FIN 402 Entire Course
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FIN 402 Week 1 Assignment Capital Markets and Investment Banking Process Paper FIN 402 Week 1 DQ 1 FIN 402 Week 1 DQ 2 FIN 402 Week 1 DQ 3 FIN 402 Week 2 Learning Team Assignment Portfolio Selection Paper FIN 402 Week 2 Assignment Asset Classes Paper FIN 402 Week 2 DQ 1 FIN 402 Week 2 DQ 2 FIN 402 Week 2 DQ 3 FIN 402 Week 3 Individual Assignment CAPM Web Exercise FIN 402 Week 3 Assignment Relative Performance Paper FIN 402 Week 3 DQ 1 FIN 402 Week 3 DQ 2 FIN 402 Week 3 DQ 3 FIN 402 Week 4 Learning Team Assignment Risk and Return Analysis Paper FIN 402 Week 4 Individual Assignment Risk and Return Tradeoff Memo FIN 402 Week 4 DQ 1 FIN 402 Week 4 DQ 2 FIN 402 Week 4 DQ 3 FIN 402 Week 5 Assignment Investment Portfolio Paper FIN 402 Week 5 Individual Assignment Investment Enhancement Paper FIN 402 Week 5 DQ 1 FIN 402 Week 5 DQ 2 FIN 402 Week 5 DQ 3 ******************************************************** FIN 402 Final Exam Guide
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FIN 402 Investment Fundamentals and Portfolio Management Final Exam Guide True/False 1.___ ___ The balance sheet shows what assets the firm controls at a point in time and how it financed the assets. 2.___ ___ Free cash flow = Cash flow from operations – Capital expenditures + Disposition of property and equipment. 3.___ ___ The income statement indicates the flow of sales, expenses, and earnings during a period of time. 4.___ ___ Financial ratios are used in stock and bond valuation models. 5.___ ___ A good portfolio is a collection of individually good assets. 6.___ ___ If the covariance of two stocks is positive, these stocks tend to move together over time. 7.___ ___ Increasing the correlation among assets in a portfolio results in an increase in the standard deviation of the portfolio. 8.___ __ In a three asset portfolio the standard deviation of the portfolio is one third of the square root of the sum of the individual standard deviations. 9.___ __ Combining assets that are not perfectly correlated does affect both the expected return of the portfolio as well as the risk of the portfolio. 10.__ ___ Bond rating agencies include the analysis of financial ratios in arriving at corporate bond ratings. Multiple choice (4 points each)
Multiple Choice 11. In the context of the Capital Asset Pricing Model (CAPM) the relevant measure of risk is 12. According to the Capital Asset Pricing Model (CAPM) a well diversified portfolio's rate of return is a function of 13. The premise of behavioral finance is that 14. The efficient market hypothesis ____________. 15. The CAPM is not testable unless 16. The duration of a bond is a function of the bond's A. coupon rate. B. yield to maturity. C. time to maturity. D. All of these are correct. E. None of these is correct. ******************************************************** FIN 402 Week 1 Assignment Capital Markets and Investment Banking Process Paper
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FIN402 Week 1 Assignment Capital Markets and Investment Banking Process Paper ******************************************************** FIN 402 Week 1 Assignment Case Problem 1.2 Preparing Carolyn Bowen’s Investment Plan
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Case Problem 1.2 Preparing Carolyn Bowen’s Investment Plan Carolyn Bowen, who just turned 55, is employed as an administrative assistant for the Xcon Corporation, where she has worked for the past 20 years. She is in good health, lives alone, and has two grown children. A few months ago her husband died, leaving her with only their home and the proceeds from a $75,000 life insurance policy. After she paid medical and funeral expenses, $60,000 of the life insurance proceeds remained. In addition to the life insurance proceeds, Carolyn has $37,500 in a savings account, which she had accumulated over the past 10 years. Recognizing that she is within 10 years of retirement, Carolyn wishes to invest her limited resources so she will be able to live comfortably once she retires. Carolyn is quite superstitious. After consulting with a number of psychics and studying her family tree, she is certain she will not live past 80. She plans to retire at either 62 or 65, whichever will allow her to meet her long-run financial goals. After talking with a number of knowledgeable individuals—including, of course, the psychics—Carolyn estimates that to live comfortably in retirement, she will need $45,000 per year before taxes. This amount will be required annually for 18 years if she retires at 62 or for 15 years if she retires at 65. As part of her financial plan, Carolyn intends to sell her home at retirement and rent an apartment. She has estimated that she will net $112,500 if she sells the house when she is 62 and $127,500 if she sells it when she is 65. Carolyn has no financial dependents and is not concerned about leaving a sizable estate to her heirs. If Carolyn retires at age 62, she will receive from Social Security and an employer-sponsored pension plan a total of $1,359 per month ($16,308 annually); if she waits until age 65 to retire, her total retirement income will be $1,688 per month ($20,256 annually). For convenience, Carolyn has already decided to convert all her assets at the time of retirement into a stream of annual income and she will at that time purchase an annuity by paying a single premium. The annuity will have a life just equal to the number of years remaining until her 80th birthday. If Carolyn retires at age 62 and buys an annuity at that time, for each $1,000 that she puts into the annuity she will receive an annual benefit equal to $79 for the
