Some Easy Questions from Chapter 1-3

Chapter I:

1-What is Investment ?

2-Why Do we invest ?

3-How do we invest ? Why do we use 6-Helpers ?

4-What process do we use with FP before investing ?

5-What is Self-Help ?

6-What is professional help ?

7- In ASEAN term: how many levels of investment? Explain each briefly !

8- In market term: How many levels of investment ? Explain each briefly !

9-In economic term: How many types of Investment ? Explain each briefly !

10-In social term: How many types of investment ? Explain each briefly !

11- What are the common mistakes that investors always meet ? Explain each briefly !

Chapter II:

12-What is RISK ?

13-How do we manage RISK ? What is Risk Avoidance ? Risk Transferring ? Risk Averse Investors ? Time Influence on Risk ?

14-How many types of RISK ?

15-What is Market Risk ? Interest Rate Risk ? Country Risk ? International Risk ? Business Risk ? Regulation Risk ? Purchasing Power Risk ?

16-If I want to invest in one country, what type of RISK the most priority for me to study on?

17- How many types of measuring RISK ?

18- How do we measure RISK with Volatility? What is Realized Return ? Expected Return ?

19- How do we measure RISK with Standard Deviation ? What is MEAN ? What is Normal Distribution ?

20- How do we measure Risk with Beta ? What is Mt ? What is St ?

Chapter III:

21-What is capital market ?

22- What are the benefit of capital market ?

23- How many types of capital market ? Explain each briefly ! With Example !

24- What is First Market ? Second Market ? Auction Market ? Negotiated Market ? Explain each briefly !

25-What is the differences of STOCK &Bond ?

26- What do we know about Reasonable Expectation?

27-Why investor think knowledge and experiences are important ?

28- Tell me about Preference and Risk Tolerance?

29- What is Probability Distribution ? What is the total of PD ?

30- If we want to study on Expected value, what should we focus on ?

31- What is Par Value ? What is Yield to maturity ? What is Coupon Rate ? What is Annual Interest Rate Return ?

32- How do we measure Bond Price ?

33- What affect Price of Bond ?

34- What is Principle of Malkiel’sTheorem ?

35- Do you have any recommendation on buying Bond and studying Bond Price ?

Correction of Exercise 4, Chapter 3

Correction of Exercise 4, Chapter 3

1.      Sophea like viewing FanSlave of FB. Totally, she decided to buy 2 Bonds from FBFS cost $ 100.00. She can get paid in only 4 times of her coupon ( 1 time = 6 months), after 4 times, her bond will expire. Her bond discount rate per year is 8%.

Please define each price of her bond that she will sell sooner !

According to the formula of Bond Price:

            Where :

-         Pb is bond price or price of bond

-         Pn is par value = 2 Bonds / 2 =  $100.00 / 2 = $ 50.00

-         I = coupon rate or total return of each coupon = (8 x 100)/100 = 8 /2 =$4.00

-         Y = yield to maturity = discount rate = 8% = 0.08

-         t = 1 to n

-         n = total maturity return of each coupon   

o   Payment is made in  4 times = (6 x 4) = 24 months = 2 years

o   n = 2

>> Pb =[(4/1.08)+(4/(1.08)x(1.08))]+(50/(1.08)x(1.08)) = 50

Finally, the each of her bond price will be sold in $ 50.00

Correction of Exercise 3, Chapter 3

Correction of Exercise 3, Chapter 3

1.      Vichara is famous member of Unicity bond, he bought with the first price of each bond $100.00. He willing to sell his 5 bonds in the second market (sell to his friends). His  bond will last 2 years. Each coupon rate will be return to him every year is $ 30.00. Unicity market provides him interest rate according to real rate return = 1.6 %, inflation rate 0.4%, and risk return is 1 %.

Please find out the total price of all of his bonds will be sold in the second market!

According to the formula of Bond Price:

Where :

-         Pb = is bond price

-         Pn = par value = 100

-         I =  total return of each coupon = 30

-         Y = real rate return + inflation rate + risk return = 1.6 + 0.4 + 1 = 3% = 0.03

-         t = from 1 to n

-         n =  2

So Pb = [(30/1.03)+(30/(1.03)x(1.03))]+(100/(1.03)x(1.03))  = 151.66

The total price of all of his bonds is = 5 x Pb = $758.3