You are required to answer all THREE (3) questions.
Instruction: Maximum word count of 2,500 words. Answer exceeding this limit will not be marked.
You feel confident in your investment knowledge and would like to invest into financial markets in Malaysia.
Given the above scenario, you are required to answer the following questions based on this module content outline:
(a) Assume that you invest into the stock market. On 3 November 2021, you believe that the stock market is about to enter a period of bear and hence you construct a stock portfolio. State the reason(s) for selecting those financial assets available in the Malaysian stock market. Given your belief in the bear market trend, show using a numerical example and explain the trading strategy that you would apply on the stock portfolio. (15 marks)
(b) Assume that you have gained RM10,000 from the stock portfolio constructed in Question (a). To prevent the unexpected factors from hurting the gains capital, you are now also involved into a derivatives market. Show using a numerical example and explain in detail the trading strategy that you would apply on a financial asset available in the derivative market in order to meet your objective effectively and efficiently. (25 marks)
(c) “Speculation in any financial assets is just like betting. Speculators are risking money on an investment that has an uncertain outcome and heavily involves chances. Since speculation looks like a pure gambling, speculators should not be allowed to trade on any exchanges.” To what extent the statement is correct? Discuss. (10 marks) [Total = 50 marks]
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