Question 2 (13 marks)

Alex Wong, age 20, is now a full-time student majoring in Product Design in a local university. Alex is currently living with his parents. Since Alexs parents are still working, they are able to support Alexs 4-year bachelor degree tuition fees and give him $2,000 living expenses a week. When he reviews his financial situation, he finds that he always takes taxi instead of public transport to school.

To save more money, Alex occasionally works on part-time jobs and loves to invest in small enterprise stocks. Regarding his financial goals, Alex plans to go for a 3-month Europe trip at an estimated cost of $100,000 in 4 years. Alex has a passion for creating new products and items. He wishes to run his own design studio at age 30 that requires a start-up capital of $500,000. It is assumed that his investment return is 5%.

(a) Based on the provided information, state a medium term financial goal of Alex using SMART approach. Make reasonable assumptions and show all workings. (7 marks)

(b) To invest in small enterprise stocks, Alex is aware of three types of investment risks such as lack of transparency in disclosing related transactions, possibilities of severe decline in profits and suspension of stock trading. Identify and briefly describe the THREE types of investment risks of investing in small enterprise market. (6 marks)