Question: The table below provides the possible returns for two securities - Zamrud and Zaitun: Scenario Probability 1 0.6 II 0.4 Zamrud Zaitun -4% 15% 12%


The table below provides the possible returns for two securities - Zamrud and Zaitun: Scenario Probability 1 0.6 II 0.4 Zamrud Zaitun -4% 15% 12% -6% (a) If you are considering investing RM45,500 in Zamrud, and RM19,500 in Zaitun, what are the securities' portfolio weights? (2 marks) (b) What are the possible returns for your investment portfolio under scenarios I and II? (3 marks) (c) What are the expected return and standard deviation of returns for your investment portfolio? (5 marks) (d) If your investment portfolio's beta is 0.06, the risk-free interest rate is 3.5%, and the market risk premium is 6%, what is the portfolio's required rate of return? (2 marks) (e) What should the beta of the investment portfolio be, if you wish to invest in it? Explain briefly. (3 marks) a. Ms. Fui Pin is planning to buy a new car 7 years from now. For this purpose, she will deposit RM10,500 at the beginning of each year for the first 4 years in the savings account of a commercial bank. Her investment in the savings account will earn a return of 9% compounded annually. How much will Ms. Fui Pin have after 7 years to buy the car? (5 marks) b. Mr. Iman borrowed RM15,000 at 14 percent annual rate of interest to be repaid over three years. The loan is amortized by three equal annual end-of-year payments. i. Calculate the annual end-of-year loan payment. (1 mark) ii. Prepare a loan amortization schedule, showing the interest and principal breakdown of each of the three loan payments. (4 marks) C. Mr. Kabir inherited the family mini market business and has decided to sell it to a potential local buyer. For this purpose, he got two offers as stated below: Offer 1: Mr. Kabir will receive RM8,000 at the end of each year forever. Offer 2: Mr. Kabir will receive RM50,000 at the end of year 1, RM65,000 at the end of year 2, and RM12,000 at the end of each year from year 3 to year 10. The current market rate of interest for Mr. Kabir is 6% compounded annually. Calculate the present value of Offer 1 and Offer 2. Which offer should Mr. Kabir choose to sell his mini market business
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
