A business negotiated a 30-year fixed-rate mortgage, borrowing $200,000. The mortgage interest rate is 9.00% per annum, compounded monthly. The business builds a factory with the proceeds of this mortgage loan but has to add an additional 20% of its own money for this project. This loan will be repaid in equal instalments over the term of the loan. 

Answer these questions by showing all your workings and the answer clearly. You must use your financial calculator and show the relevant input using suitable symbols. 

 (i) What is the amount of the business' monthly repayment? 

 (ii) How much interest would be paid on this loan in total? 

 (iii)Calculate and show the amount(s), at the end of one year after taking the loan, to be presented in the balance sheet of the business. 

 

 One choice that must be confronted by all investors, individual as well as institutional, is the degree to which the portfolio will be actively versus passively managed. Managed fund managers can use two different investment styles - active management and passive management. Contrast active management versus passive management as investment styles of fund managers. In your evaluation, consider the role of their beliefs about market efficiency. 

In your answer, you must consider the fund management styles in a way to highlight differences (contrast) between the two styles. You should also consider the role of a belief in efficient markets or otherwise applied to each management style. 

 

 

 "The management of risk is an essential element of the Bank's strategy and profitability and the way the Bank operates. The Board being ultimately responsible for risk management associated with the Bank's activities, has established integrated governance and accountability framework, policies and controls to identify, assess, monitor and manage risk." Source: Bendigo and Adelaide Bank Limited, Annual Report 2008, page 139. 

Evaluate two risks for a bank that arise due to its operating activities. 

Explain how the bank can manage or control each of these two risks.