN FINANCIAL PLANNING

Amy and Mike, a married couple, are considering retirement; they are both aged 65 and supply the following information:

• They jointly own their home worth $820,000 and have no debt.  
• They have a car ($30,000), home contents ($20,000) and savings ($20,000).
• Amy’s superannuation is $260,000 (tax-free $52,000, balance from a taxed source).
• Mike’s superannuation is $180,000 (tax-free $36,000, balance from a taxed source).
• As ‘high growth’ investors, expected return on investments is 4.0% p.a. above the inflation rate (currently 3.0% p.a.).
• They would like to receive $44,000 p.a. after tax to meet their living costs.

 :

a)     Explain how Amy and Mike could derive their cash flow for retirement.

a)     Discuss adequacy of capital for retirement and show calculations.

 a)     Discuss Amy and Mike’s risk tolerance relative to the ‘draw-down’ phase.

2.1 Suppose you long one Australian dollar call and one Australian dollar put with an exercise exchange rate of 0.75 (USD/AUD). The price of call and the price of put is USD0.06. Using the 15-period (spot) exchange rates given below, answer parts (a)-(c). Time Spot Exchange Rate (USD/AUD) 0 0.35 1 0.40 2 0.45 3 0.50 4 0.55 5 0.60 6 0.65 7 0.70 8 0.75 9 0.80 10 0.85 11 0.90 12 0.95 13 1.00 14 1.05 15 1.10 (a) Compute the net call payo, net put payo and net combined payo.

(b) Plot separately the Net Long call payo, the net long put payo and the net combined payo.

(c) Name and provide denition of the shape of the combined payo obtained from part (b)? 

2.1 Suppose you long one Australian dollar call and one Australian dollar put with an exercise exchange rate of 0.75 (USD/AUD). The price of call and the price of put is USD0.06. Using the 15-period (spot) exchange rates given below, answer parts (a)-(c). Time Spot Exchange Rate (USD/AUD) 0 0.35 1 0.40 2 0.45 3 0.50 4 0.55 5 0.60 6 0.65 7 0.70 8 0.75 9 0.80 10 0.85 11 0.90 12 0.95 13 1.00 14 1.05 15 1.10 (a) Compute the net call payo, net put payo and net combined payo. (b) Plot separately the Net Long call payo, the net long put payo and the net combined payo. (c) Name and provide denition of the shape of the combined payo obtained from part (b)? 

Provide a detailed discussion of the possible welfare effects, if the South African Government decides to subsidize Ceres farmers exports to the United Kingdom. 

SA Traders operates as a hardware store and is a registered VAT vendor. The applicable tax rate is 15%. SA Traders makes use of the periodic inventory system, as well as control accounts. The transaction amounts are VAT inclusive where applicable.

On 4 August 2020, Rod Traders purchased stationery for use in the office and paid R1 120 in cash. The amount in the VAT input column in the relevant journal for this transaction will be:

A. R146,09

B. R137,54

C. R0 as the amount should be recorded as VAT output.

D. R168,00