Louise and Christopher Maclin live in the U.K. and currently rent an apartment in London’s metropolitan area. During an initial discussion of the Maclins’ financial plans, Christopher Maclin makes the following statements to the Maclins’ financial adviser, Grant Webb: “I have used the Internet extensively to research the outlook for the housing market over the next five years, and I believe now is the best time to buy a house.” “I do not want to sell any bond in my portfolio for a lower price than I paid for the bond.” “I will not sell any of my company stock because I know my company and I believe it has excellent prospects for the future.” For each statement (a)–(c) identify the behavioral finance concept most directly exhibited. Explain how each behavioral finance concept is affecting Maclin’s investment decision making

Louise and Christopher Maclin live in the U.K. and currently rent an apartment in London’s metropolitan area. During an initial discussion of the Maclins’ financial plans, Christopher Maclin makes the following statements to the Maclins’ financial adviser, Grant Webb: “I have used the Internet extensively to research the outlook for the housing market over the next five years, and I believe now is the best time to buy a house.” “I do not want to sell any bond in my portfolio for a lower price than I paid for the bond.” “I will not sell any of my company stock because I know my company and I believe it has excellent prospects for the future.” For each statement (a)–(c) identify the behavioral finance concept most directly exhibited. Explain how each behavioral finance concept is affecting Maclin’s investment decision making

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter9: Obtaining Affordable Housing

Section: Chapter Questions

Problem 1FPC

See similar textbooks

Similar questions

Ben emailed Jennifer enquiring if she is willing to sell her upscale home in Manhattan to him for US$2 million. Ben is seeking to add additional real estate, to diversify his investment portfolio and is aware that Jennifer sits on a prime property in Manhattan. Ben further alluded in his email to Jennifer, that if she agrees, email to him the price she is willing to sell. Within twenty minutes, Jennifer emailed Ben, stating “The lowest price she is willing to accept for her home is US$3 million”. Ben responded immediately, stating that he agrees to purchase Jennifer’s home for US$3 million. He was of the opinion that even at US$3 million, it was still a good investment deal. The next day Ben’s attorney contacted Jennifer to arrange for the transfer of the property, which left Jennifer in shock. She pointed out to Ben’s attorney that she had no agreement with Ben to sell. Advised Jennifer on this matter.
The Marco family—comprising Mrs. Marco aged 40, Mr. Marco, aged 39, and their three young children— relocated to Barcelona in January 2020 whenMrs. Marco received a job offer from an international firm. They rented a three-bedroom condominium in Barcelona for 2.150€ per month, whichincluded parking and fees.While renting made life easy, the Marco family began weighing the pros and cons of purchasing a flat, in the same building, that became available inJune 2020. The idea of home ownership as a form of long-term investment appealed to the couple. The preliminary rental payments could be used formortgage payments instead.While searching for the right property they found a nice apartment at one of the best locations of the city. The apartment was owned and had beenpromoted by a state-owned construction company and was offering two alternatives:Option I: renting the apartment with a perpetual contract, meaning forever.The family was very happy living in that area, and they had the chance…
Anne Murray is planning to buy a rental property, in addition to the family home she and Henry own. She is considering a property in Bristol costing £210,000. She has savings of £85,000 which she will use as a deposit but will need to borrow the remaining amount for the purchase. She has had a fixed-rate mortgage agreed in principle by Royal East Bank, for which she will be charged 4.75% interest. She wants to know what income she might expect to get on her investment. Local agents have estimated that the monthly rent may be £1,450 per month, with agent’s fees for managing the property being charged at 5% of the rent. Provide Anne with an estimate of the relevant costs of renting the property and the net rental income that she might expect to get. Anne has estimates for some of the other costs she will incur as follows: Repairs and maintenance per year £700 Property insurance per year £395 Mortgage arrangement fee £1950…
Anne Murray is planning to buy a rental property, in addition to the family home she and Henry own. She is considering a property in Bristol costing £210,000. She has savings of £85,000 which she will use as a deposit but will need to borrow the remaining amount for the purchase. She has had a fixed-rate mortgage agreed in principle by Royal East Bank, for which she will be charged 4.75% interest. She wants to know what income she might expect to get on her investment. Local agents have estimated that the monthly rent may be £1,450 per month, with agent’s fees for managing the property being charged at 5% of the rent. Provide Anne with an estimate of the relevant costs of renting the property and the net rental income that she might expect to get. Anne has estimates for some of the other costs she will incur as follows: Repairs and maintenance per year £700 Property insurance per year £395 Mortgage arrangement fee £1950…
Shira is ready to buy a house as she is tired of renting. She has an idea of how the Home Buyers Plan (HBP) works. For one thing, she knows that the current legislation governing the HBP allows for a maximum withdrawal amount of $35,000 from a Registered Retirement Savings Plan (RRSP). She is however only looking to withdraw the minimum amount from her RRSP for a conventional mortgage based on a property valued at $160,000. She also knows that she has to pay at least 1/15th of the amount that she borrows under this plan. As of today, her RRSP has a market value of $56,320. What is the minimum annual repayment required based on the amount she is looking to withdraw from her RRSP under the HBP? Select one: O a. $3,045.33 O b. $3,754.67 O c. $2,133.33 O d. $2,333.33 Oe. $3,433.33
Stanley recently moved back to Ontario after living abroad for two years. He purchased a vehicle and is asking his Broker for insurance quotes. One insurance company's quote is favourable but the company prefers not to insure Stanley because of the gap in his insurance history. What should the Broker do to act within the scope of his agreement with the insurance company? Obtain approval for the risk from the Principal Broker for approval and then submit the completed application to the insurer.• Discuss the risk with the insurer's underwriter for binding approval and then submit the completed application to the insurer.•Discuss the risk with colleagues first and then submit the completed application to the insurer.•Submit the application without the driving gap as this will get Stanley the best rate.
Luke is currently facing some financial difficulties, however, Luke owned land and building valued at $12 million dollars. Lorna, a good friend and skilled investment analyst is advising Luke to sell his house and invest the money otherwise e.g. in securities. This means he would be much wealthier taking such an action. Before taking the decision to sell his property and to start living in a rented house , Luke has decided to consult with you to present to him, strong arguments to support the idea of selling his property. Required Give Luke your advice from an investment perspective.
Barrie and Inga Adlington are considering purchasing a vacation home in the United States on a lake because prices have dropped in recent years. The house might also serve as a retirement home once they retire in 6 years. The Adlingtons' net worth is $384,000 including their home worth about $264,000 on which they currently owe $44,000 for their first mortgage, with a $751 per month payment. Their outstanding debts in addition to their mortgage include $12,500 on one car loan ($259 monthly payment), $13,500 on a second car loan ($284 monthly payment), and a $25,500 second mortgage on their home taken out to help pay for their daughters' college expenses ($184 monthly payment). Their income is $120,000. 1. Calculate the Adlingtons' debt-to-income ratio. Round your answer to two decimal places.
Luke is currently facing some financial difficulties, however, Luke owned land and building valued at $12 million dollars. Lorna, a good friend and skilled investment analyst is advising Luke to sell his house and invest the money otherwise e.g. in securities. This means he would be much wealthier taking such an action. Before taking the decision to sell his property and to start living in a rented house , Luke has decided to consult with you to present to him, strong arguments to support the idea of selling his property. Required Give Luke your advice from an investment perspective. N.b just 5 salient points explained nothing else.
On a Saturday morning in late September 2015, Desiree Mofakye sat over her breakfast, which was rapidly turning cold, and reflected on the performance of her personal investment portfolio over the past seven years. She recalled that, after the financial crisis in 2008, she had been advised to avoid U.S. stocks and to put her savings in the emerging economies of GHANA and SA. At the time, she had chosen to allocate her funds to two exchange traded funds (ETF) invested in the equity markets of GHANA and SA, namely ALUWORKS and AGA, in the ratio of 60 per cent and 40 per cent respectively. ALUWORKS was an ETF invested in the public equity markets of SA. The ETF invested in the stocks of large-cap companies operating across diversified sectors. AGA was an ETF that invested in the public equity markets of GHANA. The ETF invested in the stocks of large-cap and mid-cap companies operating across diversified sectors, and tracked the performance of the Ghana Stock Exchange All Share Index…
Erica came to Australia from the United States on a working holiday on 1 December 2019 when she finished college. Her parents were separated, and she had been living between their houses over the last 3 years. All her belongings were packed in a box and stored in her father's basement when she left for Australia. Over the last 7 months Jane has worked in various jobs in Sydney staying with various friends and relatives then she went travelling down the east coast of Australia. At the end of September 2020, she left for New Zealand and intends to go back to the United States in 2022. Outline the tax residency consequences for Erica. Explain your answer with reference to the relevant legislative provisions, case law and the relevant guidance provided by the ATO.
On a Saturday morning in late September 2015, Desiree Mofakye sat over her breakfast, which was rapidly turning cold, and reflected on the performance of her personal investment portfolio over the past seven years. She recalled that, after the financial crisis in 2008, she had been advised to avoid U.S. stocks and to put her savings in the emerging economies of GHANA and SA. At the time, she had chosen to allocate her funds to two exchange traded funds (ETF) invested in the equity markets of GHANA and SA, namely ALUWORKS and AGA, in the ratio of 60 per cent and 40 per cent respectively. ALUWORKS was an ETF invested in the public equity markets of SA. The ETF invested in the stocks of large-cap companies operating across diversified sectors. AGA was an ETF that invested in the public equity markets of GHANA. The ETF invested in the stocks of large-cap and mid-cap companies operating across diversified sectors, and tracked the performance of the Ghana Stock Exchange All Share Index…