subsequent 18 years. If she waits until age 65 to retire, each $1,000 invested in the annuity will produce an annual benefit of $89.94 for the 15 years. ******************************************************** FIN 402 Week 1 Assignment Case Problem 1.2, 2.1, 2.2, 3.1, 12.1
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FIN 402 Week 1 Assignment Case Problem 1.2 Preparing Carolyn Bowen’s Investment Plan FIN 402 Week 1 Assignment Case Problem 2.1 Dara’s Dilemma: What to Buy? FIN 402 Week 1 Assignment Case Problem 2.2 Ravi Dumar’s High-Flying Margin Account FIN 402 Week 1 Assignment Case Problem 3.1 The Perezes’ Good Fortune FIN 402 Week 1 Assignment Case Problem 12.1 Reverend Mark Thomas Ponders Mutual Funds ******************************************************** FIN 402 Week 1 Assignment Case Problem 2.1 Dara’s Dilemma: What to Buy?
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Case Problem 2.1 Dara’s Dilemma: What to Buy? Dara Simmons, a 40-year-old financial analyst and divorced mother of two teenage children, considers herself a savvy investor. She has increased her investment portfolio considerably over the past five years. Although she has been fairly conservative with her investments, she now feels more confident in her investment knowledge and would like to branch out into some new areas that could bring higher returns. She has between $20,000 and $25,000 to invest. Attracted to the hot market for technology stocks, Dara was interested in purchasing a tech IPO stock and identified NewestHighTech.com, a company that makes sophisticated computer chips for wireless Internet connections, as a likely prospect. The 1-year-old company had received some favorable press when it got early-stage financing and again when its chip was accepted by a major cell phone manufacturer. ******************************************************** FIN 402 Week 1 Assignment Case Problem 2.2 Ravi Dumar’s High-Flying Margin Account
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Case Problem 2.2 Ravi Dumar’s High-Flying Margin Account Ravi Dumar is a stockbroker who lives with his wife, Sasha, and their five children in Milwaukee, Wisconsin. Ravi firmly believes that the only way to make money in the market is to follow an aggressive investment posture—for example, to use margin trading. In fact, Ravi has built himself a substantial margin account over the years. He currently holds $75,000 worth of stock in his margin account, though the debit balance in the account amounts to only $30,000. Recently Ravi uncovered a stock that, on the basis of extensive analysis, he feels is about to take off. The stock, Running Shoes (RS), currently trades at $20 per share. Ravi feels it should soar to at least $50 within a year. RS pays no dividends, the prevailing initial margin requirement is 50%, and margin loans are now carrying an annual
interest charge of 10%. Because Ravi feels so strongly about RS, he wants to do some pyramiding by using his margin account to purchase 1,000 shares of the stock. Questions a. Discuss the concept of pyramiding as it applies to this investment situation. b. What is the present margin position (in percent) of Ravi’s account? c. Ravi buys the 1,000 shares of RS through his margin account (bear in mind that this is a $20,000 transaction). 1. What will the margin position of the account be after the RS transaction if Ravi follows the prevailing initial margin (50%) and uses $10,000 of his money to buy the stock? 2. What if he uses only $2,500 equity and obtains a margin loan for the balance ($17,500)? 3. How do you explain the fact that the stock can be purchased with only 12.5% margin when the prevailing initial margin requirement is 50%? ******************************************************** FIN 402 Week 1 Assignment Case Problem 3.1 The Perezes’ Good Fortune
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Case Problem 3.1 The Perezes’ Good Fortune Angel and Marie Perez own a small pool hall located in southern New Jersey. They enjoy running the business, which they have owned for nearly three years. Angel, a retired professional pool shooter, saved for nearly 10 years to buy this business, which he and his wife own free and clear. The income from the pool hall is adequate to allow Angel, Marie, and their children, Mary (age 10) and José (age 4), to live comfortably. Although he lacks formal education beyond the 10th grade, Angel has become an avid reader. He enjoys reading about current events and personal finance, particularly investing. He especially likes Money magazine, from which he has gained numerous ideas for better managing the family’s finances.
