1. Please use your won words to write 240 words to answer Discussion Question ( SEE ATTACHMENT) (USE AT LEAST 1 APA FORMAT REFERENCE)
2. Please use your won words to reply 80 words to a classmate answer ( I will post later)
3.Please use your won words to write 3 pages to answer PA2 ( SEE ATTACHMENT) (USE AT LEAST 5 APA FORMAT REFERENCES)
I will check plagiarism, Plagiarism check under 20%
After you graduate from college and start your professional career, you will need to consider investing for your retirement. A 401(k) plan is a retirement plan offered by many companies. Such plans are tax-deferred savings vehicles, meaning that any deposits you make into the plan are deducted from your current pretax income, so no current taxes are paid on the money. For example, assume your salary will be $50,000 per year. If you contribute $3,000 to the 401(k) plan, you will pay taxes on only $47,000 in income. There are also no taxes paid on any capital gains or income while you are invested in the plan, but you do pay taxes when you withdraw money at retirement. As is fairly common, the company also has a 5% match. This means that the company will match your contribution up to 5% of your salary, but you must contribute the amount that you want matched, up to the maximum.
The 401(k) plan has several options for investments, most of which are mutual funds. A mutual fund is a portfolio of assets. When you purchase shares in a mutual fund, you are actually purchasing partial ownership of the fund’s assets. The return of the fund is the weighted average of the return of the assets owned by the fund, minus any expenses. The largest expense is typically the management fee, paid to the fund manager. The management fee is compensation for the manager, who makes all of the investment decisions for the fund.
Consider the following questions based on the history of capital markets.
1. What advantages do mutual funds offer compared to the company stock?
2. Assume that you invest 5 percent of your salary and receive the full 5 percent match from your employer. What EAR do you earn from the match? What conclusions do you draw about matching plans?
Professional Assignment 2
PA 2 includes two parts: Part 1 is an evaluation of beta and WACC, and Part 2 the acquisition of data in preparation for CLA 2. You need to complete both parts in your 3 page, APA-formatted report to demonstrate your comprehensive evaluation of the company’s opportunity cost as well as your skills in retrieving and organizing historical data on securities for the purpose of portfolio formation.
1. Search Yahoo Finance, or any other credible source to retrieve the most recent income statement and balance sheet for a major leveraged corporation.
· Provide these statements in proper format and include a screenshot of the data.
· Retrieve the data on the company’s historical data and calculate its annual rate of return by using adjusted closing prices for the past 20 years.
· Using the data on the company’s stock rate of return and the index’s rate of return, estimate the beta of the corporation. Compare this value with the value stated by the source.
· Retrieve the risk-free rate of return as the annual interest rate of US treasuries. Based on these values, estimate the expected annual rate of return of the corporation’s security. Compare your estimate with the expected rate of return as evaluated based on your data in Part 2.
· Using the financial statements mentioned above, estimate the annual rate of interest paid by the corporation (cost of debt).
· Additionally, find the tax rate and capitalization ratio (proportions among equity and debt). Using these values, estimate the annual weighted cost of capital (WACC) of the corporation.
2. This part of the assignment is in preparation for CLA 2. Choose five (5) major securities from different industries, one of which can be the one you chose in Part 1 of the question.
· Retrieve the data on the companies’ historical data and calculate annual rate of return for the past 20 years for each security.
Provide detailed and precise explanations and definitions. Comment on your findings and provide references for content when necessary. Explain everything in your own words.
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