Answer the following questions:
1-1: How much each of the company’s investment package is going to deliver at your retirement at the end of 10th year?
1-2: Out of the 4 investment packages offered by 4 different companies, which company’s investment package should you accept? Explain your arguments for selecting the investment package for you.
(Hints: any difference less than $200.00 should be ignored, i.e. if one investment package’s final value is $20,000.00 and other one has a value of $20,100.00 (so the difference is less than $200.00), you should be indifferent between them.)
Solution format instruction:
Excel solution is not acceptable for this problem;
Draw a time line and assign all necessary information associated/linked to each timeline irrespective of whichever calculator are you using (financial or scientific);
Answer/solution should be produced in the 3 step answering format suggested in the “final exam preparation and instructions” guide posted in “Assessment” folder under “resources” on MAF702 cloud page. Two separate 3 step answering formats are suggested for financial calculator and scientific calculator users. Please follow the format, you will have to follow the same format to answer questions in the final exam.
The following Questions (2-1 to 2-3) are based on the following paper
“Information Paper- Domestic systemically important banks in Australia, December 2013”
“D-SIB indicators are included in any assessment methodology for determining systemic importance, they should primarily relate to ‘impact of failure’ measures as opposed to ‘risk of failure’ measures.”
2-1 Why the “impact of failure” is considered more important than the “risk of failure” by the Regulators?
2-2 How is the “impact of failure” measured for Australian banks?
“the four major banks are systemically important, which imposes a negative externality on the domestic financial system. Significant and protracted difficulties in any one of them would have severe repercussions for the entire financial system and, in turn, the real economy.”
2-3 Do you agree or disagree with this statement? Analyse Figure 1 to 7, take the data of four major banks and prepare a comparative status of their performances to support your answer.
[Hint: In addition to reading the above paper, you are encouraged to do additional research, can use additional resources from Web. You can use Tables, graphs, chats, diagrams or any other form of tools you find them necessary to support your answers]