Expects some returns through capital gains and dividends

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Reference no: EM131882026

The excerpts below describe activities of either an investment, saving, speculation or gambling. Carefully read the excerpts and determine what activity they describe. The rationale for your answers should be clearly stated:

i. Mapalo intends to undertake a project of constructing 10 housing units in five years’ time. To assist him achieve this mammoth project, he has decided to place his $100,000 in a corporate bond that has just been issued by one top tier company. The coupon rate of the bond is 10%, inflation rate is at 9.9% and interest rates are at 9.5%.

ii. Kamocha is an experienced fellow who has over a long period of time developed the art of predicting the correct scores of football matches. For the 2015/16 Barclays Premier League, he predicted that Leicester City Football Club would be the champions of England and true to his prediction, Leicester City were crowned champions on 7 May 2016. He reaped a total GBP170,000 out of the prediction.

iii. Bbuli decided to invest a total K200,000 in equity for Chilanga Cement PLC. The undertaking was for a period of 36 months. Prices were relatively stable in the environment with a marginal upward trend. After that period he expects some returns through capital gains and dividends.

iv. Mabvuto has recently come from a peace-keeping mission in the Congo DR and has learnt the pattern of exchange rates in Zambia especially against the US Dollar. He has decided to withhold his massive dollar holdings in the hope that the exchange rate would deteriorate further.

v. Learned Chongo is an international dealer who deals in commodities on the various stock exchanges across the world. He recently entered into some 11 contracts to sell crude oil to a number of multi-national companies. He is worried about the declining prices of crude oil and wants to enter into some derivatives to hedge against the impact of the declining prices. That way he believes he will offset the effects of price changes and give a more reliable estimation of his expected returns.

Reference no: EM131882026

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