Accounting and Finance

Running head: ACCOUNTING AND FINANCE
Accounting and Finance
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1ACCOUNTING AND FINANCE
Table of Contents
Question 1:.......................................................................................................................................3
a) Calculating the monthly amount needed to save for before the holiday:....................................3
bi) Indicating whether investment will be purchased:.....................................................................3
bii) Indicating what will be value of cash flow at the end of year 2:..............................................4
ci) Calculating the value of Gaye’s financial assets when she retires at the age of 60:..................4
cii) Calculating the monthly pension amount that Gaye will receive on her retirement:................5
Question 2:.......................................................................................................................................5
i) Explaining the concept of Real Rate of Interest with adequate example:....................................5
ii) Defining the negative gearing in context of Australian housing market and provide a general
evaluation of the Australian economy and society:.........................................................................6
Question 3:.......................................................................................................................................7
i) Defining risk in terms of investment:...........................................................................................7
ii) Explaining the Australian dividend imputation credit system, where Australian resident and
international investors:.....................................................................................................................8
iii) Calculating the monthly returns in $ and %:..............................................................................8
iv) Calculating the average monthly return for BHP:......................................................................9
v) Calculating the annual holding period for international shareholders for BHP:.........................9
vi) Calculating the annual holding period for Australian shareholders for BHP:...........................9
vii) Calculating the MKT monthly returns for Australian market:..................................................9
viii) Calculating the average monthly return for MKT:................................................................10
ix) Calculating the annual holding period return for the Australian Share market:......................10
x) Drawing the graph for BHP and MKT:.....................................................................................11

2ACCOUNTING AND FINANCE
xi) Calculating the risk measured for by standard deviation for both BHP and MKT:.................11
xii) Detecting how risky is BHP:...................................................................................................11
xiii) Calculating the CAPM value for BHP:..................................................................................11
xiv) Plotting the SML in scatter graph:.........................................................................................12
xv) Recreating the graph with actual return of BHP:....................................................................13
xvi) Calculating the return and beta for portfolio:.........................................................................13
References:....................................................................................................................................14

3ACCOUNTING AND FINANCE
Question 1:
a) Calculating the monthly amount needed to save for before the holiday:
Particulars Value
FV $ 20,000
Rate 6%
r 0.005
T 15
PMT (20,000*0.005) / (((1+0.005)^15)-1)
PMT $ 1,287.29
The monthly payment required for completing the holding fund is $1,287.29.
bi) Indicating whether investment will be purchased:
End of Year Cash Flow Rate Dis-value
0 $ (16,000.00) 1.00 $ (16,000.00)
1 $ (2,500.00) 0.87 $ (2,173.91)
2 $ - 0.76 $ -
3 $ 5,000.00 0.66 $ 3,287.58
4 $ 6,800.00 0.57 $ 3,887.92
5 $ 7,000.00 0.50 $ 3,480.24
6 $ 7,000.00 0.43 $ 3,026.29
7 $ 9,500.00 0.38 $ 3,571.40
8 $ 5,500.00 0.33 $ 1,797.96
9 $ 2,000.00 0.28 $ 568.52