You are on the Investment Committee (IC) attending the meeting on October 3, 2008.

1. What is your overall assessment of the endowment situation? What would you ask the CIO to assess in more detail?

2. The target percentage for cash was 0.0%. Does this make sense to you?

3. Should the IC continue its current commitment pace to build out the new private equity allocation strategy? Why or why not?

4. What effect will the financial crisis have on the PIF’s liquidity in your estimation?

Information:

- The endowment distributes approximately $2.25 million per month to the College to support the general operating budget and cash to fund this transfer had historically been provided by new endowment gift inflows and monthly interest/dividend distributions, i.e., not through liquidation of endowment assets.

- Given the current level of outstanding unfunded capital commitments to private equity funds, it can be assumed that the College will receive $2-3 million of capital call notices per month. Over the past several years, the capital distributions from mature private equity funds have well outpaced new capital calls.

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 8%. The probability distribution of the risky funds is as follows:

The correlation between the fund returns is 0.12.

a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

a-2. What is the expected value and standard deviation of its rate of return? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

You want to borrow $24,500 for a new car. If the interest rate is 4.5% compounded monthly for a five-year (60 month) loan, what amount will your monthly payment be?

8% seminannual coupon corp. bond which matures on Feb 14th 2025, is purchased for settlement on April 15th 2014. The yld to maturity is 6.333% quoted on a street convention semiannual bond basis (APR2). Accrued interest = 30/360 day count convention.

(a) What is the flat (clean) price of the bond on the SDT? (use the BA II Plus BOND spreadsheet)

(b) What is the accrued interest on the SDT? (use the BA II Plus BOND spreadsheet)

(c) How many days are there (“T”) in the current coupon period?

(d) How many days are there (“t”) between the last coupon date and the SDT?

Compute the NPV for Project M if the appropriate cost of capital is 9 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.)

Should the project be accepted or rejected?

1. You wish to save $3500 at the end of 5 years by depositing in$200 into your savings account today, $400 in 1 year, $600 in 2 years, $800 in 3 years, and $900 in 4 years. What interest rate must you earn to reach to goal? Express your answers as a percentage. (Enter only numbers and decimals in your response. Round to 2 decimal places.)

2. You deposit $100 into your savings account today, $200 in 1 year, $300 in 2 years. How much will you be able to withdraw at the end of 3 years if the interest rate is 6%? (Enter only numbers and decimals in your response. Round to 2 decimal places.)

Please show how I could enter it into a TI84 calculator and what formula used on paper so I can learn from it. Thanks in advance!

Mr Tommy Tan is considering starting an organic food retail business in Singapore. He targets to have 8 retail outlets island-wide by end 2021. To maintain its target capital structure, the firm estimates that it will need to borrow $10 million to finance this growth. As the firm is tight on cash, it prefers to repay the loan in full only at the end of 10 years and only wants to service the interest on an annual basis.

The firm has approached several banks in the Singapore and 2 banks have signalled interest to be its main financier. JuneBank proposes an annual interest rate of 6.9% and the underwriting spread is 2%. BHR Bank offers the loan at an annual interest rate of 6.5% and the underwriting spread is 2.9%.

(a) What is the effective cost of borrowing from JuneBank?

(b) What is the effective cost of borrowing from BHR Bank?

(c) Using the estimations in (a) and (b), determine the bank that the firm should borrow from. (1 mark)

Herman has a honey bee hive. The hive starts with a population of 50,000 bees, but because of environmental stresses the population decreases by 10% every year. Each bee lives exactly one season, and produces 1 gram of honey over its lifetime.

a) How many bees are left at the end of the fifth year?

b) How much total honey does the hive produce over five years?

Krawczek Company will enter into a lease agreement with Heavy Equipment Co. where Krawczek will make lease payments over the next five years. The lease is cancelable and requires equal annual payments of $28,800 per year beginning on January 1 of the first year. The last payment will be January 1 of year 5, and Krawczek will continue to use the asset until December 31 of that year. Other important information includes the following:

• The fair value of the equipment is $195,000.
• The applicable discount rate is an 8 percent annual rate.
• The economic life of the asset is 10 years.
• Krawczek does not guarantee the residual value of the asset at the end of the lease, and it does not expect to keep the asset at the end of the term.
• The asset is a standard piece of equipment.

a. Is the lease an operating lease or a financing lease?

• Operating lease

• Financing lease

b. What will be the lease expense shown on the income statement at the end of year 1?

c. What will be the interest expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.)

d. What will be the amortization expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.)

