Question 1Justin is a newly-graduated civil engineer who works in a large city building. He has a lunchtime friend, Clint, who works in a broker’s office on the same floor. They spend a great deal of time discussing money-making schemes as both are interested in getting ahead as quickly as possible. Clint talks about a scheme which he says ‘can’t miss’. Here are the details:•&?ßsp;Borrow $ XXXXXXXXXXfixed for 3 years at 13.5% interest only•&?ßsp;Invest in top-200 shares•&?ßsp;No deposit of own funds needed•&?ßsp;Capital guaranteed – no losses possible – any shares which are below purchase price at the expiry of three years will be taken back by the lender in full repayment of that part of the loan•&?ßsp;Margin loan rates at the same time are 9.5%.1)Justin asks Clint to explain to him why he would pay a 4% premium over margin-loan rates. Explain to Justin.2)What is the monthly interest payment on this interest-only loan? If Justin earns $60 000 gross, is he likely to be able to afford this?3)The whole share portfolio (as suggested by Clint) is expected to pay 4% fully-franked dividends. (Justin has a 30% marginal tax rate.) What are the expected pre-tax and after-tax return percentages?4)Compute the monetary values for interest paid, dividends and net tax paid.5)If the portfolio consisted of four investments of $50 000 in each company, and one company made a capital loss, what must the average capital gain by each of the other companies be for Justin to break even?Question 22) Outline the credit risk assessment process typically conducted prior to a loan being granted in relation to the security provided by the prospective borrower and the borrower’s employment and / or business income.
Already registered? Login
Not Account? Sign up
Enter your email address to reset your password
Back to Login? Click here