Investment Planning and Risk Profiles
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Questions and Answers

What is a primary factor that influences a person's investment behavior?

  • Personal circumstances and special needs (correct)
  • Heredity and genetics
  • The stock market trends
  • Social media influence

    • Which type of investment is characterized by lower risk and capital preservation?

  • Commodities
  • Equity funds
  • Fixed deposits (correct)
  • Hedge funds

    • What is a common characteristic of moderate risk investors?

  • Superficial understanding of investment options
  • Focus solely on capital gains
  • Combination of dividend and capital gains (correct)
  • Preference for high yields only

    • What type of investment primarily aims for capital gains and high yields?

    <p>Unit Trust – Aggressive fund</p> Signup and view all the answers

    Why are bonds considered debt securities?

    <p>They arise from borrowing for large projects</p> Signup and view all the answers

    Which type of investment is least likely to be categorized as aggressive?

    <p>Fixed income/Bond fund</p> Signup and view all the answers

    What defines the risk profile of an individual when searching for suitable investments?

    <p>Their personal financial goals</p> Signup and view all the answers

    Which of the following is an example of a higher-risk investment?

    <p>Speculative shares</p> Signup and view all the answers

    What happens to callable bonds if interest rates are expected to fall?

    <p>Issuers can redeem the bonds early to re-borrow at lower rates.</p> Signup and view all the answers

    Which statement best describes the relationship between bond yield and bond price?

    <p>Higher yield results in lower bond prices, indicating an inverse relationship.</p> Signup and view all the answers

    How does the call feature of a bond impact its initial pricing for investors?

    <p>Bonds with call features usually have lower initial prices than non-callable bonds.</p> Signup and view all the answers

    What is the effect of higher coupon payments on bond prices, all else being equal?

    <p>Higher coupon payments lead to higher bond prices.</p> Signup and view all the answers

    What is a characteristic of a call protection period?

    <p>It restricts issuers from exercising the call option on the bond for a specified time.</p> Signup and view all the answers

    What generally happens to the price of a bond as its maturity increases, assuming the coupon rate and yield are constant?

    <p>The price of the bond tends to increase.</p> Signup and view all the answers

    Which risk is primarily associated with changes in the yield that affects bond pricing?

    <p>Interest rate risk</p> Signup and view all the answers

    In what way do fixed coupon payments serve as a buffer against changes in bond price?

    <p>They provide consistent income to investors even in fluctuating markets.</p> Signup and view all the answers

    What is the minimum number of shares required to be entitled to receive 1 bonus share?

    <p>5 shares</p> Signup and view all the answers

    If an investor owns 5,000 shares and receives a bonus issue, how many total shares will they have after the bonus issue?

    <p>6,000 shares</p> Signup and view all the answers

    What is the ex-bonus issue price if the original holding is RM8,250 and the total shares after the bonus issue is 6,000?

    <p>RM1.38</p> Signup and view all the answers

    What was the subscription price for the rights issue announced by Bersatu Tegas Berhad?

    <p>RM1.85</p> Signup and view all the answers

    What is the market price per share just before the rights shares were issued?

    <p>RM2.50</p> Signup and view all the answers

    What is the date by which the entitlement for the rights issue must be exercised?

    <p>30 August 2019</p> Signup and view all the answers

    In the rights issue, how many rights shares can a shareholder receive if they own 25 shares?

    <p>1 rights share</p> Signup and view all the answers

    What calculation determines the ex-right price based on the bonus issue?

    <p>Total share value divided by total shares after right issue</p> Signup and view all the answers

    What is the total value of Raymond Lee's investment before the share split?

    <p>RM11,610</p> Signup and view all the answers

    How many shares will Raymond Lee have after the 3 for 1 share split?

    <p>13,500 shares</p> Signup and view all the answers

    What happens to the price per share after a share split?

    <p>It decreases proportionally.</p> Signup and view all the answers

    What does fundamental investing primarily focus on?

    <p>Key drivers of growth in a company.</p> Signup and view all the answers

    Which statement about technical analysis is correct?

    <p>It predicts future price movements based on historical data.</p> Signup and view all the answers

    What is dollar cost averaging?

    <p>Investing the same amount at regular intervals.</p> Signup and view all the answers

    What is the primary characteristic of share margin trading?

