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QUESTION ONE [ 2 0 Marks ] a ) Briefly discuss on any five ( 5 ) roles of personal finance in Retail Investors. [
QUESTION ONE Marks a Briefly discuss on any five roles of personal finance in Retail Investors. Marks b Discuss how Institutional Investment Companies can address the possible mismatch between the goals of the Individual Investors and that of the Managers of the Company. Marks QUESTION TWO Marks a Briefly explain, with three points, why the shares of Investment Trust are sometimes traded at a discount. Marks b JameswishestoinvesthisTZSinoneoftheUTTProductstoboost his future income. According to the available information, Umoja Fund and Bond Fund are the most attractive investment products compared to the other four UTT products. The following information is also available regarding the two products Products Details Umoja Fund Bond Fund Net Asset Value TZS Total Units issued Market Price per Unit TZS Initial Costs of the value of investment Annual Management Costs of the value of the fund The average rate of Return You are a market expert, and James has approached you to facilitate him in understanding the above product to enable him to make such an investment decision. Required: With relevant calculations, advise James in each of the below scenarios: i James is a long term investor and wants to invest in an investment which will provide high value in years' time. If Umoja Fund is subject to an annual tax of and Bond Fund is subject to a deferred tax of which of the two products is the best for James? Marks ii James has obtained insider information that UTT is expecting to buy back of existing Umoja Fund units in six months time. If the discountpremium remains the same after the buyback, compute the new Net asset Value per share, New Market Value per share and advice James on whether he should buy the Units now or wait after the buyback exercise is complete. Marks QUESTION THREE Marks a Briefly discuss on any five advantages of a defined contribution pension plan over a defined benefit pension plan. Marks b Briefly explain the conditions for an employee to qualify for oldage pension benefits under the Public Social Security Fund Act, and its regulations of as amended. Marks c Mr Jangala has just been employed by XYZ LTD a company which allows its employees to have a private arrangement for their retirement pension. Mr Jangala is years old and is considering contributing to a private pension fund, which will guarantee him monthly payments equal to of his current income, which is fixed at TZS per month. Required: i If the expected real interest rate is per year, how much should be accumulated in the pension fund to meet the expectations of Mr Jangala if he lived for years after retirement? Marks ii If Mr Jangala is to retire at the age of years, how much should be contributed monthly to achieve the desired retirement benefit? Marks QUESTION FOUR Marks A certain company is currently listed at Dar es Salaam Stock Exchange DSE with its market capitalization value standing at approximately TZS Trillion. Its share prices at the end of the last ten successive months were: TZS ; TZS ; TZS ; TZS ; TZS ; TZS TZS TZS TZS and TZS Required: a Compute the average end of month price of the shares. Marks b EstablishhowmanysharescouldbeboughtwithTZSattheaverage price. Marks c What is the resulting shareholding worth at the end of the tenmonth period? Marks d SupposethataninvestorspreadtheTZSinvestmentevenlyoverthe ten months in order to benefit from TZS cost averaging ie investing TZS at the end of each month Establish how many shares were bought. Marks e What was the average price of the shares bought? Marks QUESTION FIVE Marks a Briefly explain on the three main reasons as to why institutional investors prefer investing in a passively managed fund. Marks b ATanzanianinvestorisconsideringayearinvestmentofTZSmillionin a foreign mutual fund that uses an index tracker fund. The index tracker fund has no initial charge, but charges an annual management fee of of the value of the fund and average annual share dealing costs of Based on the latest information given in the Financial Times newspaper, the long term average real rate of return on a balanced portfolio of shares is pa and the performance is expected to continue for the next years. On the assumption that the funds match the general market performance: i Briefly explain on how an index tracker fund works. Marks ii Whatistheannualtotalexpenseratio? Marks iii What is the expected value of the index tracker fund after years? Marks iv What are the effects of the expenses on the expected average annual return of the tracker fund?
QUESTION ONE Marks
a Briefly discuss on any five roles of personal finance in Retail Investors.
Marks
b Discuss how Institutional Investment Companies can address the possible mismatch between the goals of the Individual Investors and that of the Managers of the Company. Marks
QUESTION TWO Marks
a Briefly explain, with three points, why the shares of Investment Trust are
sometimes traded at a discount. Marks
b JameswishestoinvesthisTZSinoneoftheUTTProductstoboost his future income. According to the available information, Umoja Fund and Bond Fund are the most attractive investment products compared to the other four UTT products.
The following information is also available regarding the two products
Products
Details
Umoja Fund
Bond Fund
Net Asset Value TZS
Total Units issued
Market Price per Unit TZS
Initial Costs of the value of investment
Annual Management Costs of the value of the fund
The average rate of Return
You are a market expert, and James has approached you to facilitate him in understanding the above product to enable him to make such an investment decision.
Required: With relevant calculations, advise James in each of the below scenarios:
i James is a long term investor and wants to invest in an investment which will provide high value in years' time. If Umoja Fund is subject to an annual tax of and Bond Fund is subject to a deferred tax of which of the two products is the best for James? Marks
ii James has obtained insider information that UTT is expecting to buy back of existing Umoja Fund units in six months time. If the discountpremium remains the same after the buyback, compute the new Net asset Value per share, New Market Value per share and advice James on whether he should buy the Units now or wait after the buyback exercise is complete. Marks
QUESTION THREE Marks
a Briefly discuss on any five advantages of a defined contribution pension
plan over a defined benefit pension plan. Marks
b Briefly explain the conditions for an employee to qualify for oldage pension benefits under the Public Social Security Fund Act, and its regulations of
as amended. Marks
c Mr Jangala has just been employed by XYZ LTD a company which allows its employees to have a private arrangement for their retirement pension. Mr Jangala is years old and is considering contributing to a private pension
fund, which will guarantee him monthly payments equal to of his current
income, which is fixed at TZS per month.
Required:
i If the expected real interest rate is per year, how much should be accumulated in the pension fund to meet the expectations of Mr Jangala if he lived for years after retirement? Marks
ii If Mr Jangala is to retire at the age of years, how much should be contributed monthly to achieve the desired retirement benefit? Marks
QUESTION FOUR Marks
A certain company is currently listed at Dar es Salaam Stock Exchange DSE with its market capitalization value standing at approximately TZS Trillion. Its share prices at the end of the last ten successive months were: TZS ; TZS ; TZS ; TZS ; TZS ; TZS TZS TZS TZS and TZS
Required:
a Compute the average end of month price of the shares. Marks
b EstablishhowmanysharescouldbeboughtwithTZSattheaverage
price. Marks
c What is the resulting shareholding worth at the end of the tenmonth period?
Marks
d SupposethataninvestorspreadtheTZSinvestmentevenlyoverthe ten months in order to benefit from TZS cost averaging ie investing TZS
at the end of each month Establish how many shares were bought.
Marks e What was the average price of the shares bought? Marks
QUESTION FIVE Marks
a Briefly explain on the three main reasons as to why institutional investors prefer investing in a passively managed fund. Marks
b ATanzanianinvestorisconsideringayearinvestmentofTZSmillionin
a foreign mutual fund that uses an index tracker fund. The index tracker fund has no initial charge, but charges an annual management fee of of the value of the fund and average annual share dealing costs of
Based on the latest information given in the Financial Times newspaper, the long term average real rate of return on a balanced portfolio of shares is pa and the performance is expected to continue for the next years. On the assumption that the funds match the general market performance:
i Briefly explain on how an index tracker fund works. Marks
ii Whatistheannualtotalexpenseratio? Marks
iii What is the expected value of the index tracker fund after years? Marks
iv What are the effects of the expenses on the expected average annual return of
the tracker fund?
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