Tunku Abdul Rahman University College, Kuala Lumpur
IFA
ABMF 3043

Spring 2014
Statement of Financial Position as at 31 Dec 2013 (INTERNAL)
$
Noncurrent assets
Building, at cost
Equipment, at cost
Less: Accum. Depreciation
Motor vehicles, at cost
Less: Accum. Depreciation
$
$
110,500
8,000
(3,600)
17,200
(8,160)
Current assets
Inve
Tunku Abdul Rahman University College, Kuala Lumpur
IFA
ABMF 3043

Spring 2014
Investment Consideration
1. What is the difference between a Trading account and CDS account?
CDS account is similar to a bank account except that bank account will hold your cash
whereas CDS hold your shares. Since there is no physical delivery of shares
Tunku Abdul Rahman University College, Kuala Lumpur
IFA
ABMF 3043

Spring 2014
ABMF3043 Investment & Financial Analysis
Tutorial 9 Answer
1) Define yield to maturity (YTM), How is YTM determined? What does it mean to say that
YTM is a promised yield?
Yield to maturity (YTM) is defined as the indicated (promised) compounded rate of
a
Tunku Abdul Rahman University College, Kuala Lumpur
IFA
ABMF 3043

Spring 2014
ABMF3043 Investment & Financial Analysis
Tutorial 4 Answer
1) What common assumptions do the CAPM and APT share? How do they differ in assumptions?
Unlike the CAPM, APT does not assume:
1. a singleperiod investment horizon
2. the absence of taxes
3. borr
Tunku Abdul Rahman University College, Kuala Lumpur
IFA
ABMF 3043

Spring 2014
ABMF3043 Investment & Financial Analysis
Tutorial 2 Answer
1) How is expected return for one security determined? For a portfolio?
The expected return for one security is determined from a probability distribution consisting of the likely
outcomes, and th
Tunku Abdul Rahman University College, Kuala Lumpur
IFA
ABMF 3043

Spring 2014
ABMF3043 Investment & Financial Analysis
Tutorial 10 Answer
1) List two of the most important reasons for U.S. investors to purchase foreign bonds?
Diversification has always been a justification for U. S. investors to buy any foreign securities,
stocks o
Tunku Abdul Rahman University College, Kuala Lumpur
IFA
ABMF 3043

Spring 2014
ABMF3043 Investment & Financial Analysis
Tutorial 6 Answer
1) Why should investors be concerned with GDP growth?
Real GDP is the single best measure of overall economic activity. If growth in GDP slows, as it did by
the end of 2000, corporate revenues wil
Tunku Abdul Rahman University College, Kuala Lumpur
IFA
ABMF 3043

Spring 2014
ABMF3043 Investment & Financial Analysis
Tutorial 5 Answer
1) What is meant by the intrinsic value of stock? How can a stocks intrinsic value be determined?
In fundamental analysis, the intrinsic value of a stock is its justified price; that is, it is the
Tunku Abdul Rahman University College, Kuala Lumpur
IFA
ABMF 3043

Spring 2014
ABMF3043 Investment & Financial Analysis
Tutorial 3 Answer
1) How do lending possibilities change the Markowitz model? Borrowing possibilities?
Lending possibilities change part of the Markowitz efficient frontier from an arc to a
straight line. The
strai
Tunku Abdul Rahman University College, Kuala Lumpur
IFA
ABMF 3043

Spring 2014
ABMF3043 Investment & Financial Analysis
Tutorial 11 Answer
1) What is a derivatives instrument? How is it different from stocks and bonds?
A derivative instrument is a financial asset that derives its value from its underlying asset. The
underlying asset
Tunku Abdul Rahman University College, Kuala Lumpur
IFA
ABMF 3043

Spring 2014
ABMF3043 Investment & Financial Analysis
Tutorial 1 Answer
1) For each of the following issues, indicate whether the price of the issue should be par value, above par
value, or below par value.
a.
b.
c.
d.
e.
Issue
Coupon rate
A
B
C
D
E
7 %
8 3/8 %
0%
5 7
Tunku Abdul Rahman University College, Kuala Lumpur
IFA
ABMF 3043

Spring 2014
ABMF3043 Investment & Financial Analysis
Tutorial 7 Answer
1) What is the dividend discount model? Write this model in equation form. What problem are
encountered using this model?
The Dividend Discount Model is a widely used method to value common stocks
Tunku Abdul Rahman University College, Kuala Lumpur
IFA
ABMF 3043

Spring 2014
ABMF3043 Investment & Financial Analysis
Tutorial 12 Answer
Compare the following option positions using relevant (i) payoff diagram; (ii) breakeven price; and (iii)
maximum profit and loss.
a)
Buy a Call option with an exercise price of RM10 at RM0.20 pr