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IP1 assignment help!!! Q4 version 3001

Discussion in 'Financial Planning Study Group' started by xiaokong, 17th Dec, 2010.

  1. xiaokong

    xiaokong Member

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    • Grace has heard of the term ‘derivatives’ and was interested to know if any of these products would be suitable for her.
    Address Grace’s enquiry regarding the suitability of derivatives in her portfolio by briefly discussing the concept of a derivative and how they would/would not fit into her portfolio. As an example, provide an overview of options and futures, how they are commonly used and by whom.

    anyone can help me please?
    what's that question mean? is that any derivatives products are suitable for her? or discuss the future, options, swaps ... and explain why they are suitable for her or not. like discuss futures and if futures is suitable for her?
    anyone can give me a hint? thank u very much
    we can discuss other questions as exchange, i'm doing orther questions as well.
     
  2. Mel1776

    Mel1776 Member

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    i am currently doing this assignment as well, and I have prepared this answer with a description of derivatives and giving details as to how futures and options work (examples are always good). Then point out why it would or would not be suitable for Grace's circumstances.
    As i said, I am currently doing this assignment, and have not submitted or passed it, so this is just a suggestion.
    Hope this helps.
     
  3. xiaokong

    xiaokong Member

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    thanks Mel1776, just wondering if we should discuss other derivatives like swaps, warrants etc. i think that derivatives are not suitable for Greace n what do u think?
     
  4. Mel1776

    Mel1776 Member

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    i would briefly explain what derivitives are and what types there are, like swaps, warrants etc.. But I have given more details in regards to the options and futures as the question referred to. When looking at Grace's current situations and risk profile - I would say that it would not be suitable for her. The biggest things when recommending any type of investment is that is suits the persons risk profile. After my own research into the derivatives products it is clear to me that they are a high risk investment. And when it comes to futures especially the risk of the loss of capital and then some is also a point I considered. Does this make sense and bring back some understanding from the course notes? Again, this is my interpretation, don't quote me on it :)
     
  5. xiaokong

    xiaokong Member

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    thanks Mel1776:) a friend of mine who works as a para planner thinks the same. and do u check the question 5, it requests to addressing the derivatives strategies. for me, i think just say derivatives are not suitable for her n explain why, so there is actually no derivatives strategies for Grace, what do u think?
     
  6. regans

    regans New Member

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    IP1 assignment Q2 calculating purchase price of 10year govt bond

    Hi
    I just want the final answer of this question to make sure i did the right calculation.....can someone help...:)
     
  7. Shel

    Shel Member

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    I also need help with this assignment. It is scaring the absolute crap out of me and it's my last subject in the diploma. I just really want to finish it.

    :)
     
  8. Evan

    Evan Member

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    I simply explained the basics of the difference between a put and a call, as well as the potential risks and gains of buying or selling options of either type. Essentially, options are relatively high risk and not suitable for Grace. If she insisted on trading options she should only buy them and not sell them to limit her losses (as selling options can result in theoretically unlimited losses).

    Was enough to pass!
     
  9. Snowdrop

    Snowdrop New Member

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    Kaplan IP1 version 3001 Help with Question 3 - Grace's investment property
    Can someone please help? Am I on the right track using the following approach for DCF?

    Year House Loan Income CashFl DiscRate (1+i)n Payment
    0 $480,000 $350,000 $0 $130,000 7.50% 1.0000 $130,000.00
    1 $25,200 $20,665 $4,535 7.50% 1.0750 $4,218.60
    2 $25,200 $21,307 $3,893 7.50% 1.1556 $3,368.74
    3 $25,200 $21,862 $3,338 7.50% 1.2423 $2,686.96
    4 $575,000 $0 $575,000 7.50% 1.3355 $430,560.30
     
  10. Newjc

    Newjc New Member

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    I thought the same for question 4, that derivatives were too high risk for Grace. But now I am confused as in question 5, it states, address 'derivatives strategies' Should they or should they not be considered?