FIN 402 MASTER Making Decisions/fin402master.com

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FIN 402 MASTER Making Decisions/fin402master.com

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FIN 402 Week 1 Assignment Case Problem 1.2
Preparing Carolyn Bowens Investment Plan FOR
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Problem 1.2 Preparing Carolyn Bowens Investment
Plan Carolyn Bowen, who just turned 55, is
employed as an administrative assistant for the
Xcon Corporation, where she has worked for the
past 20 years. She is in good health, lives
alone, and has two grown children. A few months
ago her husband died, leaving her with only their
home and the proceeds from a 75,000 life
insurance policy. After she paid medical and
funeral expenses, 60,000 of the life insurance
proceeds remained. In addition to the life
insurance proceeds, Carolyn has 37,500 in a
savings account, which she had accumulated over
the past 10 years. Recognizing that she is within
10 years of retirement, Carolyn wishes to invest
her limited resources
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FIN 402 Week 1 Assignment Case Problem 1.2, 2.1,
2.2, 3.1, 12.1 FOR MORE CLASSES VISIT
www.fin402master.com   FIN 402 Week 1
Assignment Case Problem 1.2 Preparing Carolyn
Bowens Investment Plan FIN 402 Week 1 Assignment
Case Problem 2.1 Daras Dilemma What to Buy? FIN
402 Week 1 Assignment Case Problem 2.2 Ravi
Dumars High-Flying Margin Account FIN 402 Week 1
Assignment Case Problem 3.1 The Perezes Good
Fortune FIN 402 Week 1 Assignment Case Problem
12.1 Reverend Mark Thomas Ponders Mutual Funds
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FIN 402 Week 1 Assignment Case Problem 2.2 Ravi
Dumars High-Flying Margin Account FOR MORE
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Problem 2.2 Ravi Dumars High-Flying Margin
Account Ravi Dumar is a stockbroker who lives
with his wife, Sasha, and their five children in
Milwaukee, Wisconsin. Ravi firmly believes that
the only way to make money in the market is to
follow an aggressive investment posturefor
example, to use margin trading. In fact, Ravi has
built himself a substantial margin account over
the years. He currently holds 75,000 worth of
stock in his margin account, though the debit
balance in the account amounts to only 30,000.
Recently Ravi uncovered a stock that, on the
basis of extensive analysis, he feels is about to
take off. The stock, Running Shoes (RS),
currently trades at 20 per share. Ravi feels it
should soar to at least 50 within a year.
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FIN 402 Week 1 Assignment Case Problem 3.1 The
Perezes Good Fortune FOR MORE CLASSES VISIT
www.fin402master.com   Case Problem 3.1 The
Perezes Good Fortune Angel and Marie Perez own a
small pool hall located in southern New Jersey.
They enjoy running the business, which they have
owned for nearly three years. Angel, a retired
professional pool shooter, saved for nearly 10
years to buy this business, which he and his wife
own free and clear. The income from the pool hall
is adequate to allow Angel, Marie, and their
children, Mary (age 10) and José (age 4), to live
comfortably. Although he lacks formal education
beyond the 10th grade, Angel has become an avid
reader. He enjoys reading about current events
and personal finance, particularly investing. He
especially likes Money magazine, from which he
has gained numerous ideas for better managing the
familys finances. Because of the long hours
required to run the business, Angel can devote 3
to 4 hours a day (on the job) to reading.
Recently Angel and Marie were notified that
Maries uncle had died
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FIN 402 Week 1 Assignment Case Problem 12.1
Reverend Mark Thomas Ponders Mutual Funds FOR
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Problem 12.1 Reverend Mark Thomas Ponders Mutual
Funds The Reverend Mark Thomas is the minister of
a church in the San Diego area. He is married,
has one young child, and earns a modest income.
Because religious organizations are not notorious
for their generous retirement programs, the
reverend has decided he should do some investing
on his own. He would like to set up a program
that enables him to supplement the churchs
retirement program and at the same time provide
some funds for his childs college education
(which is still some 12 years away). He is not
out to break any investment records but wants
some backup to provide for the long-run needs of
his family. Although he has a modest income,
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FIN 402 Week 1 AssignmentCase Problem 2.1Daras
Dilemma What to Buy? FOR MORE CLASSES VISIT
www.fin402master.com   Case Problem 2.1Daras
Dilemma What to Buy? Dara Simmons, a 40-year-old
financial analyst and divorced mother of two
teenage children, considers herself a savvy
investor. She has increased her investment
portfolio considerably over the past five years.