    <p>It allows borrowing money to purchase shares.</p> Signup and view all the answers

    How does a reverse share split affect the price values of shares?

    <p>It increases the value per share.</p> Signup and view all the answers

    What is the minimum period to review and monitor the performance of a company before considering an investment?

    <p>5 to 10 years</p> Signup and view all the answers

    What right does an ordinary shareholder have during the annual general meeting?

    <p>To exercise voting rights on company matters</p> Signup and view all the answers

    Which of the following is considered a systematic risk in the stock market?

    <p>Market risk</p> Signup and view all the answers

    What type of risk is business risk categorized as?

    <p>Unique risk</p> Signup and view all the answers

    What should an investor do if they are considering adding to their shareholding?

    <p>Find out more about the management of the company</p> Signup and view all the answers

    Which of the following is NOT a recommended action for shareholders?

    <p>Avoid monitoring market trends</p> Signup and view all the answers

    What is one of the primary purposes of attending the annual general meeting as a shareholder?

    <p>To pose relevant questions and raise concerns</p> Signup and view all the answers

    What can result from business risk affecting a company?

    <p>Loss of competitive advantage specific to the company</p> Signup and view all the answers

    Study Notes

    Investment Attitudes and Influences

    • Attitudes towards investing can develop from upbringing, personal experiences, and special circumstances.
    • Past investment experiences can shape future behavior and choices in investments.
    • Unexpected life events, such as retrenchment or health issues, may drastically affect investment decisions.

    Investment Planning and Risk Profile

    • Identifying an individual's risk profile is essential before selecting suitable investments.
    • Risk profiles can be categorized as lower, moderate, or aggressive.

    Malaysian Investment Types

    • Lower Risk Investments:
      • Fixed Deposits
      • Amanah Saham Bumiputra (ASB) and Amanah Saham Wawasan 2020 (ASW)
      • Tabung Haji
      • Unit Trusts: Balanced, Money Market, Fixed Income/Bond Funds
    • Moderate Risk Investments:
      • Unit Trusts: Balanced, Equity, and Index Funds
      • Commodities such as gold
      • Public Listed Shares
      • Property investments including REITs
    • Aggressive Risk Investments:
      • Unit Trusts: Aggressive Funds, International or Sectoral Funds
      • Hedge Funds and Foreign Investments
      • Foreign exchange and commodities
      • Speculative shares in the stock market and various property investments (land, commercial, residential)

    Understanding Bonds

    • Bonds act as debt securities for companies that need to finance large projects.
    • Callable bonds allow issuers to redeem them early if prevailing interest rates fall.
    • Risks associated with bonds include interest rate risk, where bond price inversely correlates with changes in yield.

    Bond Valuation Factors

    • Interest Rate Changes: Higher yield results in lower bond prices and vice versa.
    • Coupon Rates: Fixed coupon payments provide a buffer; higher coupons typically lead to higher bond prices.
    • Bond Maturity: Longer maturities generally lead to higher bond prices for similar yields.
    • Call Features: Bonds with call capabilities can affect investor returns.

    Investment Risks

    • Bond Risks: Interest rate risk may impact pricing; always review company performance.
    • Share Risks: Market risk affects all financial products; business risk is specific to individual companies.

    Impact of Corporate Actions

    • Ex-Bonus Issues: Shareholders may receive bonus shares based on original holdings, altering the average purchase price.
    • Rights Issues: Allow shareholders to buy additional shares at a specified price, affecting total investment value.

    Share Splits and Valuation

    • Share splits increase the number of shares and lower the individual share price without changing overall equity value.
    • Reverse share splits raise share value and reduce share quantities.

    Investment Strategies

    • Fundamental Analysis: Focuses on evaluating a company's intrinsic value based on key growth drivers.
    • Technical Analysis: Assumes share price reflects all fundamental information.
    • Dollar Cost Averaging: Regular investment of the same amount over time to mitigate market volatility.
    • Share Margin Trading: Involves borrowing funds to invest in additional shares, increasing both potential risk and reward.

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    Lecture 5 - Investment in Shares and Bonds.pptx

    Description

    This quiz explores how attitudes, upbringing, and personal experiences shape investment behaviors and risk profiles. Understand the influence of unexpected events on investment decisions and learn about different types of investments. Test your knowledge on effective investment planning strategies.

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