Your client Ben is in his late 30s (married, with two kids) and working as a full-time doctor in ZZ hospital. He deposited all this money in the bank, but the interest rate is decreasing all the time. He heard that the return of stock investment is much higher. As he knows one medicine company very well, he plans to open a stock account and invest all his money in that company first.

Your client Ben is in his late 30s (married, with two kids) and working as a full-time doctor in ZZ hospital. He deposited all this money in the bank, but the interest rate is decreasing all the time. He heard that the return of stock investment is much higher. As he knows one medicine company very well, he plans to open a stock account and invest all his money in that company first.

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter2: Career Planning

Section: Chapter Questions

Problem 1FPC

See similar textbooks

Similar questions

Kaylee Fernandez came into some money from her trust fund and now has $120,000. Kaylee’s colleagues have always raved about earning a lot of money from investing in stocks and she is now interested in investing as well. She consulted an investment specialist and decided that she wants to buy some stocks in a healthcare company and a high-tech company. Kaylee has also decided that the proportion of the dollar amount she invests in the healthcare company relative to the high-tech company should at least be at least one-third, but that she should not invest more than twice the amount in the high-tech company that she invests in the healthcare company. The price per share of stock in the healthcare company is $175. The unit investment in the high-tech company is $208. The average annual return in the healthcare company during the last 3 years has been 17%. On the other hand, the high-tech company fund has been 28% for the same time period. Kaylee wants to determine a good investment…
Mustafa Kurtulmuş has always been proud of his personal investment strategies and has done very well over the past severalyears. He invests primarily in the stock market. Over the past several months, however, Mustafa has become very concerned aboutthe stock market as a good investment. In some cases, it would have been better for Mustafa to have his money in a bank than in themarket. During the next year, Mustafa must decide whether to invest 10,000 TRY in the stock market or in a certificate of deposit (CD)at an interest rate of 9%*. If the market is good, Mustafa believes that he could get a 14% return on his stock market investment. Witha fair market, he expects to get an 8% return. If the market is bad, he will most likely get no return at all - in other words, the returnwould be 0%. Mustafa estimates that the probability of a good market is 0.4, the probability of a fair market is 0.4, and the probabilityof a bad market is 0.2, and he wishes to maximize his long-run average…
Allen Young has always been proud of his personal investment strategies and has done very well over the past several years. He invests primarily in the stock market. Over the past several months, how ever, Allen has become very concerned about the stock market as a good investment. In some cases it would have been better for Allen to have his money in a bank than in the market. During the next year, Allen must decide whether to invest $ 10,000 in the stock market or in a certificate of deposit (CD) at an interest rate of 9%. If the market is good, Allen believes that he could get a 14% return on his money. With a fair market, he expects to get an 8% return. If the market is bad, he will most likely get no return at all - in other words, the return would be 0%. Allen estimates that the probability of a good market is 0.4, the probability of a fair market is 0.4, and the probability of a bad market is 0.2, and he wishes to maximize his long - run average return. (a) Develop a decision…
You are an accounting student at your local university. Your brother has recently managed to save $5,000, and he would like to invest some of this money in the stock market, so hes researching various global corporations that are listed on the stock exchange. He is reviewing a company that has Goodwill as an item on the balance sheet. He is quite perplexed about what this means, so he asks you for help, knowing that you are taking accounting classes. How would you explain the concept of goodwill to him by comparing it to other types of resources the company has available?
Annie Williams is considering a retirement portfolio and wonders if she should move some of her money into an international investment. She has been working for a short time period (she graduated University just four years ago, she has put her retirement savings into a mutual fund whose strategy mimicked the return of the S&P 500 stock index/ large company stock), this fund has historically earned a return averaging 12% over the last 80 years, but recently the returns were somewhat depressing, as the economy is going through a mild recession because of this Annie is considering an international mutual fund that diversifies its holdings around the industrialized economies of the world and average 14% annual rate of return. The international funds higher average return is offset by the fact that the standard deviation in its return is 30% compared to only 20% for the domestic index fund. Reviewing more closely, she learned that the domestic and international fund tend to earn high…
