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Calculate the return on an investment

Assignment Help Financial Management
Reference no: EM131485136

Objectives

1 Understand how to calculate the return on an investment.
2 Understand the historical returns on various important types of investments.
3 Understand the historical risks on various important types of investments.
4 Understand the implications of market efficiency.

Which of the investments discussed have had the highest average return and risk premium?

Which of the investments discussed have had the highest standard deviation?

What is capital market efficiency?

What are the three forms of market efficiency?


Summary and conclusions

Risky assets, on average, earn a risk premium.

The greater the potential reward from a risky investment, the greater the risk.

In an efficient market, prices adjust quickly and correctly to new information.

The efficient market hypothesis (EMH) states that well organised capital markets are efficient, and investors cannot make abnormal returns.

Asset prices in efficient markets are rarely over or under priced, because ‘all available' information has already been factored into the price, and investors get exactly what they pay for.

What are the important factors that should be considered by tertiary sector employees when they are deciding whether to place their superannuation contributions in the Defined Benefit Plan or the Investment Choice Plan?

What issues relating to the concept of the time value of money may be important in this decision-making process? Explain. (1500 words).

B. "If the efficient-market hypothesis is true, the pension fund manager might as well select a portfolio with a pin." Explain why this is not the case. (500 words).

Verified Expert

The time value of money plays is a key component when it comes to investment decisions and more so when it is about pension funds. Investors need to choose carefully between the myriad choices they have for pension fund investments as the amount thus saved needs to sustain them through their non-earning lives. Broadly pension plans are classified into defined benefit plan and investment choice plans and each has its own risk profile and dynamics. Time value of money plays out different under both scenarios and in line with the risk profile of the investor an informed decision should be made. The efficient market hypothesis suggest that stock prices are never over or under priced as they reflect all the information in the market and hence it is not possible to make abnormal returns. This does not mean that a pension fund manager can select a portfolio with a pin.

Reference no: EM131485136

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Reviews

inf1485136

6/1/2017 4:58:56 AM

Sorry for late reply i was not in the city. Today I just noticed that there are no references done on the assignment. I need to submit this today and no references is not going to be accepted by the tutor. pls get the tutor to do the referencing urgently to enable to submit the assignment today. I know you are going to resolve the issue within some minutes only.

len1485136

5/5/2017 5:06:41 AM

Below are the 2 questions. I believe this most likely will be available in one of the previous assignments in your archive or have to create new one. word count for each question is as below What are the important factors that should be considered by tertiary sector employees when they are deciding whether to place their superannuation contributions in the Defined Benefit Plan or the Investment Choice Plan? What issues relating to the concept of the time value of money may be important in this decision-making process? Explain. (1500 words). B. "If the efficient-market hypothesis is true, the pension fund manager might as well select a portfolio with a pin." Explain why this is not the case. (500 words).

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