Because of the long hours required to run the business, Angel can devote 3 to 4 hours a day (on the job) to reading. ******************************************************** FIN 402 Week 1 Assignment Case Problem 12.1 Reverend Mark Thomas Ponders Mutual Funds
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Case Problem 12.1 Reverend Mark Thomas Ponders Mutual Funds The Reverend Mark Thomas is the minister of a church in the San Diego area. He is married, has one young child, and earns a “modest income.” Because religious organizations are not notorious for their generous retirement programs, the reverend has decided he should do some investing on his own. He would like to set up a program that enables him to supplement the church’s retirement program and at the same time provide some funds for his child’s college education (which is still some 12 years away). He is not out to break any investment records but wants some backup to provide for the long-run needs of his family. Although he has a modest income, Mark Thomas believes that with careful planning, he can probably invest about $250 a quarter (and, with luck, increase this amount over time). He currently has about $15,000 in a savings account that he would be willing to use to begin this program. In view of his investment objectives, he is not interested in taking a lot of risk. Because his knowledge of investments extends to savings accounts, Series EE savings bonds, and a little bit about mutual funds, he approaches you for some investment advice. ******************************************************** FIN 402 Week 1 DQ 1 For more classes visit www.snaptutorial.com
What are capital market instruments? How are they used? Which is most important? Explain your answer. ******************************************************** FIN 402 Week 1 DQ 2
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What is an asset class? How are asset classes selected? What factors affect the selection? ******************************************************** FIN 402 Week 1 DQ 3
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What is a derivative? What are the different types of derivatives? How do businesses use derivatives to mitigate risks? ******************************************************** FIN 402 Week 1 Individual Problem Set
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The Problem Set is provided to you to enable you to practice the concepts outlined in the textbook. Select THREE completed problems from the assignment and post your solutions to those problems. 1. Creating prices for securities and allowing for liquidity are functions of 2. Which of the following best describes the function of an investment banker selling an issue on a "best efforts" basis? 3. From the investment banker's point of view, the major reason syndicates are formed in the distribution of large issues is for the purpose of 4. ___________ has two major functions: to handle special orders, such as purchases with a price contingency; and to maintain continuous, liquid, orderly markets 5. The Securities Investor Protection Corporation (SPIC) was established to 6. In order to be listed on an exchange, a firm must meet minimum standards pertaining to the following criteria: 7. Active trading in markets and competition among securities analysts helps ensure that I. Security prices approach informational efficiency II. Riskier securities are priced to offer higher potential returns III. Investors are unlikely to be able to consistently find under- or over-valued securities 8. __________ assets generate net income to the economy and __________ assets define allocation of income among investors. 9. Asset allocation refers to the __________. 10. _____ is an example of an agency problem ******************************************************** FIN 402 Week 1 Individual Weekly Question For more classes visit www.snaptutorial.com
Submit your Weekly Questions, with original questions, in a Microsoft Word or text file. Be sure to show your work to earn full credit. Do not use Investopedia, About.com, Wikipedia, or other generic internet websites as sources. Use credible sources only. Also, do not use quotes in lieu of a response in your own words. ******************************************************** FIN 402 Week 2 Assignment Asset Classes Paper
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FIN402 Week 2 Assignment Asset Classes Paper ******************************************************** FIN 402 Week 2 Assignment Case Problem 2.1 Traditional Versus Modern Portfolio Theory Who’s Right
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Case Problem 2.1 Traditional Versus Modern Portfolio Theory: Who’s Right?
