Jane, age 37, has £40,000 to invest in a fixed-income security. She has invested in various types of bonds for 10 years, she considers herself to be an aggressive investor, and she is in the 28% marginal income tax bracket. Her primary goal is capital appreciation; income is a secondary consideration.

Q (i)

In a sign of growing anxiety among policymakers, the Bank for International Settlements (BIS), the so-called central banks’ bank, warned on Monday (7th December 2020) of the “daylight” between elevated valuations and persistently uncertain economic conditions. “While markets have moved in the right direction in response to news about the vaccine, they are above or close to the levels that prevailed before the pandemic when questions about overstretched valuations were already present,” said Claudio Borio, head of the BIS monetary and economic department. Critically assess how the financial markets globally reacted to the news of the Covid-19 vaccine.                                                                                                               (30 marks)

 

Q (ii)Returns to Buying Winners and Selling losers have implications for stock market efficiency.” Critically assess what investors should be doing to maximise their total return.                                                                                                                    (30 marks)

 

Q (iii)

 

“According to International Monetary Fund (IMF) Director: Leading Cryptos Bitcoin (BTC), Ethereom (ETH) and Ripple’s can lead a cashless Society. Critically assess whether crypto industry is developing faster than others or is just a ‘passing fad’.                                (30 marks)

 

 

                                                                                                   (Section ‘A’ Total 60 marks)

 

SECTION B             Answer all questions in this section

 

Q2

Using the resources available in your domestic investment environment select any 4 bonds issued by Government and corporations relevant to you.

 

a). Determine the current yield and yield-to-maturity for each bond.                         (8 marks)

 

b). Evaluate the investment implications of yield curves.                                            (6 marks)

 

c). Explain factors that affect the price, yield or duration of fixed income securities. (6 marks)                                                                                                                        

                                                                                                                                  (20 marks)

 

Q3 You are a portfolio manager for Jane and John:

(i)            Jane, age 37, has £40,000 to invest in a fixed-income security. She has invested in various types of bonds for 10 years, she considers herself to be an aggressive investor, and she is in the 28% marginal income tax bracket. Her primary goal is capital appreciation; income is a secondary consideration.

 

(ii)          John, age 65, is retiring and has £150,000 to invest. He is interested in purchasing fixed-income securities to provide for his income needs during retirement. John will not have any other substantial income, and he will be in the 15% marginal income tax bracket. He has invested in bonds in the past, and he plans to be actively involved in this investment.

Required:

(a)   Explain Green bonds and critically discuss their advantages and disadvantages. What type of investors invest in green bonds?                                                      (10 marks)

                                                                                                   

(b)  Explain pandemic bonds? Will you recommend these to Jane and John?         (2 marks)

 

(c)   Discuss the kind of securities is appropriate for Jane and John. (Consider type, risk rating, marginal tax bracket, term, and other relevant factors.) 

                                                                                                                                     (8 marks)

                                                                                                                       (Total 20 marks)

 

       (Section ‘B’Total 40 marks)

                                                                                                            

                                                                                                                    [Total 100 marks]

 

 

 

Grading

 

These are not tablets of stone but a marking guide. Students are often original and so something not covered here can still be awarded a grade appropriate to the academic content.

 

 

Mark

Content

70+

Excellent

Excellent work which demonstrates authoritative grasp of the concepts, methodology and content appropriate to the subject discipline. Using credible financial and academic sources, it is superbly presented and coherent, indication of originality in the application of ideas, in synthesis of material or in performance; personal insights reflecting depth and confidence of understanding and real critical analysis. There is evidence of extensive research beyond the immediately relevant literature, and financial knowledge with superb research evidence based content throughout. Work is well structured and presented with full referencing.

60-69

Very Good

Very good work which demonstrates sound level of understanding based on a grasp of relevant concepts, methodology and content; displays skill in interpreting and analysing complex material. There is consistent evidence of independent inquiry and judgement in selecting, ordering, analyzing and evaluation. The material is well organised and referenced using the Harvard style of referencing.

50-59

Good

Work that demonstrates a coherent response to the requirements of the coursework and has a clear expression of ideas. It uses relevant source material and demonstrates some understanding of the concepts. There is some evidence of independent inquiry and judgement in selecting, ordering, analyzing and evaluation. The student draws relevant conclusions, the work organised and some referencing.

40-49

Unacceptable

Marginal fail. Recognisable if limited awareness of the requirements of the coursework. There is limited application of some appropriate theory, limited attempt at analysis, but with a reliance on descriptive superficial evidence based content. There is some evidence of some understanding. There is some attempt to draw relevant conclusions. May be condonable is stronger performance on one aspect of the work compensates for weaker work elsewhere.

35-39

Unacceptable

Unsatisfactory but showing some understanding.

0-34

Unacceptable

A poor attempt

Little evidence of understanding or application.

aa

 

APA

 

 

 

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The post Jane, age 37, has £40,000 to invest in a fixed-income security. She has invested in various types of bonds for 10 years, she considers herself to be an aggressive investor, and she is in the 28% marginal income tax bracket. Her primary goal is capital appreciation; income is a secondary consideration. appeared first on Apax Researchers.

Jane, age 37, has £40,000 to invest in a fixed-income security. She has invested in various types of bonds for 10 years, she considers herself to be an aggressive investor, and she is in the 28% marginal income tax bracket. Her primary goal is capital appreciation; income is a secondary consideration.
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