Although she has been fairly conservative with
her investments, she now feels more confident in
her investment knowledge and would like to branch
out into some new areas that could bring higher
returns. She has between 20,000 and 25,000 to
invest. Attracted to the hot market for
technology stocks, Dara was interested in
purchasing a tech IPO stock and identified
NewestHighTech.com, a company that makes
sophisticated computer chips for wireless
Internet connections, as a likely prospect. The
1-year-
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FIN 402 Week 1 Individual Problem Set FOR MORE
CLASSES VISIT www.fin402master.com   The
Problem Set is provided to you to enable you to
practice the concepts outlined in the textbook.
Select THREE completed problems from the
assignment and post your solutions to those
problems. 1. Creating prices for securities and
allowing for liquidity are functions of 2. Which
of the following best describes the function of
an investment banker selling an issue on a "best
efforts" basis? 3. From the investment banker's
point of view, the major reason syndicates are
formed in the distribution of large issues is for
the purpose of 4. ___________ has two major
functions to handle special orders, such as
purchases with a price contingency and to
maintain continuous, liquid, orderly markets
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FIN 402 Week 1 Individual Weekly Question FOR
MORE CLASSES VISIT www.fin402master.com   Submit
your Weekly Questions, with original questions,
in a Microsoft Word or text file. Be sure to show
your work to earn full credit.   Do not use
Investopedia, About.com, Wikipedia, or other
generic internet websites as sources. Use
credible sources only. Also, do not use quotes in
lieu of a response in your own words.
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FIN 402 Week 2 Assignment Case Problem 2.1
Traditional Versus Modern Portfolio Theory Whos
Right FOR MORE CLASSES VISIT www.fin402master.co
m   Case Problem 2.1 Traditional Versus Modern
Portfolio Theory Whos Right? Walt Davies and
Shane OBrien are district managers for Lee, Inc.
Over the years, as they moved through the firms
sales organization, they became (and still
remain) close friends. Walt, who is 33 years old,
currently lives in Princeton, New Jersey. Shane,
who is 35, lives in Houston, Texas. Recently, at
the national sales meeting, they were discussing
various company matters, as well as bringing each
other up to date on their families, when the
subject of investments came up. Each had always
been fascinated by the stock market, and now that
they had achieved some degree of financial
success, they had begun actively investing. As
they discussed their investments, Walt said he
thought the only way an individual who does not
have hundreds of thousands of dollars can invest
safely
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FIN 402 Week 2 Assignment Case Problem 4.1
Coatess Decision FOR MORE CLASSES VISIT
www.fin402master.com   Case Problem 4.1
Coatess Decision On January 1, 2017, Dave
Coates, a 23-year-old mathematics teacher at
Xavier High School, received a tax refund of
1,100. Because Dave didnt need this money for
his current living expenses, he decided to make a
long-term investment. After surveying a number of
alternative investments costing no more than
1,100, Dave isolated two that seemed most
suitable to his needs. Each of the investments
cost 1,050 and was expected to provide income
over a 10-year period. Investment A provided a
relatively certain stream of income. Dave was a
little less certain of the income provided by
investment B. From his search for suitable
alternatives, Dave found that the appropriate
discount rate for a relatively certain investment
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FIN 402 Week 2 Assignment Case Problem 4.1,
4.2, 2.1, 5.2, 13.1 (Part a,b,c,d) FOR MORE
CLASSES VISIT www.fin402master.com   FIN 402
Week 2 Assignment Case Problem 4.1 Coatess
Decision FIN 402 Week 2 Assignment Case Problem
4.2 The Risk-Return Tradeoff Molly ORourkes
Stock Purchase Decision FIN 402 Week 2 Assignment
Case Problem 2.1 Traditional Versus Modern
Portfolio Theory Whos Right FIN 402 Week 2
Assignment Case Problem 5.2 Susan Lussiers
Inherited Portfolio Does It Meet Her Needs FIN
402 Week 2 Assignment Case Problem 13.1 Assessing
the Stalcheckss Portfolio Performance (Part
a,b,c,d)
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FIN 402 Week 2 Assignment Case Problem 4.2 The
Risk-Return Tradeoff Molly ORourkes Stock
Purchase Decision FOR MORE CLASSES VISIT
www.fin402master.com   Case Problem 4.2 The
Risk-Return Tradeoff Molly ORourkes Stock
Purchase Decision Over the past 10 years, Molly
ORourke has slowly built a diversified portfolio
of common stock. Currently her portfolio includes
20 different common stock issues and has a total
market value of 82,500. Molly is at present
considering the addition of 50 shares of either
of two common stock issuesX or Y. To assess the
return and risk of each of these issues, she has
gathered dividend income and share price data for
both over the last 10 years (20072016). Mollys
investigation of the outlook for these issues
suggests that each will, on average, tend to
behave in the future just as it has in the past.
