Question
a) Kavi deposits $2,000 every three months into an investment account that pays 5.0% p.a. compounded quarterly. How much will Kavi have in his investment
a) Kavi deposits $2,000 every three months into an investment account that pays 5.0% p.a. compounded quarterly. How much will Kavi have in his investment account at the end of 15 years?
b) John plans to invest on the ordinary share of Jardine Matheson Holding which is currently trading at $61.00. His remisier told him that due to some internal restructuring of management, there will be a dividend of $2.10 at the end of the year. Also, it is projected that with the strong fundamentals, the share price of Jardine Matheson Holding is expected to trade at $65.00 at the end of the year. Alternatively, John can choose to buy a basket of stock index that promises 15% rate of return. Do you recommend him to purchase the share now?
c) What is financial system? List the 3 functions of financial system.
d) Moral hazard is a potential problem of information asymmetry. Explain what moral hazard is, and provide a situation of moral hazard in the context of debt contract.
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