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- As a wealthy individual investor, you are planning to invest your $2 million in a fund of funds which invests in 2 different hedge funds, namely hedge fund A and B. The incentive fees are 20% for all funds including the fund of funds. The incentive fee is applicable when a fund earns a positive return. Let’s assume that funds A and B generate 10% and -15% gross returns, respectively. Given the information above, please fill out the below table. You can copy and paste the table to the answer section and fill it out there. You may want to show your calculations in the space below the table. Fund A Fund B Fund of Funds Start of year (millions) $1.00 $1.00 $2.00 End of year (millions) $ $ $ Gross rate of return % % % Incentive fee (millions) $ $ $ End of year, net of fee $ $ $ Net rate of return % % %Viden, a financial advisor for high-net-worth individuals, is examining the portfolio of a client who has requested to reduce the risk of his portfolio which is currently populated only with stocks. The client needs an investment with regular cash flows to finance his daughter’s 4-year university education, as well as a short term fund to meet unexpected requirements in cash. (a) Determine what are the best asset classes to meet his needs, and discuss the reasons for your choice. (b) What will happen to the systematic risk of the client’s portfolio after the change?Suppose that a mutual fund agent approaches you and promote a fund which allows you to withdraw money from your Employment Provident Fund (EPF) to invest. From the analysis of the agent, the fund expected to pay up to 11% return, and you know that EPF paid an average 6% return and treasury’s return fixed at 2.75%. Based on the discussion in this chapter and in your opinion, are you going to take the investment? Justify your answer
- 1. What is a mutual fund or unit trust? Explain and discuss the business model of mutual funds. What role do they play in the economy, and in the financial sector in particular? 2. A mutual fund has assets of K5 092.2 million and K4.6 million in liabilities with outstanding shares of 150.6 million. Calculate the net asset value (NAV) of the portfolio. 3. Another mutual fund manages a portfolio of securities of K120 million. The fund owes K4 million to advisers and a further K1 million for running expenses and has 5 million shares outstanding. Calculate the net asset value.5. Comparing loads and fees Claire wants to buy shares in a mutual fund and has narrowed her selection to the following four funds. Answer the questions below to help assess each fund in terms of the fees each charges. Fund NAV Net Chg. YTD % Ret. MinT p $15.32 -0.05 2.5 IntRA r $18.77 0.05 5.4 MRGG r $27.81 0.19 7.9 MajTrkⁿ $45.21 0.28 9.0 Suppose MajTrkⁿ charges a commission of 8%. This_________an example of a relatively low-load fund. If Claire purchases $4,000 worth of MajTrkⁿ shares, only $___________will actually be invested. This means that the commission—as a percentage of the amount invested—is equal to . The mutual fund MinT p is a no-load fund that imposes a_________on reinvested dividends as well as on the initial investment. Funds that charge this type of fee _________ generally be expected to outperform funds that do not charge these fees. Claire is planning on holding her shares for at least a year and wants a fund that…1. You are evaluating investing in a private equity fund and estimate that it will yield the following cash flows: (see table) a. What is the expected IRR of the fund? You will need to use your financial calculator (or excel) to solve this problem. b. On average, private equity funds that invest in similar businesses earn a rate of return of 26%. Should vou invest in this fund (Hint: no calculations are needed)
- 4. As the Fund Manager for Bank of Trinidad and Tobago Limited, you are to advise the following two (2) clients based on their respective financial situations. a) Your best friend has asked to assist him in making the best investment out of the following options. Which would you advise him to choose and why? Show your workings to justify your response. Option 1: $12,000 in 5 years’ time at 6 percent interest.Option 2: $15,000 in 2 years’ time at 9 percent interest.Option 3: $15,000 today. No strings attached.Option4: $5,000 each year for 2 years at 7 percent interest compounded semi-annually.Assume that Mr James wants to invest his savings in less risky financial instruments with minimum rate of return per annum. Therefore he invested his savings in some financial assets in which returns will be guarantee even if the company will be in losses also. The financial instruments purchased by Mr James is known as: O a. Preference shares b. Equity shares c. Partnership shares d. DebenturesQ1. What is a mutual fund? In what sense is it a financial institution?. Q2. How is the net asset value (NAV) of a mutual fund determined? What is meant by the term marked-to-market daily? Q3. An investor purchases a mutual fund for $50. The fund pays dividends of $1.50, distributes a capital gain $2, and charges a fee of $2 when the fund is sold on year for $52.50. What is the net rate of return from this insurance? Formula for Question 3: Net gain = Dividend + capital gain + profit from fund sold – fee
- Please provide detailed explanation: #5 Sarah Mix decides to invest $500 per month in three funds, with $200 going into a small capital growth fund, and $150 going into a large capital growth fund, and $150 into an international fund. She tracked the price she paid for stock in these funds over a 6-month period, as shown in the attached image of Table 3. What is the average price paid per share in each mutual fund? How much has Sarah invested in mutual funds? What is the current value of her investment? Which fund is currently performing best for Sarah?Assume that Mr James wants to invest his savings in less risky financial instruments with a minimum rate of return per annum . Therefore he invested his savings in some financial assets in which returns will be guarantee even if the company will be in losses also . The financial instruments purchased by Mr James is known as : a . Debentures b . Equity shares Oc . Preference shares d . Partnership sharesWhich of the following investments in mutual funds would not create an independence problem for auditor Gomez? Group of answer choices a. Gomez owns a few shares of the Wensleydale Mutual Fund (WMF) and is on his firm's audit team for WMF. b. Gomez owns 3% of the shares of a diversified mutual fund that owns stock in Minotaur Corporation. Gomez is on his firm's audit team for Minotaur. c. Gomez owns 20% of the shares of a diversified mutual fund that owns stock in Faber Corporation. Gomez is on his firm's audit team for Faber. d. Gomez owns 30% of the shares of an undiversified mutual fund that owns stock in Woodson Corporation. Gomez is on his firm's audit team for Woodson.