She therefore believes that the expected return
can be estimated by finding the average HPR over
the past 10 years for each of the stocks. The
historical dividend income and stock price data
collected by Molly are given in the accompanying
table. Questions a. Determine the HPR for each
stock in each of the preceding 10 years. Find the
expected return for each stock, using the
approach specified by Molly. b. Use the HPRs and
expected return calculated in question a to find
the standard deviation of the HPRs for each stock
over the 10-year period.
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FIN 402 Week 2 Assignment Case Problem 5.2 Susan
Lussiers Inherited Portfolio Does It Meet Her
Needs FOR MORE CLASSES VISIT www.fin402master.co
m   Case Problem 5.2 Susan Lussiers Inherited
Portfolio Does It Meet Her Needs? Susan Lussier
is 35 years old and employed as a tax accountant
for a major oil and gas exploration company. She
earns nearly 135,000 a year from her salary and
from participation in the companys drilling
activities. An expert on oil and gas taxation,
she is not worried about job securityshe is
content with her income and finds it adequate to
allow her to buy and do whatever she wishes. Her
current philosophy is to live each day to its
fullest, not concerning herself with retirement,
which is too far in the future to require her
current attention. A month ago, Susans only
surviving parent, her father, was killed in a
sailing accident. He had retired in La Jolla,
California, two years earlier and had spent most
of his time sailing.
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FIN 402 Week 2 Assignment Case Problem 13.1
Assessing the Stalcheckss Portfolio Performance
(Part a,b,c,d) FOR MORE CLASSES VISIT
www.fin402master.com   Case Problem 13.1
Assessing the Stalcheckss Portfolio Performance
Mary and Nick Stalcheck have an investment
portfolio containing four investments. It was
developed to provide them with a balance between
current income and capital appreciation. Rather
than acquire mutual fund shares or diversify
within a given class of investments, they
developed their portfolio with the idea of
diversifying across various asset classes. The
portfolio currently contains common stock,
industrial bonds, mutual fund shares, and
options. They acquired each of these investments
during the past three years, and they plan to
purchase other investments sometime in the
future. Currently, the Stalchecks are interested
in measuring the return on their investment and
assessing how well they have done relative to the
market. They hope that the return earned over the
past calendar year is in excess of what they
would have earned by investing in a portfolio
consisting of the SP 500 Stock Composite Index.
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FIN 402 Week 2 weekly Problem Set FOR MORE
CLASSES VISIT www.fin402master.com   The
Problem Set is provided to you to enable you to
practice the concepts outlined in the textbook.
Select THREE completed problems from the
assignment and post your solutions to those
problems. In your solutions, provide an
explanation as to why you choose the answer. 1.
