Brief: Following on from your prior report to your client relating to their possible investments, your client has a number of follow-on questions and investment possibilities. While your client's knowledge of financial mathematics and theory is increasing, they still need additional help with theories and identifying plausible investment opportunities. Therefore, similar to the prior report, it is your responsibility to provide financial theory discussions and all mathematical calculations for any investment(s). Background: Your client's knowledge of financial theory and financial mathematics is now better than what it was because of your previous report. Similar to the prior report, your client has completed some research and has found a number of investments that need to be assessed to identify whether they may be viable investment options. Your client has specific investment criteria with the suggested investments being based on this criterion. The client therefore does not expect you to identify additional investment options. As your client wishes to invest into securities for retirement, only the viability of the investment(s) should be considered in this report. Lastly, while you expect that your client has a good base salary you have little knowledge of their assets or liabilities or overall financial position, hence it is impossible to know how many of these investments your client can purchase / invest. Therefore, you are expected to provide advice on each investment in isolation from the other investments, i.e. not as a portfolio of investments. - Provide a brief discussion of approximately 300 words detailing the difference between total risk, systematic risk and unsystematic risk. What is the impact of portfolio diversification on these respective risk elements? (8 marks) - Outline the key differences between zero-coupon bonds and coupon-paying bonds. Which type of bond's price is more sensitive to interest rate changes? (8 marks) - Under what conditions can a firm's weighted average cost of capital be used for assessing new projects? (4 marks) - Why may the standard net present value (NPV) analysis not provide the correct answer in evaluating mutually exclusive projects with different lives? What is the annual equivalence approach? (5 marks) Brief: Following on from your prior report to your client relating to their possible investments, your client has a number of follow-on questions and investment possibilities. While your client's knowledge of financial mathematics and theory is increasing, they still need additional help with theories and identifying plausible investment opportunities. Therefore, similar to the prior report, it is your responsibility to provide financial theory discussions and all mathematical calculations for any investment(s). Background: Your client's knowledge of financial theory and financial mathematics is now better than what it was because of your previous report. Similar to the prior report, your client has completed some research and has found a number of investments that need to be assessed to identify whether they may be viable investment options. Your client has specific investment criteria with the suggested investments being based on this criterion. The client therefore does not expect you to identify additional investment options. As your client wishes to invest into securities for retirement, only the viability of the investment(s) should be considered in this report. Lastly, while you expect that your client has a good base salary you have little knowledge of their assets or liabilities or overall financial position, hence it is impossible to know how many of these investments your client can purchase / invest. Therefore, you are expected to provide advice on each investment in isolation from the other investments, i.e. not as a portfolio of investments. - Provide a brief discussion of approximately 300 words detailing the difference between total risk, systematic risk and unsystematic risk. What is the impact of portfolio diversification on these respective risk elements? (8 marks) - Outline the key differences between zero-coupon bonds and coupon-paying bonds. Which type of bond's price is more sensitive to interest rate changes? (8 marks) - Under what conditions can a firm's weighted average cost of capital be used for assessing new projects? (4 marks) - Why may the standard net present value (NPV) analysis not provide the correct answer in evaluating mutually exclusive projects with different lives? What is the annual equivalence approach