Please search case study “Orange County Bankruptcy” in Google. First, do some self-learning, and then write an essay to give me some directions on:

1. Who is Robert Citron? (1 mark)
2. What was the Orange County Governance Structure? (1 mark)
3. What was the political and economic background before the bankruptcy? (1 mark)
4. What was the Orange County Investment Pool and balance sheet (1994)? (1 mark)
5. What was Citrons Strategy? (1 mark)
6. How the Fed action affects the interest rate in 1994? (1 mark)
7. Describe the crisis following the Fed action. (1 mark)
8. Describe the outcomes. (1 mark)
9. Finally what are the lessons to learn? (1 mark)
10. Please list all the references. (1 mark)

Healthcare Financing reference cite needed

Discuss the differences between second-party payment and third-party
payment. What led to the creation of the third-party payment system?

 ​(Bond valuation)  ​Pybus, Inc. is considering issuing bonds that will mature in 18years with an annual coupon rate of 8percent. Their par value will be ​$1 comma 000

​,and the interest will be paid semiannually. Pybus is hoping to get a AA rating on its bonds​ and, if it​ does, the yield to maturity on similar AA bonds is 7.5

percent. ​ However, Pybus is not sure whether the new bonds will receive a AA rating. If they receive an A​ rating, the yield to maturity on similar A bonds is 8.5

percent. What will be the price of these bonds if they receive either an A or a AA​ rating?

Below are the prices on the first and last day of the year for Netflix common stock for several recent years.

Netflix paid no dividends over this period. Calculate the return that an investor would have earned in each calendar year. What is the average of these annual​ returns? Next, calculate the average annual growth rate in Netflix stock from the first day of 2014 to the last day of 2017. Compare these two answers.

The rate of return for 2017 is _____​%. ​(Enter as a percentage and round to the nearest whole​ percent.)

The rate of return for 2016 is _____​%.​(Enter as a percentage and round to the nearest whole​ percent.)

The rate of return for 2015 is _____​%. ​(Enter as a percentage and round to the nearest whole​ percent.)

The rate of return for 2014 is _____​%.​(Enter as a percentage and round to the nearest whole​ percent.)

The average of these returns is _____​%.​(Enter as a percentage and round to two decimal​ places.)

The average annual growth rate is _____% ​(Enter as a percentage and round to two decimal​ places.)

Suppose you just have had your 55th birthday and you plan to retire in five years. As far as your retirement goal is concerned, all you want is to maintain your living standard at the same level as when you start your retirement. You expect to “stick around” until 90 and you plan to leave nothing to no one”. Therefore, your “sole” concern is maintaining your living standard during your retirement years.
Your current living expense per month is $20,000 (which include everything that you can possibly lay your fingers on) and you expect it to go up in exactly the same pace as the Composite CPI (Of Hong Kong) The average yearly rate of increase of the index for the next five years is 3% You do, however,
expect the index to pick up its (yearly) pace afterwards (indeed, throughout your entire retirement period) by 2 percentage points. That is, the expected yearly inflation rate as measured by the CPI is 5% per year during your retirement years.

To facilitate the planning of your retirement, you listed out the following relevant questions which you would like to think over’
a) To achieve your “sole” retirement goal, how much money do you need at the beginning of the first
year, 10th year and the last year of your retirement period [Note that as the expected inflation rate
provided in the question is assumed to be yearly, simply assume the overall price level remains unchanged throughout each year BUT jumps at the end of the year (i.e., at the beginning of the coming year],

b) i) State the approximate and exact relationships between nominal rate of return, real rate of return and (expected) inflation rate. What is the name of this relationship?

ii) Given the inflation figures provided in the question, what is the average yearly investment rate of return (based on the exact relationship in part (i)) that you need to achieve to maintain your living standard during the retirement years? (3 mans)

c) Using the PVA formula. estimate how much money do you need to have in your investment account at the beginnlng of youf retirement to achieve your “sole” retirement goal lF the expected yearly investment return is
- 7%
- 10%
- 40%

[Note: Marks would only be given for using the PVA formula in the calculations. Although some of you may be tempted to use the present value growing annuity formula (which was NOT covered in the lFM course) to answer this question, I would strongly urge you NOT to use that formula Instead, please draw on the insights derived from Part (bi) above to construct the relevant equation and carry out the calculations ]

d) Based on your answer to Part (c) above, what conclusion can you draw with respect to the relationships between (i) nominal cash flow, (ii) real (inflation-adjusted) cash flow, (iii) nominal interest rate and (iv) real interest rate when using the PVA formula to answer Part (c)*