If RF 6 percent, b 1.3, and the ERP 6.5
percent, compute Ke(the required rate of
return). 2. If in problem 1 the beta (b) were 1.9
and the other values remained the same, what is
the new value of Ke? What is the relationship
between a higher beta and the required rate of
return (Ke)? 3. Assume the same facts as in
problem 2, but with an ERP of 9 percent. What is
the new value for Ke? What does this tell you
about investors feelings toward risk based on
the new ERP? 4. Assume D1 1.60, Ke 13
percent, g 8 percent. Using Formula 75, for
the constant growth dividend valuation model,
computeP0. 5. J. Jones investment bankers will
use a combined earnings and dividend model to
determine the value of the Allen Corporation. The
approach they take is basically the
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FIN 402 Week 2 weekly Problem Set FOR MORE
CLASSES VISIT www.fin402master.com   1. (2
point) Calculate the expected return of the
following stocks using CAPM. You can use internet
websites to get Beta figures, such as Yahoo!
Finance, Google Finance, MSN Money, Marketwatch,
etc. Use 4 as the risk free rate and 6 as the
risk premium. a. Proctor Gamble (PG) b.
Microsoft (MSFT) c. Macys (M) d.
JP Morgan Chase (JPM) e. Southern Company
(SO) 2. (2 points) Look up Microsofts
financials on the internet. Sites to use include
those listed above as well as the SECs website
www.sec.gov. Select two ratios from each of the
following categories (8 calculations in total)
and show your calculations. Be sure to show the
formula and your calculations. No points will be
given if work is not shown even if you get the
correct answer. Categories a.
Profitability ratios b. Asset-utilization
ratios c. Liquidity ratios d. Debt
ratios
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FIN 402 Week 3 Assignment Case Problem 6.1 Sara
Decides to Take the Plunge FOR MORE CLASSES
VISIT www.fin402master.com   Case Problem 6.1
Sara Decides to Take the Plunge Sara Thomas is a
child psychologist who has built a thriving
practice in her hometown of Boise, Idaho. Over
the past several years she has been able to
accumulate a substantial sum of money. She has
worked long and hard to be successful, but she
never imagined anything like this. Even so,
success has not spoiled Sara. Still single, she
keeps to her old circle of friends. One of her
closest friends is Terry Jenkins, who happens to
be a stockbroker and who acts as Saras financial
advisor. Not long ago Sara attended a seminar on
investing in the stock market, and since then
shes been doing some reading about the market.
She has concluded that keeping all of her money
in low-yielding savings accounts doesnt make
sense. As a result, Sara has decided to move part
of her money to stocks. One evening, Sara told
Terry about her decision and explained that she
had found several stocks that she thought looked
sort of interesting. She described them as
follows North Atlantic Swim Suit Company.
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FIN 402 Week 3 Assignment Case Problem 6.1, 6.2,
7.1, 7.2, 8.1, 8.2, 9.2 FOR MORE CLASSES VISIT
www.fin402master.com   FIN 402 Week 3
Assignment Case Problem 6.1 Sara Decides to Take
the Plunge FIN 402 Week 3 Assignment Case Problem
6.2 Wally Wonders Whether Theres a Place for
Dividends FIN 402 Week 3 Assignment Case Problem
7.1 Some Financial Ratios Are Real Eye-Openers
FIN 402 Week 3 Assignment Case Problem 7.2 Doris
Looks at an Auto Issue FIN 402 Week 3 Assignment
Case Problem 8.1 Chris Looks for a Way to Invest
His Wealth FIN 402 Week 3 Assignment Case Problem
8.2 An Analysis of a High-Flying Stock FIN 402
Week 3 Assignment Case Problem 9.2 Deb Takes
Measure of the Market
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FIN 402 Week 3 AssignmentCase Problem 6.2 Wally
Wonders Whether Theres a Place for Dividends
FOR MORE CLASSES VISIT www.fin402master.com   C
ase Problem 6.2 Wally Wonders Whether Theres a
Place for Dividends Wally Wilson is a commercial
artist who makes a good living by doing freelance
workmostly layouts and illustrationsfor local
ad agencies and major institutional clients (such
as large department stores). Wally has been
investing in the stock market for some time,
buying mostly high-quality growth stocks as a way
to achieve long-term growth and capital
appreciation. He feels that with the limited time
he has to devote to his security holdings,
high-quality issues are his best bet. He has
become a bit perplexed lately with the market,
disturbed that some of his growth stocks arent
doing even as well as many good-grade income
shares. He therefore decides to have a chat with
his broker, Al Fried. During their conversation,
it becomes clear that both Al and Wally are
thinking along the same lines. Al points out that
dividend yields on income shares are indeed way
up and that, because of the state of the economy,
the outlook for growth stocks is not particularly
bright. He suggests that Wally seriously consider
putting some of his money into income shares to
capture the high dividend yields that are
available. After all, as Al says, the bottom
line is not so much where the payoff comes from
as how much it amounts to!
