Part A:    Using examples, explain following  “ in terms of  how these are used for financial planning”.

attached retrenches and each one need to be around page

a.     Asset allocation

b.     Rule of 100x

c.      Dollar averaging

d.     Fund expense ratios

e.     Fund Standard deviation

f.      Fund Beta

g.     Portfolio beta

Part B:  Planning problems using Excel

1.     Mortgage payments :

·       Loan amount : $200,000

·       Interest rate (annual): 4.00 %

·       Term : 30 years

·        Calculate

                                               i.     monthly payments:  ( Hint : Rate and number of periods should be adjusted for monthly)

                                              ii.     Total  interest amount over the life of the loan

2.     In reference to (1, above).

a.     Calculate PMT ( Monthly payments) if you want to pay of the above loan in 20 years

b.     How much less interest will you pay  over the life of the loan ( versus paying in 30 years)

3.     Mary is 30 years old and has $ 20,000 in her investment account equally spread in two funds and plans to add additional $ 2000 in each fund

·         Fund A :

                                                               i.      Current amount : $ 10,000

                                                             ii.       Historical performance , 10 year average : 6.5 %

                                                            iii.      $2000 added ever year

·         Fund  B  :

                                                               i.      Current amount : $ 10,000

                                                             ii.       Historical performance , 10 year average : 5 .5 %

                                                            iii.      $2000 added ever year

·         Calculate ( using 10 year average performance) amount in each fund, and total portfolio  at      end of 10 years, 20 years and 30 years

4.     Jane is 40 years old and has $ 50,000 in her investment  account equally spread . And she plans to put in $ 2000 every  year in each of the two funds .

·       Fund A :

                                               i.     Current amount : $ 25,000

                                              ii.     Historical performance , 10 year average : 8.5 %

                                             iii.     Fund beta : 1.2

                                             iv.     $2000 added ever year

·       Fund  B  :

                                               i.     Current amount : $ 25,000

                                              ii.      Historical performance , 10 year average : 4 .5 %

                                             iii.     Fund beta : 0.5

                                             iv.     $2000 added ever year

a.     Using ten year average performance, calculate amount in each fund, and total portfolio  at end of 10 years, 20 years and 30 years

b.     Calculate portfolio beta at 10 year, 20 years and 30 years  ( Hint : Portfolio beta  is weighted average beta . Covered in Std deviation and Beta lectures…. recorded lecture for Beta)

5.     Calculate Bond price; ( 10 % of this assignment )

a.     Par : $1000

b.     Yield maturity : 6.0%

c.      Term left till maturity : 22 years

d.     Coupon rate : 5 %

e.     Bond Price : ?

6.     In reference to above ( # 5) ( 5  %  of this assignment)

a.     Is the Bond being sold at discount or premium. Explain your answer.

7.     Calculate Bond Yield to maturity RATE ( 10 % of this assignment) )

a.     Bond Price : $ 1050

b.     Par : $ 1000

c.      Term to maturity 22 years

d.     Coupon rate : 4 %

e.     Yield to maturity Rate : ?

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