Dr. Atsu.pdf - Adobe Acrobat Reader DC (64-bit) File Edit View Sign Window Help Home Tools ustom... design ... division ... 3 / 6 goals a... ii. market ... 111 iv. E iii) Calculate the expected return and standard deviation of the portfolio (2) by combining equities B and C if the invested put 50% of the investment in equity B and the remaining in equity C. V. market... 21% 2- Scanned by TapScanner d) Which of the portfolios (X, Y or Z) should the investor select and why? e) Distinguish between diversifiable and non-diversifiable risks. Which of these risks is rewardable and why? (40 Marks) QUESTION TWO a) Suppose Saforo and Efo Atsu formed a firm that operates within Accra and Kumasi. The firm is considering two mutually exclusive projects: Project A has a cost of GHS15,000, returns GHS4,000 after-tax the first year with this amount increasing by GHS1,000 annually over a 5-year life; Project B costs GHS15,000 and returns GHS13,000 after-tax the first year, followed by 4 years of GHS2,000 per year, as in the table below. i. Calculate the Net Present Value (NPV) of each project using a discount rate of 10% Calculate the profitability index (PI) of each project using a discount rate of 10% Calculate the payback of period (PBP) of each project Comment on the advisability of selection based on the criteria (PBP, NPV and Pl What are strengths and weaknesses of the NPV and the payback period investment decision criteria? (14 marks) b) To buy his favorite car, Rich-Doh is planning to accumulate money by investing his Christmas bonuses for the next five years in a security which pays a 10 percent. annual rate of return. The car will cost $20,000 at the end of the fifth year and Larry's Christmas bonus is $3,000 a year. Will Larry accumulate enough money (6 marks) to buy the car? QUESTION THREE a) Suppose Eva Schmidt is considering borrowing GHS 60,000 at a 10% annual rate of interest to be repaid over 5 years. The loan is amortized into five equal annual end-of-year payments. i) Prepare a loan amortization schedule showing the interest and principal breakdown of each of the five loan payments. **** ii) Suppose the percentage of a borrower's annual income that goes toward paying debts is 30%. If Eva Schmidt earns GHS 4,000 monthly, does she qualify for the loan? Motivate your answer. market... J open st... Dr. Atsu... x Search 'Insert Page' PExport PDF Adobe Export PDF Convert PDF Files to Word or Excel Online Select PDF File Dr. Atsu.pdf Sign In Convert to Microsoft Word (*.docx) Document Language: English (U.S.) Change Convert X Free 7-Day Trial x V Convert, edit and e-sign PDF forms & agreements