FIN200 Corporate Finance Management

Table of Contents

Question:

A. What are the key factors to consider when deciding whether to invest their superannuation in the Defined Benefit Plan (or the Investment Choice Plan)?

In this decision-making process, what issues may be relevant to the time value money concept?

B. “If efficient-market theory is true, then the pension fund manager might as good select a portfolio using a pin.” Explain why that is not the case.

Answer:

Answer:

Employees need to have retirement plans in order to ensure their financial security after retirement.

Employees in the tertiary sector must invest their superannuation funds in a suitable manner through both investment choice and defined benefit plans.

This is because workers don’t have any work security for their entire lives.

They are similar to entrepreneurs in that they don’t have a clear vision of their future.

They must put large amounts of their superannuation obligations in these retirement plans to improve their financial security.

They will be able to earn a fixed wage by investing in these plans.

These profits ensure that they have security for their entire lives and are not dependent on others for perseverance.

Defined benefit plans, investment choice arrangements and other arrangements that provide a secure and reliable way for workers in the tertiary sector to manage their superannuation obligations can be considered the best.

These plans would also help employees secure their future throughout their lives (Gallery Newton, Palm, 2011).

Additionally, every thing in the world has both positive and negative perspectives.

These ventures are designed to give back to financial specialists, but there are some risks.

Workers in the tertiary sector should be aware of all these factors before they invest their superannuation obligations in investment choices or defined benefit plans (Hinz Holzmann, Tuesta, Takayama 2012).

Representatives should consider certain critical aspects of these arrangements before making a decision about whether or not to invest their superannuation obligations in them.

The market patterns associated with these arrangements should be the primary consideration.

To increase the potential yields of ventures, it is important to consider market slants.

This is because they will be able to compare all available arrangements (Cannon and Tonks 2008).

They will also be able to see the benefits and risks associated with these speculations arrangements.

Representatives should also consider the hazard level.

This is because they will be able to determine whether a speculation plan is safe or not with the help of this variable.

If it’s unsafe, what’s the level of danger?

They can withstand this hazard (Ellis Munnell and Eschtruth 2014).

With this assistance, they will be able to recognize their limit of hazard resilience before making any decision.

The expected returns should also be taken into consideration by speculators when setting their superannuation obligations in a characterized benefit arrangement or venture decision arrangement.

Tertiary sector workers should assess whether their plan offers the returns they desire.

These arrangements will make the most of the money they contribute.

Profits legitimize the amount of risk they are willing to take (Broadbent Palumbo and Woodman 2006).

These two critical components are essential to determine whether individuals should or shouldn’t invest in a speculation plan.

Additionally, speculation needs are another important component that can impact the venture selection of individuals.

Representatives from Tertiary Division should be able to clearly see their venture requirements.

They should conclude that speculation is necessary for them.

They require a genuine speculation arrangement.

These speculation arrangements are essential for them.

Without these arrangements, the future is not secure.

They lack the support they need to make their dreams come true.

These are all the things representatives should consider in order to properly recognize their speculation needs (Secunda 2015).

This will allow representatives to identify their true speculation needs and help them choose reasonable venture arrangements.

The time span should also be taken into consideration by workers when choosing a venture arrangement.

They would be able to understand that they can contribute for a short or long time span with the help of this variable.

They would also be able to calculate their arrival time for both long and short days (Cannon and Tonks 2008).

This component will allow tertiary division workers to select the plan that is most likely to deliver expected returns within a pre-decided time frame.

The tertiary sector workers should also decide which stock, portfolio and value will best meet their venture requirements.

They should assess which alternative will provide exceptional returns at lower risks and be able to determine which one is most beneficial (Benartzi 2012).

It is difficult to choose a venture plan.

These individuals should assess whether these arrangements offer fixed pay or variable salaries to speculators.

Many people put their superannuation obligations in these venture arrangements and receive returns according to the stock and market movements.

These arrangements can be extremely dangerous for financial professionals.

These arrangements do not yield significant returns to speculators.

The above mentioned are the key variables that representatives of tertiary areas must consider when choosing a venture plan that will satisfy their needs and desires in a feasible and critical manner (Hinz Holzmann, Tuesta, Takayama and Takayama 2012).

The idea of TVM (Time Value of Money) is another factor that influences the selection of venture arrangements.

TVM is an essential part of the venture hypothesis.

TVM is a vital piece of a venture decision because it includes all future and present esteem associated with the particular arrangement.

Financial specialists can also use TVM to calculate the true returns they will receive in a given time frame.

There are some issues with this idea that could impact financial specialists’ venture decisions.

