Vincent and Marie have been happily married. Together, they have 2 grown children who are gainfully employed and no longer in need of financial support. Vincent is now 50 years old, and Marie 48. After working

Question 1

a) Many investors experience all kinds of biases what will affect how they select and manage their investment portfolio. Discuss what the following biases are, and how they can negatively impact your investments

i) Overconfidence Bias

ii) Regret Aversion Bias

(Total 12 marks)

b) When investing, you will frequently experience risks. Outline what is risk in terms of investment returns.

(Total 5 marks)

c) Outline the significance of a fully diversified portfolio in terms of risk.

(Total 8 marks)

Question 2

When deciding whether to invest in Carnival Technologies, Melvin collated the stock prices of the company:

a) Apply the correct processes to determine the Arithmetic and Geometric Mean of the investment for the last 10 years. (use the product method to calculate your GM)

(20 marks)

b) Identify the difference between Passive and Active managed funds.

(5 marks)

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Question 3

Read the attached Straits Times article published on 21 January 2025 entitled “Why Bitcoin and gold can have a place in portfolios”, and consider the following question.

a) It is mentioned that Bitcoin and gold share similarities. Identify from the article what these similarities are.

(Total 9 marks)

b) Discuss how gold is in many ways superior to Bitcoin.

(Total 12 marks)

c) In the last sentence of the first column of the article, the head of the World Gold Council for the Asia-Pacific region regards Bitcoin and gold as being alternatives to fiat currencies. Explain what a “fiat” currency is.

(please use the internet to search for your answer)

(Total 4 marks)

Question 4

Vincent and Marie have been happily married. Together, they have 2 grown children who are gainfully employed and no longer in need of financial support. Vincent is now 50 years old, and Marie 48.

After working for 25 years, Vincent feels he will be ready to retire when he is 60 years old. From a recent article he read in a scientific journal, he has ascertained that the local average mortality of a man would be about 81 years old, and a woman about 85 years old.

If Vincent and Marie would each need $2,500 a month in today’s dollars to retire, employ the correct tools to ascertain how much Vincent would need to set aside when he retires for the both of them to be able to retire up to their respective ages of average mortality.

Use the following additional assumptions for the question: