Faculty of Business and Information Science
A coursework completed as part of the requirement for
COURSE NAME:
FINANCIAL MANAGEMENT 2
COURSE CODE:
BA208
LECTURER:
MISS LIM AI FEN
Entitled
ASSIGNMENT TITLE:
GROUP ASSIGNMENT
Submitted on
DATE OF SUBMISSION:
3 March 2021
DUE DATE:
4 March 2021
Produced by
1
Name
Student ID
PUA CHING LYNN
1001851499
2
NO
CRITERIA
MAXIMUM
MARKS
MARKS
AWARDED
REMARKS
Discuss and evaluate risk and return associated
1
with each of these alternatives.
35
Alternative 1: Nonmarketable financial assets
Alternative 2: Capital Market Securities
Alternative 3: Derivative Securities
Explain how to manage risks identified in question
2
(1).
35
List
3
and
specify
all
your
recommended
nonmarketable financial asset(s) and its financial 20
institution(s)
recommended
(for
alternative
marketable
1)
or
your
securities
(for
alternative 2 or/and 3) in your portfolio. State the
reason(s) for selecting that financial asset(s).
4
Peer evaluation (Peer evaluation form)
10
Total marks
100
3
TABLE OF CONTENT
Content
page
Discuss and evaluate risk and return associated with each of these alternatives
6-20
Alternative 1: Nonmarketable Financial Assets
6-7
The Risk in Nonmarketable Financial Assets
8
Risk- Fixed Deposit
The Return in Nonmarketable Financial Assets
9
Return- Fixed Deposit
Alternative 2: Capital Market Securities
10-12
Risk in Capital Market Securities
13
Risk- Bond
Risk- Stock
14
The Return in Capital Market Securities
15
Return- Bond
Return- Stock
15-16
Alternative 3: Derivative Securities
17-18
Future Contract
The Risk in Derivative Securities
19
The Return in Derivative Securities
20
Explain how to manage risks identified in question (1)
21-27
Alternative 1
21-22
Fixed deposit
Alternative 2
23
Bond
4
Stock
24-26
Alternative 3
26-27
Future Contract
List and specify all your recommended nonmarketable financial asset(s) and its 28-45
financial institution(s) (for alternative 1) or your recommended marketable
securities (for alternative 2 or/and 3) in your portfolio. State the reason(s) for
selecting that financial asset(s).
Alternative 1
28
Fixed Deposit
Alternative 2
29-35
Bond
Stock
36-45
Conclusion
46
WACC
References
47-49
Turnitin Report.
50-52
5
Discuss and evaluate risk and return associated with each of these alternatives.
Alternative 1: Non Marketable Financial Assets
Non marketable securities are financial assets that are unable to trade on major and
active secondary market. It is mainly traded as part of a private transaction since it is difficult
to buy and sell so it may only trade on over-the-counter (OTC) exchange thus it is highly
illiquid. It is indeed suitable for investors who prefer long term investment with a guaranteed
return and certain that they will not need part of their money for a specific period of time until
the maturity because no interest will be given in case one withdraw the money out of the
account before maturity. The lack of marketability and liquidity make investors demand a
higher rate of return on the non-marketable financial assets. Thus, even when the market
perform well , there is certainly no returns will be given which draw people away but risk
averse investor may prefer such investment as the risk is relatively lower that marketable
securities. Fixed deposit (FD) is one of the most recognized non-marketable assets that offers
higher interest and return though sophisticated saving and investment tools. The interest
payment for FD is calculated and paid once upon maturity. The types of FD in the market in
Malaysia are short term fixed deposit, long term fixed deposit, conventional fixed deposit and
Islamic fixed deposit. As compared to Singapore and Taiwan, Malaysia banks have indeed
relatively higher FD rate.
Overnight policy rate (OPR) which is the interest rate bank charged on one another in
the interbank market. OPR has positive relationship with deposit rate, lending rate and prime
rate. Hence, when OPR moved, all other interest rate will follow OPR in the same direction.
For instance, when OPR is set to be lower, all other rates will be lowered, vice versa. Low OPR
leads to low interest rate (i) which makes the FD rate become lower. FD rate has decreased
gradually which makes them less attractive as compared to bonds which provide a return of 45% annually which is generally more than double the current FD rates.
Besides, saving account is basically one of the most common type of account in all
banks in Malaysia. Depositor can earn interest in the fastest and safest way by depositing their
money in saving account. Unlike FD, saving account allow you to access your fund whenever
you want but the interest paid is relatively lower. Still it is a good option for parking cash in
case of emergency or as a contingency plan since it is highly liquid. However, its interest rate
will be revised in case if the OPR changed.
6
Therefore, we decide to invest in FD since it offer relatively higher rate than saving
account that bear least interest among all accounts. We will put 10% of our fund in FD because
it helps to diversify our investment portfolio since it considered less risky and volatile.
7
Risk of the Non-marketable Financial Asset
1. Liquidity risk
Liquidity risk is the inability of a bank to fulfil its financial obligation thereby causing the
bank to lose liquidity (Kumar, 2008). Bank run occurs when sudden unexpected large deposits
withdrawals results from high liquidity risk where depositors fear of bankruptcy of bank. Since
huge cash outflows from the bank itself until to a point where bank runs out of cash this will
disrupt the optimal function of banking system and bank forced to sell their asset to meet
depositors demand (What is a Bank Run, n.d.). If this disruption persisted, it will lead to
uncontrolled bank run and eventually multiples banks bankrupt and economy enters recession.
In short, depositors will face liquidity risk when bank has poor liquidity management.
2. Inflation risk
Real interest rate decrease when inflation increase. This is unfavourable to depositors where
they incur loss upon depositing their money in the bank for long term investment. For instance,
if the investors deposit RM100000 for 1 years at 6.8% but inflation rate increase to 10% after
2 years. The investors are then suffer loss as the real interest rate turn negative where 6.8%
minus 10% equal to −3.2% given that real interest rate is the difference between nominal
interest rate and inflation. The hope of getting fixed interest rate and a return of RM68000
vanished when inflation rate increased. Money loses values and people’s purchasing power
diminish if the inflation rate kept increasing until hyperinflation happened. Barter system will
then take place where exchange of goods replace the money as a medium of exchange.
3. Reinvestment risk
One may not be able to earn the same rate of returns as previously as the reinvestment risk
arises. This is due to the fact that changed in interest rate would have caused the cash flows
earned from current investment unable to be reinvested to earn the exact same rate of return.
For instance, the decreasing interest rate in Malaysia leave investors contemplate whether to
go for reinvestment of their fixed deposits or not. They might get lower rate for their FDs at
the time of maturity (Archana, 2020).