Instability and possibility are two of the key issues that could impact the speculation leadership.

This is because financial specialists will be able to recognize the instabilities in the commercial center with the help of these issues.

They will be able to see that the plan they have chosen is feasible to deliver the returns they desire (Petty, Titman Keown, Martin Martin, Martin, and Burrow 2015).

This is how the concept of time value money plays a fundamental part in choosing a business plan.

Answer:

Investment decision making is complicated without the efficient market hypothesis.

The EMH hypothesis plays a major role in selecting a portfolio that will yield significant returns on speculations.

The EMH hypothesis plays a crucial role in selecting a stock and portfolio that is highly valued to maximize the expected profits of ventures.

This hypothesis allowed business associations to trade stocks on reasonable estimates.

EMH theory allows business firms to trade undervalued stocks in the commercial centre (Ang, Goetzmann, and Schaefer 2011, 2011).

The effective market speculation ensures that business associations do not exchange undervalued stocks at excessive costs in the commercial centre.

The EMH hypothesis plays a crucial role in venture leadership preparation.

The EMH hypothesis would allow the purchaser to buy enhanced stocks at reasonable prices.

These stocks offer exceptional returns to financial professionals.

Financial specialists can be assured that they will have the ability to reap high returns at lower risks with broadened stocks.

The efficient market hypothesis is a significant part of selecting a portfolio that will yield substantial yields.

The annuity support administrator plays a significant role in the selection of portfolios for speculators.

The administrator is well-informed about securities exchange.

Financial specialists then ask the supervisor to select appropriate portfolios.

The supervisor should not pick a portfolio by using a stick.

One might argue that the store director should not pick a bunch of portfolios based on the accuracy of the market speculation.

Portfolios that contain a cluster of portfolios might prove to be speculators’ worst nightmare (Lee, Lee, and Lee, 2009).

Portfolios that are packed increase the risk of speculators and decrease the benefits.

This is because such portfolios do not guarantee that financial professionals have purchased all around larger portfolios in a matter of minutes.

This is because there are instabilities at the commercial center. Each arrangement of an association will not be different.

The reserve supervisor should also consider these speculation options carefully.

Portfolio in gathering cannot be purchased due to productive market speculation.

This is because individuals might face inconveniences by choosing portfolio in gathering.

Financial specialists may find these portfolios risky.

This is because such portfolios can decrease the hazard resistance limits of speculators.

The store supervisor should set out some guidelines to help financial specialists choose a sensible portfolio.

The director should ensure that financial specialists have a comprehensive portfolio.

The decision to choose portfolio was not underestimated or exaggerated.

This is because such portfolios satisfy the desires of speculators (Naseer & Bin Tariq 2015).

Administrators must ensure that the selected portfolio works in the best interests of their financial specialists.

The portfolio should be within the financial experts’ hazard tolerance limit.

It can be interpreted as indicating that the fund supervisor should not select a portfolio to gather solely on the basis of the efficiency of the efficient market hypothesis.

Refer to

Ang, A.; Goetzmann W. N.; Schaefer S. M. (2011).

The Efficient market Theory and Evidence: Implications to Active Investment Management.

USA: Now Publishers Inc.

Saving More Tomorrow: Practical Behavioral Finance Strategies to Enhance 401(k).

Broadbent J., Palumbo M., and Woodman E. (2006).

The implications of the shift from defined benefit to defined contributor pension plans for asset allocation, risk management and asset allocation.

Reserve Bank of Australia, Board of Governors of the Federal Reserve System, and Bank of Canada, pages 1-54.

Cannon, E., and Tonks I.

Annuity Markets.

UK: OUP Oxford.

Ellis, C.D. Munnell, A.H., and Eschtruth A.

Falling short: How to Avoid the Coming Retirement Crisis.

USA: Oxford University Press.

Gallery, N., Newton C. and Palm C. (2011).

Framework to assess financial literacy and make superannuation investment decisions.

Australasian Accounting Business & Finance Journal 5(2), p.

Hinz, R.; Holzmann, R.; Tuesta, D.; Takayama N. (2012).

Review of international experience on matching contributions for pensions.

USA: World Bank Publications.

Lee, A.C. Lee, J.C. Lee, C.F.

Theory and application of financial analysis, planning & forecasting.

USA: World Scientific.

M. Naseer and Y. Bin Tariq

The Efficient Market Hypothesis: Critical Review of the Literature.

IUP Journal of Financial Risk Management 12(4), p.1-16

Burrow, M. (2015).

Financial Management: Principles & Applications.

Australia: Pearson Higher Education AU.

The Behavioral Economic Case For Paternalistic Workplace Retirement Plans.

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