1.
A description of each of the 10 mutual funds to include, investment objective, inception date, minimum investment, fund family, fund manager(s), how long the manager(s) has been in place, annual turnover of the fund, fees (front, back, management fee, 12b-1). Explain what each of these terms means in simple terms. (5 points)
Front-end load
Often associated with class 'A' shares of a mutual fund. Also known as Sales Charge, this is a fee paid when shares are purchased. Also known as a "front-end load," this fee typically goes to the brokers that sell the fund's shares. Front-end loads reduce the amount of your investment. For example, let's say you have $1,000 and want to invest it in a mutual fund with a 5% front-end load. The $50 sales load you must pay comes off the top, and the remaining $950 will be invested in the fund. The Maximum sales load under the Investment Company Act of 1940 is 9%. The maximum sales load under NASD Rules is 81⁄2%.
Back-end load
Associated with class "B" mutual fund shares. Also known as Deferred Sales Charge, this is a fee paid when shares are sold. Also known as a "back-end load," this fee typically goes to the Stockbrokers that sell the fund's shares. Back-end loads start with a fee about 5 to 6 percent, which incrementally discounts for each year that the investors own the fund’s shares. The rate at which the fee declines is disclosed in the prospectus. The amount of this type of load will depend on how long the investor holds his or her shares and typically decreases to zero if the investor holds his or her shares long enough.
2.
Descriptive statistics for each of the 10 mutual funds to include, average return over the past 10 years, standard deviation of returns (population)[p129](divided by n), correlation among the 10 funds over the 10 year period, covariance of the 10 funds over the 10 year period. [P270] Explain what each of these terms means in simple terms. (10 points)
The standard deviation is a measure of variability which is used as the standard measure of the total risk of individual assets and portfolios of assets. There are two variants of standard deviation: population and sample. The sample standard deviation is used when working with historical returns, as they are deemed to be samples unless 100% of the data points
LITERATURE REVIEW OF INVESTMENT APPRAISAL METHODS What is meant by investment appraisal practices? The investment appraisal process includes the generation of ideas, assessment and authorization, implementation and control of the project (Dennis R. Young, 2007). Decision-making is increasingly more complex today because of uncertainty. Additionally, most capital projects involve numerous variables and possible outcomes. For instance, estimating cash flows associated with a project involves working…
return on an investment or project is the "annualized effective compounded return rate" or "rate of return" that makes the net present value (NPV as NET*1/(1+IRR)^year) of all cash flows (both positive and negative) from a particular investment equal to zero. In more specific terms, the IRR of an investment is the discount rate at which the net present value of costs (negative cash flows) of the investment equals the net present value of the benefits (positive cash flows) of the investment. IRR calculations…
possible future investments or projects the company will be embarking on. It is important that there is a set plan in place and procedures so that management can have a way to evaluate how beneficial a new project will be. New projects are often introduced to management by consumers and existing customers. Also, new innovation often leads management to discover the need to take on a new project. After deciding to take on the project management must determine the cost of the new project and the financial…
high-sulfur coal. Bethesda is considering operating a new strip mine in Ohio on 5,000 acres of land it purchased 10 years ago for $5,300,000. Bethesda is currently operating at full capacity and if this project is undertaken will need to purchase additional equipment that will cost $34,000,000. The project…
and makes recommendations based on that information”. It is crucial for companies to use financial modeling during developing a new business project. A financial model can show whether a future project will be profitable or not, how much money it needs to invest, will it be need for investing some other additional investments and what is the sum of these future investments. What are the future cash inflows and outflows will be in each particular year from the implementing year. In what period investors…
brand which was introduced in 1901 is known for its safety razors. Over the past century the company has made many changes including its merger with Procter and Gamble. Today Gillette is considering the production of a new safety razor. This project will present the pros and cons of this new razor and review the cost and profits, if any, if this new razor actually goes into production. Gillette has a strong hold on the disposable razor market; therefor, one major consideration is how many existing…
Table of Contents I. Introduction 2 Company Strategy and Goals 2 Capital Allocation and Investment Appraisal Methodology 2 II. Evaluation of the Investment Appraisal Techniques for BHP Billiton 4 Evaluation of Net present Value (NPV) Method 4 Evaluation of Internal Rate of Return (IRR) Method 6 Recommendations to BHP Billiton Regarding Investment Appraisal Metrics 7 III. References 10 Introduction BHP Billiton is one of the world’s leading natural resources companies, operating in more than…
Name: Ruixuan Cao Professor’s name: Dr. Wright Course: AF 211 Accounting for Planning and Control Managers in making investment decisions are faced with the problem of limited resources. This, therefore, necessitates an understanding of the topic of capital budgeting. Capital budgeting is the process of determining and pursuing investments which cash flows are expected in the future period usually more than a year. It entails the decision on the acquisition of new assets or equipment that…
Capital Budgeting Presentation Investment Opportunity Analysis Type your name Net Cash Flow For Second Year When There is No Depreciation Net cash inflow is the difference between a company’s cash inflow and outflow (expenses). If all the expenses are same as describe in the scenario except there is no depreciation, the correct net cash inflow for the second year would be $525,000[(3,100,000-2,400,000) (1-0.25)]. This change in cash flow due the tax shield on depreciation which lessens the tax…