8
Return of Non-marketable Financial Asset
Return in Interest rate of fixed deposit:
Bank
3-month
6-month
9-month
12-month
(%) p.a.
(%) p.a.
(%) p.a.
(%) p.a.
2.4
2.4
2.4
Verda- Affin Hwang Asset Management 2.4
Hong Leong Bank
2.5 1
2.5 2
1.6
1.6
CIMB Bank3
2.1
2.2
2.2
2.25
Bank Simpanan Malaysia
1.8
1.85
1.9
2.2
OCBC Bank
1.45
1.6
1.7
2.384
Multiple banks such as Hong Leong Banks, CIMB Bank and OCBC Bank launched
Chinese New Year 2021 fixed deposits promotion until March to attract investors to deposit
their money in the banks. For instance, RM10000 at 2.4% interest per year would yield RM
10240 based on the formula where future value of investment (FV) = PV (1+r) n.
Therefore after 1 year, the future value of investment Verda- Affin Hwang Asset
Management is RM10240, RM10160 in Hong Leong Bank, RM10225 in CIMB Bank whereas
RM10220 in Bank Simpanan Malaysia and RM10238 in OCBC Bank. The lowest future value
received is from Hong Leong Bank and the highest is RM10240 from Verda- Affin Hwang
Asset Management after 1 year.
1
Promotion date from 10 January to 31 March 2021 with a minimum of RM10000 and revised when OPR
change.
2
Promotion date from 10 January to 31 March 2021 with a minimum of RM10000 and revised when OPR
change.
3
eFixed Deposit Rates for a minimum of RM5000 and the campaign period is from 3 February to 4 March
2021.
4
The “Online Fixed Deposit Promotion” offers 2.28%p.a. with minimum of RM1000 from 6 February to 31
March 2021 and deposits must be made from fund transfer from other bank only to enjoy such promotional rate
for 1 year.
9
Alternative 2: Capital Market Securities
Bond
Bonds are debt securities offered by the capital market indicates bonds are loan made
to the eligible public listed company or government to meet their financing meets and it is a
type of fixed income investment where the bondholder will be received a fixed specified
interest payment at a given date. The issuer has the obligation to pay the face value or par value
of the bond upon maturity. In Malaysia, Sukuk is a bond that is issued in accordance with the
Shariah principles which can be traded either on the Bursa Malaysia or over-the-counter (OTC)
via licensed banks (Investing in Bonds, n.d.). Sukuk or Government.
According to Mohamad (2020), the bond market has a positive prospect with upward
yields bias in 2021 and government highly encourages the issuance of sustainable and
responsible Sukuk and bonds through income tax exemption for the next five years to drive
hope for economy recovery from the impact of Covid-19. Hence, we choose to include bond
in the portfolio. By investing in more than one bond can reduce the unsystematic risk through
diversification. With steady foreign demand and growth of yield, the Malaysian bond market
is found to experience its seventh straight month of net foreign inflow in November 2020 (Lam,
2020). This has assured us that the Malaysian bonds are worth to be invested in. The first bond
we chose is UMWH IMTN 5.220% 02.10.2026 that offers coupon payment of 5.22% annually
and this company has a credit rating of AA2 from RAM. Besides, BGSM MGMT IMTN 5.600%
27.12.2023 - ISSUE NO 9 is chosen because it offers a relatively higher interest payment of
5.6% per annum. BGSM Management Sdn Bhd received credit rating of AA3 from RAM
indicate it is subjected to low credit risk and proved to be a reliable one. Furthermore, we chose
to invest in bond issued by MMC Corporation Berhad where the stock code is MMC CORP
IMTN 5.700% 24.03.2028. This bond offers 5.7% coupon payment annually and the credit
rating given by MARC is AA with a stable outlook.
10
Stock
A share of stock in a firm represents ownership and it is funds provided by the firm’s
owners which is referring to investors and stockholders that are repaid subject to the firm’s
performance. Generally, there are two types of equity which are common stock and preferred
stock. The difference in monetary term is that common stockholder receive a fixed dividend at
regular intervals unlike common stock may pay dividend depending on the financial health i.e.
the profitability of the company. People purchase stock as a type of investment in the hope that
the stock value of the particular company will go up in the future. This is due to the fact that
when the stock price increases, the shareholder can sell the high priced stock and make capital
gain. Another way of getting return from stocks is that the firm pays the stockholder dividends.
However, stock is risky than bonds since stockholders is the residue claimant if the company
bankrupt and the worst is that if nothing is left over, they will eventually get nothing at all. In
Malaysia, stocks are sold on the Bursa Malaysia and Over-the-Counter Markets and only
eligible public listed companies are able to issue shares and sell it to public investors on the
stock market.
Malaysian’s stock market is the top performer in 2020 ahead of countries such as
Thailand, Philippines and even Singapore (Kok, 2021). Hence, the outlook for overall stock
market performance is predicted to be positive which is why we choose to invest part of our
fund in stocks to gain higher return since we have diversified our portfolio with bonds as well
to mitigate the risk of stocks. In short, we decide to put RM60000 of our fund in stock
investment. We have chosen Top Glove Corporation Berhad, Kuala Lumpur Berhad (KLK),
Hong Leong Financial Group (HLFG) and Hai-O Enterprise Berhad. All these stocks are of
different sectors to diversify our portfolio and so that we seize the opportunity not to miss out
on the hottest sectors or being dragged down by the coldest ones in 2021.
The plantation giant Kuala Lumpur Kepong (KLK) Berhad has been practicing green
technology to produce environmentally friendly palm oil. This advantage of achieving one of
the Sustainable Development Goals (SDG) drives the business growth and increase investment
inflows where investors are willing to purchase KLK’s stocks as they places higher expectation
on the company’s performance and brighter future prospects for instance they earn 14 cents
more for every unit share being held in 2020. Besides, we include Top Glove stocks in our
portfolio is mainly because its net profit spiked up to RM2 billion due to the strong global
demand for gloves during the Covid-19 pandemic. The company is experiencing increasing
11
trend of cash flow from operating activities which will further increases its cash position (Lim,
2020). Thus, we look forward to see the rising stock price and receive higher dividends.
Next, shareholders of Hong Leong Financial Group (HLFG) has been earning RM 1
ringgit plus for the past five years which is relatively higher than the giant producers’
mentioned above with lower share price. This is why we aim to invest part of our fund in this
reputable and reliable group. Furthermore, being the first traditional healthcare company listed
on Bursa Malaysia Securities Berhad, Hai-O Enterprise Berhad has achieved remarkable
performance in providing superior and high quality TCM services and medicines to the
Malaysian. With cheapest price per share among the stocks we choose, making it the affordable
one to purchase. In essence, we reduce the unsystematic risks by choosing four stocks in
different sectors to structure a well-diversified portfolio.
12
The Risk in Capital Market Securities
Risk- Bond
i)
Credit Risk.
Credit risk is known as default risk where the possibility that the issuer of debt unable to
pay the contractual interest or principal as scheduled (Gitman & Zutter, 2015). The
repercussion is bondholders unable to receive the coupon payment and some of them could not
receive the face value upon the bonds mature. This condition is less likely to happen in
government bonds because government can either increase the taxes to or print money to pay
for the bond investors. However, taxes increase and printing money is the least approach that
will be taken by government as both of these plans may disrupt the business cycle and leading
to bad economic growth. Hence, the government bond is deemed as risk free rate where the
return of the bond is lower due to less risk exposure in investing the bonds. Corporation expose
to the risk of default resulting from the higher returns offered from the bonds issued which will
increase their financial burden.
ii)
Interest Rate Risk.
Interest rate risk is a risk resulting from changes in the interest rate. The interest rate is
inversely related to the price of bonds. Hence, when the interest increase, the bond price will
decrease, and vice versa. The higher interest rate causes current bondholder to sell their bonds
to prevent loss incurred. The supply of the existing bond increase thus lowering down the bond
price. The devaluation of bonds will make the bondholder to receive lower bond market value
at the maturity than the face value implying the bond is sell at a discount. As a result, people
hold more money to buy the newly issued bonds with higher interest rates to receive higher
coupon interest payment. The demand of the new bonds will increase and demand of the
existing/ older bonds will decrease. Time to maturity will also affect the price of the bond. The
longer the time to maturity, the higher the volatility of the interest rates. Hence, the longer the
bond is being hold, the higher the interest rate risk will be faced by bondholders, the less liquid
the bond is. Moreover, inflation will contribute to higher interest rate as well because interest
rate equal to the sum of real interest rate and inflation rate. When inflation rate increases, the
interest rate rises. These conditions make cash less attractive than cash.
13
Risk - Stocks
1. Market value risk
Market value risk arises when the market turns into unfavourable condition towards one’s
investment. Hence, one should avoid putting same sectors and category stocks in the portfolio
so that the loss incurred from the one of the particular stock can be offset or covered by other
stock in the portfolio.
2. Economic risk.
A bad economy situation has high probability to heighten the economic risk since almost
every stock unable to escape from it. For instance, the Covid-19 pandemic accelerated in
Malaysia and spiked the unemployment rate to rise to 5.0% in April 2020. With high
unemployment rate, there is a leakage of spending in the circular flow of economy. Therefore,
people save a greater proportion of their income and less demand for goods and services which
will then reduce the purchasing power. This will deteriorate the stock price as demand is low
causes stockholders unable to benefit from getting any dividend due to low net income of
companies as a sign of poor financial health. Most of the investors are pessimistic about the
stock market which induces them to sell the stock immediately that implies the supply will be
greater than the demand of stock consequently reduces the stock price. Hence, economic risk
has indeed bring repercussion to stocks.
3. Inflationary Risk
Inflation makes people suffers as the purchasing power decrease and the money value drop.
Inflation affect the rate of return of the portfolio and one suffers loss as the investment is
experiencing the drop in money value. Inflation has indeed hurt shareholders thus one should
aim for stock that yield high return to safeguard yourself from inflation.
4. Transaction cost
Shareholders are required to pay high transaction which is the commission of brokerage
charged from servicing. Transaction costs considered one of the key determinants of net returns
because it reduces returns and the amount of capital available to invest. High transaction costs
will also results in low liquidity in stocks which put a strain on the return of investors. The
larger the amount one invest in stocks, the higher the transaction fees one will need to pay.
14
Return in the Capital Market Securities
Returns- Bond
1. Coupon payment
Issuers have the obligation to give coupon payment which is the annual interest payment
of the bond to bondholders until it matures. The coupon payment remain constant i.e.
unchanged throughout the life of the bond. Most of the coupon payment made twice a year
meaning it is split into semi-annually. Coupon payment is unaffected by the market price and
market yield and this secure the bondholder with fixed income.
2. Lower Interest Rate
The current economic prospect in Malaysia is worrying due to the surging cases of Covid-19
pandemic and the economists expect the likelihood for a further cut of 25bps in overnight
policy rating OPR within the first half of the year (Idris, 2021). The lower the OPR, the lower
the all other interest rates given that all interest rates will follow the movement of OPR
implying they are directly related. With low interest rate, the expected return of the bonds
increases, and the demand for money decrease where people will buy bond now and sell when
bond prices increases to make capital gain. Hence, people left with holding less speculative
balance indicates that bond is more attractive than cash when the interest rate drops in the future.
The demand for the existing bonds increases resulting in higher bond prices. The bondholder
can then sell the bond at premium whereby the bond price is higher than the par value. This
benefits the bondholders to reap profits.
Return - Stocks
1) Earning per share (EPS)
EPS is interest to stockholders and it generally represents the number of ringgit earned
during the period on behalf of each outstanding share of common stock. For instance, the EPS
of Top Glove stocks is 22 cents in 2020, this indicate for 1 unit of share being hold, the investors
earned 22 cents. The higher the EPS, the higher the profits gained for stockholders.
2) Return on Equity (ROE)
ROE is used to measure how much or how well the firm earns for each ringgit of common
stock equity. The ROE of the four stocks that we chose range from 7%- 29%. Hence, higher
ROE indicates that the company is efficient in utilizing the investment financing to improve
and growth their business so that they are able to provide investors higher and promising returns.
15
3) Total Rate of Return (ROR)
Total gain or loss experienced on stock investment. It is a sum of cash distribution which
means the changes in investment value plus the dividends. High ROR indicates one make profit
and negative ROR implies loss incurred.
4) Dividend
Dividend is reward gives to investors for putting their money into the business venture and
the amount given to shareholders is determined by the board of directors. However, not all
companies are bound to pay dividend to shareholders. Dividend may be paid quarterly, semiannually or annually depend on the company itself.
16
3.0 Alternative 3: Derivative Securities
A derivative is a financial instrument that derive their value from the value of an
underlying asset so it does not have its own value unlike stocks and bonds that have their own
valuation. However, it does holds little value and its entire value is thus largely depend on the
underlying asset.
The common of derivatives are forward, future, option and swap contracts. Derivative
is used for hedging, arbitraging and speculation by the market players. For instances, hedgers
use derivative markets to reduce risks and speculators speculate on the belief about the future
price movement and volatility while arbitraging activities involve selling or buying contracts
and other assets to benefit from the mispricing.
Future Contract
Future contract is a legal binding agreement between buyer and seller to trade an asset
at an agreed price and time in the future. It is a standardized and exchange traded forward
contracts which means the place of delivery, quality, quantity and maturity are unable to be
customized.
Forward contract
Forward contract is a formal agreement which the parties involve are said to have taken
long and short position. The transaction of this contract are made via the over-the-counter (OTC)
and the contractual agreement on the quantity delivery places and times is unregulated so that
both parties can negotiate for the terms in the contracts.
For instance, Futures Crude Palm Oil contract (FCPO can be traded on Bursa Malaysia
Derivative (BMD). It is traded electronically and allow us to trade and access easily to all BMD
products. The minimum contract size is 25 metric tons (MT) which is equal to 1 contract, RM
1 per metric ton. FCPO can be hedged up to 3 years forward thus provide investors a more
effective and efficient hedging instrument to manage and reduce risk exposure.
Malaysia achieved highest monthly export value at about RM96 billion and palm oil
based agriculture products was one of the main products contributed to the increase in exports
and Malaysia has already filed a complaint against the European Union over its palm oil
measure to resolve the dispute of banning palm oil (Malaysia, 2021). Malaysia has indeed
showed effort to tackle the challenge to protect the palm oil industry because banning of palm
17
oil will result in huge loss of export income and bring benefit but only harm to our country. In
addition, the FCPO on BMD closed at a fresh high of RM3877 per tonne which is the highest
record since February and is positive for the market.
In essence, future contract is suitable for risk seeking or loving investors as high profit
gained is always associated with high risk.
18
Risk in Derivative Securities
1. Counterparty credit risk
Forward contract trader will encounter counterparty credit risk when the other party goes
default on or before the maturity of the contract. For instance, one have gone 10 long quantity
of Crude Palm Oil Future Contract with 10 tons per contract and the future price is RM3000
per ton. However, on the date of maturity, the spot price drop to RM2000, one will incur losses
of RM100000 [(RM3000- RM2000) x 10 contracts x 10 tons/contract]. Buyer will need to
settle the total amount of difference between agreed price in the contract and the spot price at
the expiration date. The seller is thus exposed to high default risk as the buyer might not be
able to pay for RM100000. Thus, the price movement is indeed unpredictable, unforeseeable
and unexpected.
2. Leverage Risk
According to Milton (2019), “leverage is the ability to trade a relatively large number of
contracts.” Leverage allow investor to margin investment without putting 100% of the
contract’s value. Hence, they are required to pay initial margin amount which is a portion of
the total value. If an investment has a very high market risk i.e. systematic risk, and high beta,
leverage risk is higher for a highly volatile securities such as derivative. Most of the time
leverage only favourable to low beta, volatile and market risk investment where the profit can
be magnified which allow you to make a leveraged return. Investors use leverage to increase
the return of investment however, if price is move against you, your loss will be overwhelmed
and unable to repay the debt. For instance, current market price of FCPO is RM3396 and
investor short for 1 future contract hence the total value will be RM 84900 (RM 3396 x 1
contract x 25 MT) and the initial margin required is RM9000. Although you only put down
small portion of the total value but you will still have exposure to RM75900 (RM84900RM9000). If the spot price goes up to RM4000 at maturity, the loss incurred will be RM15100
(RM604 x 1 contract x 25 MT). Hence, investors lose more than initial margin and need to
bear the additional losses incurred. Price sensitivity of a derivative contract has indeed
magnified by the effect of leverage. However, leverage is a necessary evil used in the derivative
market otherwise trading become a hassle that put everyone off as investors unable to enjoy
greater capital efficiency.
19
Return of Derivative Securities
1. Buy Put Option
Going long or buying on a Put is a strategy that can benefit the investors with unlimited
profits and the risk is limited to the premium paid. The buyer of the Put own the right to sell
an asset at a pre-specified price to limit one’s risk. Hence, the investor will gain if the
underlying asset fall down. The investor can exercise the option when the price of asset drop
below the strike price .i.e. the exercise price. Long put holder will gain when the price of the
asset lower than the sum of strike price and put option premium.
2. Buy Call option
Buying or going long on a call is a strategy that must be devised when the investor is bullish
on the market direction moving up in the short term. This option is the simplest and easiest way
to benefit if the investor believe that the market will make an upward move. Investors has the
right to buy an asset at a pre-specified price to limit one’s risk. The investor can exercise the
option when the price of asset rise above the strike price. The risk is limited to the premium
paid and the investors can enjoy unlimited profits if the price of an asset goes up.
20
Explain how to manage risks identified in question (1).
Alternative 1: Non-marketable Financial Asset
1. Liquidity risk
Depositors should always determine and evaluate the financial performance and health
of a financial institutions by looking at the financial statements. For instance, one must check
the asset quality ratio of banks during any economic shocks. Depositor should avoid deposit in
banks that faced extreme deterioration of asset quality during bad economy condition. This is
because expenses spent on impairment loans is too high and if banks unable to cover the bad
debts and loans, banks will not be able to meet their short term obligation when one wish to
withdraw the deposits upon maturity.
To further illustrate this point, “the S&P Global Ratings foresees a visible deterioration
of Malaysian banks’ asset quality condition due to Covid-19 and related business disruptions”
(EE, 2020). The gross non-performing assets (NPAs) increases to about 2.7% percent which is
higher than last year indicate the asset quality performance is in poor shape but it is considered
one of the lowest of in the Asean region so depositors can be reassured that Malaysian banks
are not in the detrimental state and is performing relatively better than other countries’ banks.
Furthermore, liquidity of a bank is measured by liquidity coverage ratio. It measures
the ability of a bank to fulfil its short term (within one month) obligation without having to
borrow cash within interbank or access to any outside cash. For depositor that wish to deposit
fund within one month or less, then one should aware of the bank’s liquidity coverage ratio as
if the bank is capable to fund cash outflows for 30 day and meet every obligation to depositors
and creditors immediately, the bank proved to have enough asset to honour them and will
continue to function optimally.
Therefore, depositors must examine the balance sheet and asset quality as well as
liquidity coverage ratio before deciding to invest in a bank.
2. Inflation risk
Depositors may not be able to get inflation-beating returns when inflation rate increases,
a condition where the general price of goods and services rises. However, by investing in a
fixed deposit for a short term may ensure one to get comfortable margin and earn higher returns.
The value of money saved could be much less than it was earned and depositors will definitely
21
incur losses. Thus, one should always lookout for investment options whose return are more
than the prevailing inflation rate to ensure the real value of money to return received is above
the inflation rate with a positive return (Sharma, 2019). The fixed deposit’s interest rates
offered by banks is difficult to beat inflation and thus it is advisable to invest in short term fixed
deposits rather than long term’s. The longer the time to maturity, the higher volatility of interest
rate and thus exposing one to higher risk of inflation. However, there are indeed banks that
offers higher interest rate for short term deposits and depositors should seize the opportunity
to invest funds into those banks.
Besides, investors should always ensure that the interest rate of fixed deposits surpass
Consumer Price Index (CPI). CPI is generally an indicator of inflation used to measures the
percentage change in price of a basket of goods and services consumed by households in a
specific time period for identifying inflation or deflation (Inflation, n.d.). The critical strength
of CPI is that its flexibility to take into account external factors such as consumer choice and
seasonal adjustment. Hence, investors who would like to look for clues the future inflation rate
could actually check the CPI before making investment choice. However, as an economic
predictor, CPI has it limitation as well that it does not take into consideration of all costs such
as taxes and only measure prices from the consumers’ perspective. Therefore, PPI comes into
place which reflect the average change in prices that domestic producers of goods receive for
their products. PPI tracks changes to the cost of production and thus providing a history series
of data about the prices movement in every stage. Investors can make use of this PPI as a
reference to predict the future inflation rate before investing.
In short, depositors could divide their funds according to the probability of withdrawal
and plan a good structure of deposit method to avoid liquidity risk and inflation risk.
22
Alternative 2:
Bond:
1. Choose higher credit rating bond
Investors rely heavily on bond ratings to evaluate the creditworthiness of a specific bonds.
The bond issuer’s financial capacity and strength are the main concern for investors looking
for a long term investment. With higher credit rating, the risk of default could be minimized
and the coupon interest payment and bond’s principal can be received in the stipulated date in
the contract. Hence, we chose three bond with high credit ratings to reduce credit risk. The first
bond -UMWH IMTN 5.220% 02.10.2026 is rated as AA2 by RAM, second-BGSM MGMT
IMTN 5.600% 27.12.2023 - ISSUE NO 9 has a credit rating of AA3 and lastly, MMC CORP
IMTN 5.700% 24.03.2028 is rated as AA bond by MARC. Therefore, we can invest safely in
such stable investment that are hardly encountered liquidity issues.
2. Diversify bonds portfolio by acquiring bonds with different maturity dates.
Investors should always avoid putting all eggs in one basket. Allocate different bonds to
your investment portfolio can reduce the loss incurred or offset the losses in one bond with the
gain in another. We chose bonds with different maturity that range from 3 years to maximum
7 years. We are a risk averse investors and plan to hold the bonds until maturity and do not sell
it merely due to the changes in interest rate. The prices of three bonds are calculated and we
found out that all the prices are above the current price on 25 February 2021 to make sure the
bond we chose is worth investing and minimize the loss incurred.
23
Alternative 2:
Stocks
1. Robo Advisor
It is an automated portfolio managers to help investors in managing investments. It is an
alternative to traditional advisor. Sign up for a robo advisor is simple where you just need to
list out your investment goals on the internet and answer related questions such as risk tolerance,
amount of money to be invested and investment time line. Robo advisor will use algorithm to
generate a personalized diversified investments portfolio and provide an asset allocation
approach that suit you (Anspach, 2021). Hence, it is considered efficient and effective system
for an amateur investor and it can avoid market sentiment because emotion and attitude would
drive the investors to make wrong decision sometimes. Trading with emotion during time of
volatility will not be seen in a robo advisors and they are taking emotion out of wealth while
helping investors to get the best returns. There are four robo-advisors licensed by Securities
Malaysia such as MYTHEO, Raiz Invest, Stashaway and Wahed Invest. Hence, Malaysian can
actually make use of it and the robo advisor fees are affordable.
2. Technical Analysis
An investment strategy used to predict probable future stock price movement and guide
investors to what most likely to happen given past information. Technical analysis rely on past
stock price data and price patterns such as trends and regular cycles in order to produce its
forecasts. In general, technical analysis emphasizes on multiple indicators such as price trends,
chart patterns, volume and momentum, moving average, support and resistance as well as
oscillators. For instance, momentum measures the changes in speed or movement of prices of
stocks whereas support and resistance helps investor to indicate whether the stock is on bearish
or bullish trend (Sraders, 2019).
Bottom up and top-down are ways to approach technical analysis. Top-down approach is
generally a macroeconomic analysis that examine and look at the whole economy, sectors and
then the outlook or financial health and performance of the company before choosing the
particular securities (Seth, 2021). Short term investors often adopt top-down approach to make
short term gain. Next, the bottom-up investing merely focus on individual stocks and its
fundamentals rather than the industry and the market cycles. Long term investors may favour
this approach as they delve deep into the particular company they deemed to have growth
potential.
24
Hence, most investors believe that the use of technical analysis help to create self-fulfilling
trading rules and minimize their risk.
3. Fundamental Analysis
A method of measuring the intrinsic value of a stock to see if the stocks prices traded on
the market are currently overvalued or undervalued. Fundamental analysis involve examine the
key ratios of a company to determine its financial health and performance to help with
investment decisions.
Thus, investors can make use of publicly available data to determine the estimated value of
the particular stock price. Investors may buy a stock where its value is higher than the market
price, i.e. stock is undervalued. This method consists of qualitative and quantitative analysis.
In terms of qualitative, corporate governance are emphasized to check whether the company is
accountable, transparent and comply with all rules and regulations. For quantitative, the
financial ratios on the balance sheet and income statement such as P/E ratio and EPS will be
calculated to ensure a company’s financial health is sustainable and is profitable for investors.
Therefore, investor can minimize risk through fundamental analysis before putting fund to
invest in a specific stock.
4. Transaction Cost
Investor can avoid paying high transaction costs by comparing and finding the best share
trading account in Malaysia.
The table below are the brokerage fees charged by each platform:
We choose Rakuten Trade as trading platform to invest in Top Glove, Hong Leong
Financial Group (HLFG), Kuala Lumpur Kepong Berhad (KLK) and Hai-O stocks as Rakuten
25
Trade offers the lowest brokerage fees of RM7 as compared to other platform. In addition,
opening an account in Rakuten Trade is free of charge and the time taken to register is within
two hours or even less. This has indeed help investor to save money and time.
Thus, investors should compare brokerage fees before investing to maximize the return.
5. Market Value Risk
Investors should always invest stocks with different sector to diversify the investment
portfolio and to avoid losses when the market go against it. For instance the stocks we chose
are from different sector where Top Glove is belongs to pharmaceutical’s, HLFG is belongs to
financial services sector, KLK is in plantation’s whereas Hai-O is categorised in consumer
products and services sector.
Alternative 3:
Derivative instruments
1. Counterparty Credit Risk
Future contract aim to eliminate the counterparty credit risk that faced in forward contract.
Clearing house guarantees each trade by transferring the default risk on itself where in case of
default of one parties, it will stands ready to complete the trade. Clearing house will collect
margins from both parties to the transaction to collateralize each party’s exposure under the
contract and this involve the marking to market process when clearinghouse recognize any
losses incurred by the long or short position (Future Contract, n.d.). When investor’ margin
balance fall below the maintenance margin, one will receive a margin call from the broker to
immediately top up to the level of initial margin. This will drastically lower the probability of
default to almost zero thus giving the investors the ability to enter or exit whenever they choose
to do so.
2. Leverage Risk
A single multi-party contract could be used to drives a common settlement mechanism for
all investors in an autonomous manner. By enabling investor to participate in trades with more
than one (multiple) counterparties, leverage risk could be reduced. Investors will be able to
take different position simultaneously and predict as well as forecast the price movement and
26
price range for the asset. This will indeed create potential of higher returns while the risk
remained fixed to the initial stake (Kalikar, 2019). Investors can avoid exposure of risk of
losing more than they put into the investment. The transformation of one-to many or many-tomany in a direct setting can indeed bring unprecedented with unlimited profits to the investors.
27
List and specify all your recommended nonmarketable financial asset(s) and its financial
institution(s) (for alternative 1) or your recommended marketable securities (for
alternative 2 or/and 3) in your portfolio. State the reason(s) for selecting that financial
asset(s).
Alternative 1
Fixed deposit
Fixed deposits is considered a risk free investment among the non-marketable securities
and is suitable for risk averse investors to put their money into fixed deposit that bear relatively
higher interest than saving accounts. However, the one can only withdraw the money until the
date of maturity with the guaranteed of the principal with return.
Investor is required to deposit a minimum of RM10000 into Hong Leong Bank that
offers the highest interest rate for a 6-month fixed deposit.
Given the investor invests 10% of RM100000 which will earn RM250 by depositing in bank 6
months.
Simple interest formula:
I= P x r x t
Interest earned = Principal x Interest rate x Time
= RM10000 x 2.5% x 6 month
= RM250
Future value investment= Principal + Interest earned
= RM10000 + RM250
= RM10250
From the calculation above, the investor will get RM10250 in the end of maturity which
is after 6-month. OPR will be announced on next month-March, and if further cut of OPR will
lead to Hong Leong Bank revise the interest rate of 2.5% and the investor gain lower return.
Therefore, we avoid placing too much confidence and expectation on the interest rate of fixed
deposits and invest only 10% out of RM100000 into FD since Malaysia’s economy outlook is
marked at risk due to slower economic and business growth (Jaafar, 2021).
28
Alternative 2
Bond
Cost of debt/ required rate of return:
UMWH IMTN 5.220% 02.10.2026
Invest Amount= RM10000 (100 units)
Coupon Rate= 5.22%
Current Price (25 February 2021) = RM11076
Number of years to maturity= 5
Coupon payment= RM10000 x 5.22%
= RM522
Current Yield= Annual Coupon payment ÷ Current Price
= RM522 ÷ RM11076
= 4.71%
𝑐𝑜𝑢𝑝𝑜𝑛 𝑝𝑎𝑚𝑒𝑛𝑡 +
𝐹𝑢𝑡𝑢𝑟𝑒 𝑣𝑎𝑙𝑢𝑒 − 𝑃𝑟𝑒𝑒𝑛𝑡 𝑣𝑎𝑙𝑢𝑒
𝑛
Yield to maturity (YTM) =
𝐹𝑢𝑡𝑢𝑟𝑒 𝑣𝑙𝑎𝑢𝑒 + 𝑃𝑟𝑒𝑠𝑒𝑛𝑡 𝑣𝑎𝑙𝑢𝑒
2
𝑅𝑀522 +
𝑅𝑀10000 − 𝑅𝑀11076
5
=
𝑅𝑀10000 + 𝑅𝑀11076
2
=
0.0291/ 2.91%
⸫ The required rate of return on bond is approximately 2.91%.
29
Present value of Bond (Bo) =
=
𝑐
𝑟
x [1− (1+r)-n] + F/ (1+r) n
261
0.01455
x [1− (1.01455)-10] + 10000/ (1.01455)10
= 2412.74+ 8654.97
= RM11067.71
⸫The bond will sell for RM11067.71today that is higher than par value of RM10000.
30
BGSM MGMT IMTN 5.600% 27.12.2023 - ISSUE NO 9
Invest Amount= RM10000 (100 units)
Coupon Rate= 5.60%
Current Price (25 February 2021) = RM10812
Number of years to maturity= 2
Coupon payment= RM10000 x 5.6%
= RM560
Current Yield= Annual Coupon payment ÷ Current Price
= RM560 ÷ RM10812
= 0.0518/ 5.18%
𝑅𝑀560 +
𝑅𝑀10000 − 𝑅𝑀10812
2
Yield to maturity (YTM) =
𝑅𝑀10000 + 𝑅𝑀10812
2
=
0.0148/ 1.48%
⸫ The required rate of return on bond is 1.48%
Present value of Bond (Bo) =
=
𝑐
𝑟
x [1− (1+r)-n] + F/ (1+r) n
280
0.0074
x [1− (1.00074)-4] + 10000/ (1.0074)4
= 1099.58+ 9709.4
= RM10808.98
⸫The bond will sell for RM10808.98 today that is higher than face value of RM10000.
31
MMC CORP IMTN 5.700% 24.03.2028
Invest Amount= RM20000 (200 units)
Coupon Rate= 5.70%
Current Price (25 February 2021) = RM20999
Number of years to maturity= 7
Coupon payment= RM20000 x 5.7%
= RM1140
Current Yield= Annual Coupon payment ÷ Current Price
= RM1140 ÷ RM20999
= 0.0543 / 5.43%
𝑅𝑀1140 +
Yield to maturity (YTM) =
𝑅𝑀20000 − 𝑅𝑀20999
7
𝑅𝑀20000 + 𝑅𝑀20999
2
=
0.0486/ 4.86%
⸫ The required rate of return on bond is 4.86%.
Present value of Bond (Bo) =
=
𝑐
𝑟
x [1− (1+r)-n] + F/ (1+r) n
570
0.0243
x [1− (1.0243)-14] + 20000/ (1.0243)14
= 6696.24+ 14290.57
= RM20986.81
⸫The bond will sell for RM20986.81 today that is higher than par value of RM20000.
32
The following table are YTM calculation using Excel:
33
The following are Present value of Bond calculation using Excel PV (Present value) function:
Bond 1:
*Excel will produce negative
value for bond price
Bond 2:
*Excel will produce negative
value for bond price
34
Bond 3:
*Excel will produce negative
value for bond price
In essence, the YTM of all three bonds above are below the bonds’ coupon interest rate
and its current yield which measures the bonds’ coupon payment relative its current price. The
bonds will sell at premium since three bonds’ market values is above its face value i.e. the par
value. YTM measures both the value of the coupon payment that the investor receives and the
loss that bondholder incurs upon maturity. Hence, when the bond sells at a premium, its YTM
is below its current yield as the YTM takes into account that the bondholder will receive just
RM10000 at maturity, which represent a loss relative to the bond’s current market price.
Coupon rate> Current yield>YTM= Bond sells at premium
35
Alternative 2
Stock (Equities)
We allocate RM5000 for stocks which is 50% out of RM100000 that we have. We did a
complete search for each of the company that we wish to invest in.
The following shows four stocks from four companies regarding of their financial performance
and profitability:
Top
Glove
Corporation
2020
2019
2018
2017
2016
Share price (RM)
26.28
4.75
11.14
5.61
4.25
Dividend (cent)
8.5
1.33
1.67
1.43
1.43
Price
119.5
95.0
190.0
112.2
85.0
28.9
14.4
18.1
16.3
19.3
22.0
5.0
6.0
5.0
5.0
6190883
2554141
2398396
2072791
1875697
1788830
367546
433206
338888
362439
Berhad
/Earning ratio
ROE
(Return on Equity (%)
EPS
(Earning per share) (cent)
Total Equity
RM (‘000)
Profit after tax
RM (‘000)
Hong
Leong
Financial
2020
2019
2018
2017
2016
Share price (RM)
14.68
16.8
18
18.54
13.10
Dividend (cent)
38.0
38.0
40.0
42.0
38.0
Price
11.1
12.8
10.8
11.0
8.0
9.6
9.4
11.1
10.4
9.3
132.2
131.8
166.8
167.8
163.6
31052751
237882611
229317551
218962403
210474534
2064
2317
2895
2914
2779
Group (HLFG)
/Earning ratio
ROE
(Return on Equity (%)
EPS
(Earning per share) (cent)
Total Equity
RM (‘000)
Profit after tax
RM(‘000)
36
Kuala
Lumpur
Kepong
2020
2019
2018
2017
2016
Share price (RM)
22.8
23.08
24.96
24.56
23.98
Dividend (cent)
50.0
50.0
50.0
50.0
50.0
Price
31.7
39.8
43.6
26.0
16.0
7.1
6.0
5.5
8.7
15.2
72.0
58.0
57.2
94.4
149.5
11804100
11286655
12045548
12440042
11288026
857049
650733
660317
1066876
1683140
Hai-O Enterprise Berhad
2020
2019
2018
2017
2016
Share price (RM)
1.72
2.57
4.96
3.81
2.54
Dividend (cent)
10.0
13.0
20.0
16.0
15.0
Price
15.33
15.64
19.93
18.55
20.37
10.9
15.4
23.5
20.9
14.1
11.22
16.43
24.88
20.54
12.47
310190
320674
318923
296169
268981
32319
47447
72521
59415
36565
Berhad (KLK)
/Earning ratio
ROE
(Return on Equity (%)
EPS
(Earning per share) (cent)
Total Equity
RM (‘000)
Profit after tax
RM (‘000)
/Earning ratio
ROE
(Return on Equity (%)
EPS
(Earning per share) (cent)
Total Equity
RM (‘000)
Profit after tax
RM (‘000)
The growth rate of dividend of these four stocks can be found by using formula:
𝐹𝑉n ^1/n
)
𝑃𝑉
r= (
−1
37
However, we use excel to get a more accurate dividend growth rate by using the Excel RATE
function.
This table show the dividend growth rate we got using Excel RATE function:
Company
Dividend Growth rate %
Top Glove Corporation Berhad
56.14
Kuala Lumpur Kepong Berhad (KLK)
0.00
Hong Leong Financial Group (HLFG)
0.00
Hai-O Enterprise Group
-9.64
38
5.21 Cost of common stock
After successfully getting the dividend growth rate% (g), the required return of common stocks
i.e. the cost of common stock can be calculated by using the formula:
*Price of all stocks (P0) are based on 25 February 2021
Top Glove Corporation Berhad
D1= D0 x (1+ g)
= RM 0.085 x (1+ 0.5614)
= RM0.13
rs =
𝑅𝑀0.13
𝑅𝑀5.3
+ 0.5614
= 0.5859 / 58.59%
Hong Leong Financial Group (HLFG)
D1= RM0.38 x (1)
= RM0.38
𝑅𝑀0.38
rs = 𝑅𝑀16.2 + 0
= 0.0235 / 2.35%
39
Kuala Lumpur Kepong Berhad (KLK)
D1= RM0.5 x (1)
=RM0.5
rs =
𝑅𝑀0.5
𝑅𝑀23.28
+0
= 0.0215 / 2.15%
Hai-O Enterprise Berhad
D1= RM0.1 x (1−0.0964)
=RM0.09036
rs =
𝑅𝑀0.09036
𝑅𝑀2.18
−0.0964
= −0.055/ −5.5%
40
Top Glove Corporation Berhad:
(From SimpleWall)
The share price of Top glove Corp Berhad on 25 February is RM5.3 The group
experienced spiked in growth in terms of sales due to the surging Covid-19 pandemic last year.
However, stock prices declined from RM26.08 to RM8.37 within just a day in September 3,
2020 due to the share buyback schemes conducted by the company itself. The announcement
of special dividend of 20% by the group itself failed to stop the price drop and partly is due to
the fact that vaccines are widely available now and thus the glove demand will decrease
(Mahalingam, 2021).
We chose to put only 5% of the fund to invest in Top Glove stocks because the dividend
paid is the lowest among the other three stocks. Shareholder only received 8.5 cents per share
and the dividend paid in the past few years shown were even lower. Top Glove received
approval from shareholders for the bonus share issues implied that shareholder who is entitled
to receive Top Glove bonus issue shares is allowed to sell any of the Top Glove’s shares arising
from the bonus issue beginning at September 3, 2020 (Lim, 2020). However, this may result in
diluting the EPS proportionally. The lower EPS indicates for every unit share being held,
shareholders earned merely 22 cents in 2020. This is indeed not a very attractive return that we
expected to get from the largest glove producers in the world. However, we still possess hope
on Top Glove shares as it is still performing well as compared to its competitors.
41
Hong Leong Financial Group (HLFG)
(From SimpleWall)
Hong Leong Financial Group (HLFG) has been the top three gainer in Bursa Malaysia
since last week and its latest share price is RM16.2 on 25 February. It has achieved higher
contributions from its stockbroking divisions, insurance, investment banking where its net
profit for fourth quarter rose to about RM525 million (Jaafar, 2020). The movement of share
price is less volatile and has been stable over the past year as well. The increase in share price
is partly due to excellent financial achievement with increment net profits and revenue of
approximate RM31 million and RM14 million respectively in fourth quarter 2020.
Shareholders of HLFG earned RM1.32 for each unit of shares being hold and the group
has been maintaining its EPS at least RM1 which is the highest among the stocks chose. The
return on equity increased 2% from year 2019 to 2020. The higher the return on common equity
indicates higher return earned on common stockholder’s investment in the company where the
company earned 0.096 ringgit for each ringgit of common stock equity or in another word, for
1 ringgit of common stock equity it contributes to 0.096 ringgit’s profit.
We placed higher expectation on the HLFG because it exceeded the Malaysia Banks
industry which returned 3.4% over the past year and therefore is considered top notch company
in financial sectors. It is suitable for long term investment and is a good choice for risk seeking
42
investors looking for higher return while still being at the safe side. Therefore we decided to
put RM30000 funds into investing HLFG stocks.
43
Kuala Lumpur Kepong Berhad (KLK)
(From SimpleWall)
Each share of KLK on 25 February 2021 is RM23.28. KLK has paid consistent dividend
to its shareholders for the past five years at RM0.50 per share. Although there the dividend
growth rate is zero, the earning per share (EPS) has increased to RM0.72 from RM0.58, a total
increased of RM0.14 due to the decrease in share prices. The increase in selling prices of crude
palm oil (CPO) and palm kernel (PK) has positive impact on the company’s profits with an
increase of 52.5%, higher than last year (Wong, 2020).
Rather than solely depend on producing CPO and PK, KLK took a big step venturing
into medical gloves to create a portfolio which has high return of asset and equity. It is
forecasted its expansion into medical gloves could eventually raise the net profits for the
company by range between 4%-7% for the financial year ending September 2022 (Tan, 2021).
Besides, KLK plans to increase capacity through a joint venture project with IJM
Plantation Berhad to construct a new refinery, kernel crushing plants and jetty in Kalimantan
in order to speed up its production. When examine under SWOT analysis, the group seemed to
be in a favourable situation where the opportunity is arising as the increase in demand of CPO
drives the commodity prices up and thus benefiting the group with higher profits (Kaur, 2021).
Therefore, we decided to invest RM10000 in KLK shares with all sustainable dividends
paid with nearly zero dividend volatility.
44
Hai-O Enterprise Berhad
(From SimpleWall)
Hai-O Enterprise Berhad’s share prices on 25 February is RM2.18 per share. The
dividend volatility of the group has been unstable from the past five years but it is still in
acceptable range since its dividend has not shrunk linearly at 8.5% per annum (Simply Wall St,
2021). The company has paid out more than 50% of its profits as dividends to the shareholders
in 2020. The company has the commitment to pay dividend to maximize shareholders’ wealth
although the dividends decreased from RM0.13 to RM0.10 per share.
The EPS is forecasted to experience growth in the forth-coming years. Listing status of
Hai-O Enterprise Berhad will be taken over by Beshom Holdings Berhad where Beshom will
concentrate on marketing and manufacturing property whereas Hai-O will focus on wholesale
as well as retail business (Chin, 2021). This organized structure is considered excellent for the
group as they can put 100% effort in increasing the business growth and sales.
Although the EPS, ROE, and profits after tax of the group decreases, investors are still
looking forward that Hai-O will back on its track with increase in revenue as what it had
achieved in 2018 with the highest EPS and dividends paid. Thus, we chose to Hai-O stocks as
part of our portfolio by investing RM5000 to buy the shares although the required return will
become negative when calculated.
45
Conclusion
WACC
Portfolio investment
Required
Weightage WACC
return (%)
Fixed deposit
2.5
0.10
0.002500
Bond-UMWH IMTN 5.220% 02.10.2026
2.91
0.10
0.002910
5.600% 1.48
0.10
0.001480
Bond- MMC CORP IMTN 5.700% 24.03.2028 4.86
0.20
0.009720
Stock- Top Glove Corporation Berhad
58.59
0.05
0.029795
Stock- Hong Leong Financial Group
2.35
0.30
0.007050
Stock- Kuala Lumpur Kepong Berhad
2.15
0.10
0.002150
Stock- Hai-O Enterprise Berhad
-5.50
0.05
-0.00275
Bond-
BGSM
MGMT
IMTN
27.12.2023 - ISSUE NO 9
Total WACC
0.052855
With RM100000 funds, we expected the required return annually is 5.2855% by
investing in alternative 1 and 2 which are fixed deposit, bonds and stocks. We do not choose
alternative 3 because we are risk averse investors and the fluctuation of price of asset would be
high and if the price go against us, the loss incurred will be overwhelmed.
46
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Lim, J. (2020, September 3). Top Glove up as much as 8.86% in morning trade of two-for-one
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49
BA208 Assignment (Jan-April)
ORIGINALITY REPORT
8
%
SIMILARITY INDEX
7%
INTERNET SOURCES
1%
PUBLICATIONS
4%
STUDENT PAPERS
PRIMARY SOURCES
1
epdf.pub
1%
2
docplayer.net
1%
3
www.theedgemarkets.com
1%
4
www.danajamin.com
1%
Submitted to Colorado Technical University
Online
1%
5
Internet Source
Internet Source
Internet Source
Internet Source
Student Paper
6
Submitted to Open University Malaysia
<1 %
7
Submitted to Webster University
<1 %
8
silo.pub
<1 %
9
www.hlb.com.my
<1 %
Student Paper
Student Paper
Internet Source
Internet Source
<1 %
10
opcionesbinariassancarlosdebariloche.blogspot.com
11
Submitted to RMIT University
<1 %
Submitted to University of Northumbria at
Newcastle
<1 %
13
www.htsdc.org
<1 %
14
www.colonialfirststate.com.au
<1 %
15
debubglobalbank.com
<1 %
16
www.econstor.eu
<1 %
17
Submitted to Universiti Malaysia Sarawak
<1 %
18
Submitted to University of East London
<1 %
19
Submitted to Strathmore University
<1 %
20
whatis.techtarget.com
<1 %
21
Submitted to TAR University College
12
Internet Source
Student Paper
Student Paper
Internet Source
Internet Source
Internet Source
Internet Source
Student Paper
Student Paper
Student Paper
Internet Source
Student Paper
<1 %
22
www.khor-reports.com
<1 %
23
Submitted to Oxford Brookes University
<1 %
Zabihollah Rezaee. "Financial Services Firms",
Wiley, 2011
<1 %
25
www.bixmalaysia.com
<1 %
26
lifedividend.biz
<1 %
27
financenumericals.blogspot.com
<1 %
28
www.thesundaily.my
<1 %
Moorad Choudhry. "Fixed Income Securities
and Derivatives Handbook", Wiley, 2010
<1 %
www.coursehero.com
<1 %
24
Internet Source
Student Paper
Publication
29
Internet Source
Internet Source
Internet Source
Internet Source
Publication
30
Internet Source