Walt Davies and Shane O’Brien are district managers for Lee, Inc. Over the years, as they moved through the firm’s sales organization, they became (and still remain) close friends. Walt, who is 33 years old, currently lives in Princeton, New Jersey. Shane, who is 35, lives in Houston, Texas. Recently, at the national sales meeting, they were discussing various company matters, as well as bringing each other up to date on their families, when the subject of investments came up. Each had always been fascinated by the stock market, and now that they had achieved some degree of financial success, they had begun actively investing. ******************************************************** FIN 402 Week 2 Assignment Case Problem 4.1 Coates’s Decision
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Case Problem 4.1 Coates’s Decision On January 1, 2017, Dave Coates, a 23-year-old mathematics teacher at Xavier High School, received a tax refund of $1,100. Because Dave didn’t need this money for his current living expenses, he decided to make a long-term investment. After surveying a number of alternative investments costing no more than $1,100, Dave isolated two that seemed most suitable to his needs. Each of the investments cost $1,050 and was expected to provide income over a 10-year period. Investment A provided a relatively certain stream of income. Dave was a little less certain of the income provided by investment B. From his search for suitable alternatives, Dave found that the appropriate discount rate for a relatively certain investment was 4%. Because he felt a bit uncomfortable with an investment like B, he estimated that such an investment would have to provide a return at least 4% higher than investment A. Although Dave planned to reinvest funds returned from the investments in other vehicles providing similar returns, he wished to keep the extra $50 ($1,100 − $1,050) invested for the full 10 years in a savings account paying 3% interest compounded annually. ******************************************************** FIN 402 Week 2 Assignment Case Problem 4.1, 4.2, 2.1, 5.2, 13.1 (Part a,b,c,d)
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FIN 402 Week 2 Assignment Case Problem 4.1 Coates’s Decision FIN 402 Week 2 Assignment Case Problem 4.2 The Risk-Return Tradeoff Molly O’Rourke’s Stock Purchase Decision FIN 402 Week 2 Assignment Case Problem 2.1 Traditional Versus Modern Portfolio Theory Who’s Right FIN 402 Week 2 Assignment Case Problem 5.2 Susan Lussier’s Inherited Portfolio Does It Meet Her Needs FIN 402 Week 2 Assignment Case Problem 13.1 Assessing the Stalchecks’s Portfolio Performance (Part a,b,c,d) ******************************************************** FIN 402 Week 2 Assignment Case Problem 4.2 The Risk-Return Tradeoff Molly O’Rourke’s Stock Purchase Decision
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Case Problem 4.2 The Risk-Return Tradeoff: Molly O’Rourke’s Stock Purchase Decision Over the past 10 years, Molly O’Rourke has slowly built a diversified portfolio of common stock. Currently her portfolio includes 20 different common stock issues and has a total market value of $82,500. Molly is at present considering the addition of 50 shares of either of two common stock issues—X or Y. To assess the return and risk of each of these issues, she has gathered dividend income and share price data for both over the last 10 years (2007–2016). Molly’s investigation of the outlook for these issues suggests
that each will, on average, tend to behave in the future just as it has in the past. She therefore believes that the expected return can be estimated by finding the average HPR over the past 10 years for each of the stocks. The historical dividend income and stock price data collected by Molly are given in the accompanying table. Questions Determine the HPR for each stock in each of the preceding 10 years. Find the expected return for each stock, using the approach specified by Molly. ******************************************************** FIN 402 Week 2 Assignment Case Problem 5.2 Susan Lussier’s Inherited Portfolio Does It Meet Her Needs For more classes visit www.snaptutorial.com
Case Problem 5.2 Susan Lussier’s Inherited Portfolio: Does It Meet Her Needs? Susan Lussier is 35 years old and employed as a tax accountant for a major oil and gas exploration company. She earns nearly $135,000 a year from her salary and from participation in the company’s drilling activities. An expert on oil and gas taxation, she is not worried about job security—she is content with her income and finds it adequate to allow her to buy and do whatever she wishes. Her current philosophy is to live each day to its fullest, not concerning herself with retirement, which is too far in the future to require her current attention. ******************************************************** FIN 402 Week 2 Assignment Case Problem 13.1 Assessing the Stalchecks’s Portfolio Performance (Part a,b,c,d)
