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Peter has saved $20,000 and would like to decide which of the following make investment plan is the best for his option. 5-year Time deposit
Peter has saved $20,000 and would like to decide which of the following make investment plan is the best for his option.
- 5-year Time deposit with annual interest rate 4%.
- A 5-year Bond with current selling price of $1,000 per bond. The annual coupon of the bond is $30.
- Stock of a listed company with current selling price of $100 per share. The expected annual dividend is $7 per share and the expected market price of the stock after 5 years will be $110 per share.
- To set up an investment portfolio which consists of 40% investment in Bond and the rest of the investment in stock.
The required annual return by Peter is 4%.
Required:
| (1) | Should he invest in 5-year time deposit? Why? | (11 marks) |
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| (2) | Should he invest in 5-year bond? Why? | (13 marks) |
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| (3) | Should he invest in stock? Why? | (13 marks) |
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| (4) | Should he invest in this portfolio? Why? | (8 marks) |
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| (5) | If he can only choose among the above FOUR options, which one should he choose? Why? | (5 marks) |
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