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FIN 402 Week 3 AssignmentCase Problem 7.1 Some
Financial Ratios Are Real Eye-Openers FOR MORE
CLASSES VISIT www.fin402master.com   Case
Problem 7.1 Some Financial Ratios Are Real
Eye-Openers Jack Arnold is a resident of Lubbock,
Texas, where he is a prosperous rancher and
businessman. He has also built up a sizable
portfolio of common stock, which, he believes, is
due to the fact that he thoroughly evaluates each
stock he invests in. As Jack says, You cant be
too careful about these things! Anytime I plan to
invest in a stock, you can bet Im going to learn
as much as I can about the company. Jack prefers
to compute his own ratios even though he could
easily obtain analytical reports from his broker
at no cost. (In fact, Bob Smith, his broker, has
been volunteering such services for years.)
Recently Jack has been keeping an eye on a small
chemical stock. The firm, South Plains Chemical
Company, is big in the fertilizer businesswhich
is something Jack knows a lot about. Not long
ago, he received a copy of the firms latest
financial statements (summarized here) and
decided to take a closer look at the company.
Questions a. Using the South Plains Chemical
Company figures, compute the following ratios.
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FIN 402 Week 3 AssignmentCase Problem 7.2 Doris
Looks at an Auto Issue FOR MORE CLASSES VISIT
www.fin402master.com   Case Problem 7.2 Doris
Looks at an Auto Issue Doris Wise is a young
career woman. She lives in Phoenix, Arizona,
where she owns and operates a highly successful
modeling agency. Doris manages her modest but
rapidly growing investment portfolio, made up
mostly of high-grade common stocks. Because shes
young and single and has no pressing family
requirements, Doris has invested primarily in
stocks that offer the potential for attractive
capital gains. Her broker recently recommended an
auto company stock and sent her some literature
and analytical reports to study. One report,
prepared by the brokerage house she deals with,
provided an up-to-date look at the economy, an
extensive study of the auto industry, and an
equally extensive review of several auto
companies (including the one her broker
recommended).
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FIN 402 Week 3 AssignmentCase Problem 8.1 Chris
Looks for a Way to Invest His Wealth FOR MORE
CLASSES VISIT www.fin402master.com   Case
Problem 8.1 Chris Looks for a Way to Invest His
Wealth Chris Norton is a young Hollywood writer
who is well on his way to television
superstardom. After writing several successful
television specials, he was recently named the
head writer for one of TVs top-rated sitcoms.
Chris fully realizes that his business is a
fickle one, and on the advice of his dad and
manager, he has decided to set up an investment
program. Chris will earn about a half-million
dollars this year. Because of his age, income
level, and desire to get as big a bang as
possible from his investment dollars, he has
decided to invest in speculative, high-growth
stocks. Chris is currently working with a
respected Beverly Hills broker and is in the
process of building up a diversified portfolio of
speculative stocks. The broker recently sent him
information on a hot new issue. She advised Chris
to study the numbers and, if he likes them, to
buy as many as 1,000 shares of the stock. Among
other things, corporate sales for the next three
years have been forecasted as follows The firm
has 2.5 million shares of common stock
outstanding. They are currently being traded at
70 a share and pay no dividends. The company has
a net profit rate of 20, and its stock has been
trading at a P/E of around 40 times earnings. All
these operating characteristics are expected to
hold in the future. Questions a. Looking first at
the stock 1. Compute the companys net profits
and EPS for each of the next 3 years.
