Finance and Accounting

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

1FINANCE AND ACCOUNTING
Table of Contents
Question 1:.......................................................................................................................................3
a) Holiday funding calculation:.......................................................................................................3
bi) NPV value of the project:...........................................................................................................3
bii) Cash flow at the end of year 2:..................................................................................................4
ci) Gaye’s financial assets at the age of 60:.....................................................................................4
cii) Gaye’s monthly retirement amount:..........................................................................................5
Question 2:.......................................................................................................................................6
i) Evaluating and providing examples of Real Rate of Interest:......................................................6
ii) Negative gearing used in Australian housing market:................................................................7
Question 3:.......................................................................................................................................7
i) Defining risk in terms of investment:...........................................................................................7
ii) Dividend imputation credit system having impact on Australian resident and international
investors:..........................................................................................................................................8
iii) Monthly returns of BHP in $ and %:.........................................................................................8
iv) BHP average monthly return:.....................................................................................................9
v) International shareholders Annual holding return:......................................................................9
vi) Australian shareholders annual return from BHP:.....................................................................9
vii) MKT monthly returns:............................................................................................................10
viii) MKT average monthly return:...............................................................................................10
ix) Australian annual holding:.......................................................................................................10
x) Graph of returns BHP and MKT:..............................................................................................11
xi) Standard deviation for both BHP and MKT:...........................................................................11

2FINANCE AND ACCOUNTING
xii) BHP risk evaluation:...............................................................................................................11
xiii) CAPM value for BHP:...........................................................................................................12
xiv) SML in scatter graph:.............................................................................................................12
xv) Actual return of BHP in SML:................................................................................................13
xvi) Return and beta for portfolio:.................................................................................................13
References and Bibliography:........................................................................................................14

3FINANCE AND ACCOUNTING
Question 1:
a) Holiday funding calculation:
Holiday expense=$ 20,000.00Interest monthly=6 %
12 =0.05 % Time=15 months
Monthly deposi t needed=($ 20,000 .00 ×0.05 % )
( ( ( 1+0.05 % ) 15 ) −1)
Monthly deposit needed= 100
0.077 7
Mon thly deposit needed=$ 1,287.3
Monthly deposit needed for the holiday funding is mainly at the levels of $1,287.3.
bi) NPV value of the project:
NPV =−16000+ −2500
( 1+ 15 % ) 1 + 0
( 1+15 % ) 2 + 5000
( 1+ 15 % ) 3 + 6800
( 1+15 % ) 4 + 7000
( 1+15 % ) 5 + 7000
( 1+15 % )6 + 9500
( 1+15 % ) 7 + 5500
( 1+15 % ) 8
NPV =−16000−2173.9 1+3287.58+3887.9 2+3480.2 4+3026.3 9+ 3571.4 0+1798 .96+568.5 2−1112. 33
NPV =333.68
The positive NPV of $333.68 indicates that the project needs to be selected by the
organization.