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Unformatted text preview: OFFICE USE ONLY AFF3121 Dr Wicky J Wickramanayake Page 1 of 8 Monash University Semester Two Examination 2008 Faculty of Business and Economics Department of Accounting and Finance EXAM CODES: AFF3121 TITLE OF PAPER: INVESTMENTS AND PORTFOLIO MANAGEMENT EXAM DURATION: 3 h o u r s w r i t i n g t i m e READING TIME: 1 m i n u t e s THIS PAPER IS FOR STUDENTS STUDYING AT: (office use only - tick where applicable) ¡ Berwick ¡ Clayton ¡ Peninsula ¡ Distance Education ¡ Open Learning ; Caulfield ¡ Gippsland ¡ Sunway ¡ Enhancement Studies ¡ Other (specify) During an exam, you must not have in your possession, a book, notes, paper, calculator, pencil case, mobile phone or any other material/item which has not been authorised for the exam or specifically permitted as noted below. Any material or item on your desk, chair or person will be deemed to be in your possession. You are reminded that possession of unauthorised materials in an exam is a disciplinable offence under Monash Statute 4.1. AUTHORISED MATERIALS CALCULATORS ; YES ¡ NO (Permitted calculators: Citizen SRT-135, Casio FX82MS scientific calculator, the Casio FX82AU scientific calculator, and Sharp EL-735 financial calculator, or calculators with an 'approved for use' Faculty label) OPEN BOOK ¡ YES ; NO SPECIFICALLY PERMITTED ITEMS ¡ YES ; NO if yes, items permitted are: This paper consists of six (6) questions, one (1 ) formulae sheet and one (1) Normal Distribution Table printed on a total of eight (8) pages . The total marks available in the examination are 120. This examination constitutes 70% of the total assessment for this unit. Students should attempt ALL questions on this examination paper. To be eligible for a pass in this unit, students must earn a minimum of 50% in the final examination. PLEASE CHECK THE PAPER BEFORE COMMENCING. THIS IS A FINAL PAPER. STUDENT ID: ¡¡¡¡¡¡¡¡¡¡... DESK NUMBER: ¡¡¡¡¡¡¡¡. THIS EXAMINATION PAPER MUST BE INSERTED INTO THE ANSWER BOOK/S AT THE COMPLETION OF THE PAPER OTHERWISE A FAIL MAY BE RECORDED OFFICE USE ONLY AFF3121 INVESTMENTS AND PORTFOLIO MANAGEMENT AFF3121 Dr Wicky J Wickramanayake Page 2 of 8 Question One Tim and Sandra Watson, U.S. residents, are reviewing their financial plan. The Watsons, both aged 53, have one daughter, aged 18. With their combined after-tax salaries totalling $100,000 a year, they are able to meet their living expenses and save $25,000 after taxes annually. They expect little change in either their incomes or expenses on an inflation-adjusted basis other than the addition of their daughter¡s college expenses. Their only long-term financial goal is to provide for themselves and for their daughter¡s education. Both Watsons wish to retire in ten years....
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