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FIN 402 Week 3 AssignmentCase Problem 8.2 An
Analysis of a High-Flying Stock FOR MORE CLASSES
VISIT www.fin402master.com   Case Problem 8.2
An Analysis of a High-Flying Stock Marc Dodier is
a recent university graduate and a security
analyst with the Kansas City brokerage firm of
Lippman, Brickbats, and Shaft. Marc has been
following one of the hottest issues on Wall
Street, CI Medical Supplies, a company that has
turned in an outstanding performance lately and,
even more important, has exhibited excellent
growth potential. It has five million shares
outstanding and pays a nominal annual dividend of
0.05 per share. Marc has decided to take a
closer look at CI to assess its investment
potential. Assume the companys sales for the
past five years have been as follows Marc is
concerned with the future prospects of the
company, not its past. As a result, he pores over
the numbers and generates the following estimates
of future performance Questions a. Determine the
average annual rate of growth in sales over the
past five years. (Assume sales in 2011 amounted
to 7.5 million.)
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FIN 402 Week 3 AssignmentCase Problem 9.2 Deb
Takes Measure of the Market FOR MORE CLASSES
VISIT www.fin402master.com   Case Problem 9.2
Deb Takes Measure of the Market Several months
ago, Deb Forrester received a substantial sum of
money from the estate of her late aunt. Deb
initially placed the money in a savings account
because she was not sure what to do with it.
Since then, however, she has taken a course in
investments at the local university. The textbook
for the course was, in fact, this one, and the
class just completed this chapter. Excited about
what she has learned in class, Deb has decided
that she definitely wants to invest in stocks.
But before she does, she wants to use her
newfound knowledge in technical analysis to
determine whether now would be a good time to
enter the market. Deb has decided to use all of
the following measures to help her determine if
now is, indeed, a good time to start putting
money into the stock market Advance-decline
line New highs-new lows indicator (Assume the
current 10-day moving average is 0 and the last
10 periods were each 0.) Arms index Mutual
fund cash ratio Deb goes to the Internet and,
after considerable effort, is able to put
together the accompanying table of data.
Questions a. Based on the data presented in the
table, calculate a value (where appropriate) for
periods 1 through 5, for each of the four
measures listed above. Chart your results, where
applicable.
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FIN 402 Week 3 Weekly Problem Set FOR MORE
CLASSES VISIT www.fin402master.com   The
Problem Set is provided to you to enable you to
practice the concepts outlined in the textbook.
Select THREE completed problems from the
assignment and post your solutions to those
problems. In your solutions, provide an
explanation as to why you choose the answer. 1.
Which of the following are assumptions of the
simple CAPM model? 2. Consider the CAPM. The
risk-free rate is 6 and the expected return on
the market is 18. What is the expected return on
a stock with a beta of 1.3? 3. The market
portfolio has a beta of __________. 4. You have
a 50,000 portfolio consisting of Intel, GE and
Con Edison. You put 20,000 in Intel, 12,000 in
GE and the rest in Con Edison. Intel, GE and Con
Edison have betas of 1.3, 1.0 and 0.8
respectively. What is your portfolio beta?
27
FIN 402 Week 4 Assignment Case Problem 10.1 Max
and Veronica Develop a Bond Investment
Program FOR MORE CLASSES VISIT www.fin402master.
com   Case Problem 10.1 Max and Veronica Develop
a Bond Investment Program Max and Veronica
Shuman, along with their teenage sons, Terry and
Thomas, live in Portland, Oregon. Max is a sales
rep for a major medical firm, and Veronica is a
personnel officer at a local bank. Together they
earn an annual income of around 100,000. Max has
just learned that his recently departed rich
uncle has named him in his will to the tune of
some 250,000 after taxes. Needless to say, the
family is elated. Max intends to spend 50,000 of
his inheritance on a number of long-overdue
family items (like some badly needed remodeling
of their kitchen and family room, the down
payment on a new Porsche Boxster, and braces to
correct Toms overbite). Max wants to invest the
remaining 200,000 in various types of
fixed-income securities. Max and Veronica have no
unusual income requirements or health problems.
Their only investment objectives are that they
want to achieve some capital appreciation, and
they want to keep their funds fully invested for
at least 20 years. They would rather not have to
rely on their investments as a source of current
income but want to maintain some liquidity in
their portfolio just in case. Questions
a. Describe the type of bond investment program
you think the Shuman family should follow. In
answering this.
28
FIN 402 MASTER Making Decisions/fin402master.com

• FOR MORE CLASSES VISIT
• www.fin402master.com