B describe types of investors and distinctive characteristics and needs of each;

Question 1

Individual

Answer 1

Characteristics:SR:Education, major purchase, starting a business. LR: Retirement.

Needs: Depends

Question 2

Defined Benefit Pension Plans

Answer 2

Characteristics: Managers contribute a fixed amount to an employees pension plan ‘forever’. Perpetual life

Needs:”objective of an endowment or a foundation is to maintain the real (inflation-adjusted) capital value of the fund while generating income to fund the objectives of the institution. “

Question 3

Banks

Answer 3

Characteristics:Accept and deposit reserves

Needs:”to earn a return on its reserves (borrow) that exceeds the rate of interest it pays on its deposits (loans).” -Keep risk low, keep liquidity high

Low risk, short investment, high liquidity, interest income

Question 4

Insurance Companies

Answer 4

Characteristics: Invest customer premiums in order to fund customer claims

Needs: Relatively conservative considering that they have got to pay claims.

Low risk, life ins is low, P&C (property and casualty) is short, liquidity is high, income is low:because things die before people do.

Question 5

Mutual Funds

Answer 5

Characteristics: ‘pooled investments’(one portfolio, several investors)

Total net value of the assets? NAV…Total net val. assets / # issues = NAV of each share or assets per share

Needs: Liquidity is high..all else depends

Question 6

Sovereign Wealth Funds

Answer 6

Characteristics: Government owned investment funds

Question 7

Endowments and Foundations

Answer 7

Characteristics: Invest donations and charitable funds

Needs: Universities, foundations

Endowments: High risk, Long T, Low liquidity, income tied to spending level

Question 8

Defined Benefit Pensions

Answer 8

Pension Funds: High risk, long T, high L, Income depends

Question 9

Foundation

Answer 9

Research Based

Question 10

Investment Companies

Answer 10

Mutual Funds: Manage pooled funds of investors as restricted by sub category of investment, or particular region

Question 11

Investment Companies

Answer 11

Mutual Funds: Manage pooled funds of investors as restricted by sub category of investment, or particular region

Question 12

Sovereign Wealth Funds

Answer 12

Gov owned pools of assets
“objective of an endowment or a foundation is to maintain the real (inflation-adjusted) capital value of the fund while generating income to fund the objectives of the institution.”