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Case Problem 13.1 Assessing the Stalchecks’s Portfolio Performance Mary and Nick Stalcheck have an investment portfolio containing four investments. It was developed to provide them with a balance between current income and capital appreciation. Rather than acquire mutual fund shares or diversify within a given class of investments, they developed their portfolio with the idea of diversifying across various asset classes. The portfolio currently contains common stock, industrial bonds, mutual fund shares, and options. They acquired each of these investments during the past three years, and they plan to purchase other investments sometime in the future. Currently, the Stalchecks are interested in measuring the return on their investment and assessing how well they have done relative to the market. They hope that the return earned over the past calendar year is in excess of what they would have earned by investing in a portfolio consisting of the S&P 500 Stock Composite Index. Their research has indicated that the risk-free rate was 7.2% and that the (before-tax) return on the S&P 500 portfolio was 10.1% during the past year. With the aid of a friend, they have been able to estimate the beta of their portfolio, which was 1.20. In their analysis, they have planned to ignore taxes because they feel their earnings have been adequately sheltered. Because they did not make any portfolio transactions during the past year, all of the Stalchecks’s investments have been held more than 12 months, and they would have to consider only unrealized capital gains, if any. To make the necessary calculations, the Stalchecks have gathered the following information on each investment in their portfolio. ******************************************************** FIN 402 Week 2 DQ 1
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What are different ratio categories? Which category is most important to bondholders? Why? Which category is most important to stockholders? Why? ********************************************************
FIN 402 Week 2 DQ 2
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What are liquidity ratios? Why are they important? How may an investor use liquidity ratios when making investment decisions? ******************************************************** FIN 402 Week 2 DQ 3
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What is the CAPM? Are CAPM assumptions realistic? Why or why not? ******************************************************** FIN 402 Week 2 Learning Team Assignment Portfolio Selection Paper (2 Papers) For more classes visit www.snaptutorial.com
This Tutorial contains 2 Different Papers Resources: Electronic Reserve Readings, Internet, University Library Select one publicly traded bond. Select five organizations from the following list. These organizations represent the stocks that comprise your portfolio. Cisco Systems, Inc.® Citigroup® Dell® Disney® Ford Motor Company® General Electric Company® The Home Depot, Inc.® Lockheed Martin Corporation® Microsoft® Motorola, Inc.® Proctor & Gamble® Time Warner Inc.® United Parcel Service of America, Inc.® Wal-Mart Stores, Inc.® Obtain faculty approval of your selections prior to beginning the assignment. Conduct research on the selected securities. Examine the organizations’ 10K and investment reports, general economic data, and Federal Reserve data. Prepare a 1,750- to 2,450-word paper in which you describe the selected securities. ******************************************************** FIN 402 Week 2 Learning Team Assignment Portfolio Selection Paper
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Resources: Electronic Reserve Readings, Internet, University Library
Select one publicly traded bond. Select five organizations from the following list. These organizations represent the stocks that comprise your portfolio. Cisco Systems, Inc.® Citigroup® Dell® Disney® Ford Motor Company® General Electric Company® The Home Depot, Inc.® Lockheed Martin Corporation® Microsoft® Motorola, Inc.® Proctor & Gamble® Time Warner Inc.® United Parcel Service of America, Inc.® Wal-Mart Stores, Inc.® ******************************************************** FIN 402 Week 2 Weekly Problem Set
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The Problem Set is provided to you to enable you to practice the concepts outlined in the textbook. Select THREE completed problems from the assignment and post your solutions to those problems. In your solutions, provide an explanation as to why you choose the answer. 1. If RF = 6 percent, b = 1.3, and the ERP = 6.5 percent, compute Ke(the required rate of return). 2. If in problem 1 the beta (b) were 1.9 and the other values remained the same, what is the new value of Ke? What is the relationship between a higher beta and the required rate of return (Ke)? 3. Assume the same facts as in problem 2, but with an ERP of 9 percent. What is the new value for Ke? What does this tell you about investors’ feelings toward risk based on the new ERP? 4. Assume D1 = $1.60, Ke= 13 percent, g = 8 percent. Using Formula 7–5, for the constant growth dividend valuation model, computeP0. 5. J. Jones investment bankers will use a combined earnings and dividend model to determine the value of the Allen Corporation. The approach they take is basically the same as that in Table 7–2 in the chapter. Estimated earnings per share for the next five years are: 2008 $3.20 2009 3.60 2010 4.10 2011 4.62 2012 5.20 ******************************************************** FIN 402 Week 2 Weekly Question
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1. (2 point) Calculate the expected return of the following stocks using CAPM. You can use internet websites to get Beta figures, such as Yahoo! Finance, Google Finance, MSN Money, Marketwatch, etc. Use 4% as the risk free rate and 6% as the risk premium. a. Proctor & Gamble (PG) b. Microsoft (MSFT) c. Macy’s (M) d. JP Morgan Chase (JPM) e. Southern Company (SO) 2. (2 points) Look up Microsoft’s financials on the internet. Sites to use include those listed above as well as the SEC’s website – www.sec.gov. Select two ratios from each of the following categories (8 calculations in total) and show your calculations. Be sure to show the formula and your calculations. No points will be given if work is not shown even if you get the correct answer. Categories: a. Profitability ratios b. Asset-utilization ratios c. Liquidity ratios d. Debt ratios 3. (1 point) Identify two leading indicators for the economy and two lagging indicators. Discuss 1. what these metrics indicate about the economy and 2. what is the most recent statistic on your selected indicators and what that may mean for our current economy. Example: Retail sales – leading indicator; shows consumer’s confidence in the economy – if they are willing to spend more money, they feel more confident about their job situation; currently, retail sales are just under 3% yoy and shows consumers are still willing to spend ******************************************************** FIN 402 Week 3 Assignment Case Problem 6.1 Sara Decides to Take the Plunge
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Case Problem 6.1 Sara Decides to Take the Plunge Sara Thomas is a child psychologist who has built a thriving practice in her hometown of Boise, Idaho. Over the past several years she has been able to accumulate a substantial sum of money. She has worked long and hard to be successful, but she never imagined anything like this. Even so, success has not spoiled Sara. Still single, she keeps to her old circle of friends. One of her closest friends is Terry Jenkins, who happens to be a stockbroker and who acts as Sara’s financial advisor. Not long ago Sara attended a seminar on investing in the stock market, and since then she’s been doing some reading about the market. She has concluded that keeping all of her money in low-yielding savings accounts doesn’t make sense. As a result, Sara has decided to move part of her money to stocks. One evening, Sara told Terry about her decision and explained that she had found several stocks that she thought looked “sort of interesting.” She described them as follows: · North Atlantic Swim Suit Company. This highly speculative stock pays no dividends. Although the earnings of NASS have been a bit erratic, Sara feels that its growth prospects have never been brighter—“what with more people than ever going to the beaches the way they are these days,” she says. ******************************************************** FIN 402 Week 3 Assignment Case Problem 6.1, 6.2, 7.1, 7.2, 8.1, 8.2, 9.2
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FIN 402 Week 3 Assignment Case Problem 6.1 Sara Decides to Take the Plunge
FIN 402 Week 3 Assignment Case Problem 6.2 Wally Wonders Whether There’s a Place for Dividends FIN 402 Week 3 Assignment Case Problem 7.1 Some Financial Ratios Are Real Eye-Openers FIN 402 Week 3 Assignment Case Problem 7.2 Doris Looks at an Auto Issue FIN 402 Week 3 Assignment Case Problem 8.1 Chris Looks for a Way to Invest His Wealth FIN 402 Week 3 Assignment Case Problem 8.2 An Analysis of a High-Flying Stock FIN 402 Week 3 Assignment Case Problem 9.2 Deb Takes Measure of the Market ******************************************************** FIN 402 Week 3 Assignment Case Problem 6.2 Wally Wonders Whether There’s a Place for Dividends
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Case Problem 6.2 Wally Wonders Whether There’s a Place for Dividends Wally Wilson is a commercial artist who makes a good living by doing freelance work—mostly layouts and illustrations—for local ad agencies and major institutional clients (such as large department stores). Wally has been investing in the stock market for some time, buying mostly high-quality growth stocks as a way to achieve long-term growth and capital appreciation. He feels that with the limited time he has to devote to his security holdings, high-quality issues are his best bet. He has become a bit perplexed lately with the market, disturbed that some of his
growth stocks aren’t doing even as well as many good-grade income shares. He therefore decides to have a chat with his broker, Al Fried. ******************************************************** FIN 402 Week 3 Assignment Case Problem 7.1 Some Financial Ratios Are Real Eye-Openers
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Case Problem 7.1 Some Financial Ratios Are Real Eye-Openers Jack Arnold is a resident of Lubbock, Texas, where he is a prosperous rancher and businessman. He has also built up a sizable portfolio of common stock, which, he believes, is due to the fact that he thoroughly evaluates each stock he invests in. As Jack says, “You can’t be too careful about these things! Anytime I plan to invest in a stock, you can bet I’m going to learn as much as I can about the company.” Jack prefers to compute his own ratios even though he could easily obtain analytical reports from his broker at no cost. (In fact, Bob Smith, his broker, has been volunteering such services for years.) Recently Jack has been keeping an eye on a small chemical stock. The firm, South Plains Chemical Company, is big in the fertilizer business—which is something Jack knows a lot about. Not long ago, he received a copy of the firm’s latest financial statements (summarized here) and decided to take a closer look at the company. Questions Using the South Plains Chemical Company figures, compute the following ratios. ******************************************************** FIN 402 Week 3 Assignment Case Problem 7.2 Doris Looks at an Auto Issue