You have recently completed your training contract and managed to save a small amount of money during the three years of your contract. You are thinking about investing the money and are considering investment opportunities which would maximize your return. A friend of yours has recently received a ‘hot tip’ from his uncle for HiFly Ltd, a share on the JSE, which is currently providing high returns. You are looking at investing 40% of your money in HiFly Ltd and the balance in Treasury Bills. The average rate of return on Treasury Bills next year will be 9%. You have been provided with the following relevant information: (Information attached in image below) ROUND ALL ANSWERS TO TWO DECIMAL PLACES REQUIRED: Calculate the expected return of HiFly Ltd. Answer% Calculate the expected return of the market. Answer% Calculate the standard deviation of HiFly Ltd. Answer% Calculate the standard deviation of the market. Answer% Calculate the covariance of returns between the market and HiFly…
Ebenezer is CEO of a successful small business. One day he stops by to see Tim Cratchit, the new branch manager at First National Bank. Ebenezer and his partner Marley would like to double the size of their loan with the bank from $500,000 to $1 million. Ebenezer explains, “Business is booming, sales and earnings are up each of the past three years, and we could certainly use the funds for further business expansion.” Tim Cratchit has a big heart, and Ebenezer has been a close friend of the family. He thinks to himself this loan decision will be easy, but he asks Ebenezer to email the past three years’ financial statements as required by bank policy.In looking over the financial statements sent by Ebenezer, Tim becomes concerned. Sales and earnings have increased just as Ebenezer said. However, receivables, inventory, and accounts payable have grown at a much faster rate than sales. Further, he notices a steady decrease in operating cash flows over the past three years, with negative…
a)Peter just found a new job and now he has $1000 for making investment for every month. Because of the pandemic, he would like to invest in the medical product manufacturing stocks in both Japan and the US in each month. Suggest how he can do that and suggest how he can be benefitted by this approach. Elaborate your answers in detail by stating how it enables him to do four things which normally cannot be done without adopting this approach.
John is CFO at a venture-backed tech start-up with revenues of $20 million and approximately 80 employees. He has worked at the company for several years, and now reports to Ralph, the company's newly hired CEO.The company had been doing really well, but recently big customers have been placing fewer orders and Ralph is feeling pressure to show growth. This pressure is amplified because the company is venture-backed, and the investors expect results. While the company did well in the first round of funding, if they don't perform now, they may have trouble with gaining sufficient funding in the second round, which could mean the end of the company.All of this was on John's mind when Ralph came to him about recording a major order that was still under negotiation. The deal had not gone through, although both parties expected to complete the deal in the next week. With the current quarter ending in the next few days, including this order would give a significant boost to the company's…
Phoebe Jones is now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the people she works with, what she would really like to do is open a bookstore of her own. She would like to open her store in about eight years and figures she'll need about $ 60,000 in capital to do so. Given that Phoebe thinks she can make about 8 percent on her money. How much would Phoebe have to invest today, in one lump sum, to end up with $60,000 in eight years? Round the answer to two decimal places. $_________________ If she's starting from scratch, how much would she have to put away annually to accumulate the needed capital in eight years? Round the answer to two decimal places. $ __________________ How about if she already has $20,000 socked away, how much would she have to put away annually to accumulate the required capital in eight years? Round the answer to two decimal places. $___________________ Given that Phoebe has…
Assume that you just graduated from Mason and are employed at an investment bank making $120,000 (after-tax) per year, and you expect to make the same amount for each of the next 5 years. A classmate from MBA643, who knows what a hard party person you were, gives you a call and tries to convince you to join forces with him on a project. The project is to produce a new type of vodka, “Hangover’s over”, that won’t make one feel hangover the next morning no matter how many bottles one drinks. If you decide to join, you will have to quit your current job, and work full-time on the project. The project requires an initial investment of $400,000 in production equipment, which can be depreciated straight-line over 5 years to a salvage value of $80,000. You own a house that you are currently renting out for $24,000 a year and planning to use the house as your office if you join the project. You expect to sell 20,000 bottles of the “Hangover’s over” at $40 per unit each year for the next 5…
Imagine that you have worked every summer for the last four years in order to save money to buy a car. You have $23,000 deposited in a savings account at your local bank. One day, you turn on the news and discover that the stock market is crashing and people are rushing to banks to withdraw all of their money. Your best course of action is to: