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Fin 200 gha wk 9

1-Let’s say that you have a defined-contribution pension plan. Recall that your plan can consist of different financial instruments. You will at some point have all 3 of the below allocations. Rank when in your working life and why it would be best to have the following portfolio allocations:

(a) 100% bonds and money-market instruments,

(b) 100% stocks,

(c) 50% bonds and 50% stocks? (first part, middle, or last)

2-If you were an employee and you had the opportunity, would you rather participate in a defined-benefit pension plan or in a defined-contribution pension plan? Explain your answer and make sure to use what we learned in this class.

3-What is Fannie Mae? (2-3 sentence answer needed).

4-List the 5 types of financial intermediaries that may be classified as nondepository institutions.

315 gha 10 wk 10

1. An investor in the 35 percent tax bracket may purchase a corporate bond that is rated double A and is traded on the New York Stock Exchange (the bond division). This bond yields 9.0 percent. The investor may also buy a double-A-rated municipal bond with a 5.85 percent yield. Why may the corporate bond be preferred? (Assume that the terms of the bonds are the same.) Show your work.

2. You are in the 28 percent federal income tax bracket. A corporate bond offers you 6.8 percent while a tax-exempt bond with the same credit rating and term to maturity offers 4.1 percent. On the basis of taxation, which bond should be preferred? Explain. Show your work.

3. You are in the 35 percent federal income tax bracket. A corporate bond offers you 6.8 percent while a tax-exempt bond with the same credit rating and term to maturity offers 4.1 percent. On the basis of taxation, which bond should be preferred? Explain. Show your work.

4. You bought a stock for $50 and sold it for $100 7 years later. What was the annual rate of return? Show your work.