QUESTION FIVE $[20$ Marks$]$

a$)$ Umoja Unit Trust Scheme is one of the open$-$ended trust funds in Tanzania.

Explain to prospective Tanzanian investors what is an "open$-$ended trust fund ${?}^{\text{'}}$

$[5$ Marks$]$

b$)$ Suppose that an investor anticipates an $($annual$)$ income tax rate of $30\%,$ and a $($deferred$)$ capital gains tax rate of $15\%$

Required:

What would be the final value of an investment of TZS $50M$ for $5$ years under the following scenarios?

i$)$ The investment yields an average of $3\%$ p$.$a$.$ entirely in dividends.

$[5$ Marks$]$

ii$)$ The investment yields an average of $3\%$ p$.$a$.$ entirely in price rises.

$[5$ Marks$]$

iii$)$ Explain why the two scenarios above have the same pre$-$tax rate of return, but they yield different answers.

$[5$ Marks$]$

QUESTION SIX

$[20$ Marks$]$

a$)$ Discuss the importance of institutional investors for financial markets.

$[10$ Marks$]$

b$)$ Discuss on four $(4)$ advantages$/$disadvantages of Index Funds. $[10$ Marks$]$ THE END!