question archive Provide the answers of the questions given at the end of this case Ms Sania Mirza's investment goal is to buy a home within 1 years
Provide the answers of the questions given at the end of this case Ms Sania Mirza's investment goal is to buy a home within 1 years
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Provide the answers of the questions given at the end of this case
Ms Sania Mirza's investment goal is to buy a home within 1 years. She is looking for a two-bedroom house for around $250,000. Sania mentioned to a workmate (Shoaib Malik) who is a stock broker at Geo securities limited, that she has already saved over $120,000 in a form of term deposit at national saving institute providing her 10% annual returns after tax and all deductions. Further Sania says she can achieve her goal comfortably by keeping her money in an accessible online savings bank account earning a good rate of interest (8%).
Her workmate (Shoaib Malik) doesn’t understand why she doesn't try to fast-track things by investing the money in the share market. 'Shares can go up by 20% in a year,' he says.
Sania reply this Question as "I am already keeping an eye out for properties. It's important to me that I can withdraw my money immediately, if the right house comes up for sale. It might happen this year; or it might not happen for a year or two." Further she mentioned that she can easily save $ 10,000 per year.
Sania is a smart qualified working lady She knows that with her income, banks or HBFC (House Building Financial corporation) may offer her a long term loan. But according to her she is not willing to take any long term loan but if someone provide her a flexible saving plan she can adopt it very quickly.
Suddenly she meet an old and experienced Mutual fund(MF) manager(Ms Momo working with with National commodity exchange) guiding her to invest his money in an open ended(OEMF) or closed ended mutual funds(CEMF) for this purpose. Ms Momo also mentioned that OEMF always having a fixed maturity period and CEMF do not have any maturity period but listed and traded at stock Market.
1. Can Sania achieve his goal with his existing savings and salary only? Support your answer by providing appropriate reasons or calculations.
2. List down the names of Long-term and short term financial institutions used in this study
3. List down the names of Long-term and short term instruments used in this study.
4. According to you should Sania go for the MF. (If yes provide reason for selecting CEMF or OMEF, If No provide reason Why Not)
5. Ms Sania meet stock broker(Shoaib Malik) and an MF manager(Momo) Both advises her to invest his savings by providing different options for saving but no one offered her a short term loan in order to meet her goal, Why? (Provide reason in your own)
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i) Ms sania is planning to buy a house worth $250,000.
her present savings are $120,000
At present she is short of $130000
Scenario 2:-
If she gets the house next Year
the Situtaion will not be win win for her even for Next Year as she will be able to gnerate following additional Return:-
Interest on Savings $12,000
Yearly Savings $10,000
Total= $22,000
Then also She will Have to go for external Finacing for Buying the house.
ii) National Savings Institute
Banks or HBFC (House Building Financial corporation)
Stock Exchange
National commodity exchange)
iii) Term Deposits at National Saving Institute
Shares
Open Ended Mutual Funds
Closed Ended Mutual Funds
Long Term Loan
iv
Mutual Funds are less risky than trading self on Stock Exchange as they are managed by professionals and highly qualified professionals.So rather than investing self on stock exchange mutual Funds are better options to go for but Also mutual funds are subject to market Risk. They do not provide guranteed Retrurns. At present she is able to Secure 8% on Savings Account as well which is a good secured return.
And CLosed Ended Mutual Fund comes with a liquidity facility as they are traded so money wont get blocked in these types of fund. But At present it not feasible for Ms Sania to invest funds in mutual funds as they are good for long term investment anytime. Mutual Fund deducts allocation fees and entry load at starting and also their is no promise to return.As Mutual Funds provide good returns in long Term and no so good for short term investments.
So rather than Investing in Mutual Fund she should go for bank deposit.
v) AT present MS. Sania is not in need of Loan as she has not yet Purchased a house and she is looking for better option where she can invest money and get good returns. but the options provided by both doesnt provide assured returns. At present she is not in a situation that she invest in riskier funds or block money.
