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QUESTION 1
(a). Suppose you make an investment of K1,000. This first year the investment returns 12%, the second year it returns 6%, and the third year it returns 8%. How much would this investment be worth, assuming no withdrawals are made?
(b). Congratulations! You have just won a small lottery. It will pay you either 5 annual payments of K15,000 each (with the first payment to be received one year from today), or a single lump sum to be received today. If you can invest at a 6% annual rate of interest, what is the least you should accept as the lump sum payout amount?
(c). Suppose an annuity costs K40,000 and produces cash flows of K10,000 over each of the following eight years. What is the rate of return on the annuity?
(d). How long does it take for your money to grow to ten times its original value if the interest rate is 5% per year?
What is the impact of factors affecting loanable fund?
In a brief paragraph or even bulleted ideas design/create a federal budget.
1. Using the expenditures from the pie chart in the lecture prioritize your spending. Your fictional government has 100 dollars divide your 100 dollars among the expenditures listed on that pie chart (10 expenditures): military, medicare/medicaid, unemployment, housing community development, education, energy & envirnoment, international affairs, transporation, veterns benefits, national parks & historical sites.
So for each expenditure tell me how much of your 100 dollars is going to each of the 10 outlays.
2. The second half of this assignment is to tell me how you got your 100 dollars. Based on the five income groups: bottom 20%, lower middle 20%, middle 20%, upper middle 20%, top 20%. How much of does each of the 5 income groups contribute to the 100 dollars.
Mpho has recently inherited a trust fund that offers two alternatives: she can take a R1 million pay-out now or receive an annual payment of R145 000 at the end of each year for 10 years. If she invests the money, she can receive 7% interest, compounded annually. Evaluate every option and advise her on which is the better option to take.
Your friend Fred is looking to buy a car and has a deposit of R50 000. The interest rate on offer is a fixed interest rate for 60 months of 7,5% per annum, compounded monthly. The car costs R300 000. What will the monthly repayment be?
Siya and Rachel want to ensure that they are able to fund their two children’s tertiary studies and have asked you to assist them in determining how much they need to save monthly to have R2 million in 18 years from now. They believe they can get an annual interest rate of 5%, compounded monthly. How much should they contribute to the fund monthly?
Dave and Sandra pool their individual savings of R2 000 each per month and deposit this into a money market account earning 5% interest per annum, compounded annually. What will the balance of the account be at the end of five years?
The financial market is composed of products and services provided by financial institutions. Identify and describe the following financial institutions.
a). Identify and explain at least five financial instruments (for each) traded in money and capital markets. (20 Marks)
b). distinguish the two types of markets in (a) above
a). Outline and discuss the main risks faced by financial institutions and how they manifest giving practical examples. (10Marks)
b). Discuss how these risks can be mitigated and managed.
Josh intends to retire early and wants to understand how much he should save of his monthly salary of R25 000 to develop an asset that will pay him his salary monthly once he has retired. Assuming that he would need to develop an asset of R3 000 000, and that he can obtain an interest rate and return of 10% per annum, compounded monthly, for the next 20 years, what should he save monthly to achieve this?
(a) What are derivative instruments? (5 marks)
(b) Explain the types of derivative instruments. (10 marks)
(c) What are the advantages and disadvantages of using derivative instruments? (10 marks)