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Case Problem 7.2 Doris Looks at an Auto Issue Doris Wise is a young career woman. She lives in Phoenix, Arizona, where she owns and operates a highly successful modeling agency. Doris manages her modest but rapidly growing investment portfolio, made up mostly of high-grade common stocks. Because she’s young and single and has no pressing family requirements, Doris has invested primarily in stocks that offer the potential for attractive capital gains. Her broker recently recommended an auto company stock and sent her some literature and analytical reports to study. One report, prepared by the brokerage house she deals with, provided an up-to-date look at the economy, an extensive study of the auto industry, and an equally extensive review of several auto companies (including the one her broker recommended). She feels strongly about the merits of security analysis and believes it is important to spend time studying a stock before making an investment decision. Questions ******************************************************** FIN 402 Week 3 Assignment Case Problem 8.1 Chris Looks for a Way to Invest His Wealth
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Case Problem 8.1 Chris Looks for a Way to Invest His Wealth Chris Norton is a young Hollywood writer who is well on his way to television superstardom. After writing several successful television specials, he was recently named the head writer for one of TV’s top-rated sitcoms. Chris fully realizes that his business is a fickle one, and on the advice of his dad and manager, he has decided to set up an investment program. Chris will earn about a half-million
dollars this year. Because of his age, income level, and desire to get as big a bang as possible from his investment dollars, he has decided to invest in speculative, high-growth stocks. ******************************************************** FIN 402 Week 3 Assignment Case Problem 8.2 An Analysis of a High-Flying Stock
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Case Problem 8.2 An Analysis of a High-Flying Stock Marc Dodier is a recent university graduate and a security analyst with the Kansas City brokerage firm of Lippman, Brickbats, and Shaft. Marc has been following one of the hottest issues on Wall Street, C&I Medical Supplies, a company that has turned in an outstanding performance lately and, even more important, has exhibited excellent growth potential. It has five million shares outstanding and pays a nominal annual dividend of $0.05 per share. Marc has decided to take a closer look at C&I to assess its investment potential. Assume the company’s sales for the past five years have been as follows: Marc is concerned with the future prospects of the company, not its past. As a result, he pores over the numbers and generates the following estimates of future performance: Questions Determine the average annual rate of growth in sales over the past five years. (Assume sales in 2011 amounted to $7.5 million.) Use this average growth rate to forecast revenues for next year (2017) and the year after that (2018). ******************************************************** FIN 402 Week 3 Assignment Case Problem 9.2 Deb Takes Measure of the Market
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Case Problem 9.2 Deb Takes Measure of the Market Several months ago, Deb Forrester received a substantial sum of money from the estate of her late aunt. Deb initially placed the money in a savings account because she was not sure what to do with it. Since then, however, she has taken a course in investments at the local university. The textbook for the course was, in fact, this one, and the class just completed this chapter. Excited about what she has learned in class, Deb has decided that she definitely wants to invest in stocks. But before she does, she wants to use her newfound knowledge in technical analysis to determine whether now would be a good time to enter the market. Deb has decided to use all of the following measures to help her determine if now is, indeed, a good time to start putting money into the stock market: 路 Advance-decline line 路 New highs-new lows indicator (Assume the current 10-day moving average is 0 and the last 10 periods were each 0.) 路 Arms index 路 Mutual fund cash ratio Deb goes to the Internet and, after considerable effort, is able to put together the accompanying table of data. Questions Based on the data presented in the table, calculate a value (where appropriate) for periods 1 through 5, for each of the four measures listed above. Chart your results, where applicable. Discuss each measure individually and note what it indicates for the market, as it now stands. Taken collectively, what do these four measures indicate about the current state of the market? According to these measures, is this a good time for Deb to consider getting into the market, or should she wait a while? Explain. Comment on the time periods used in the table, which are not defined here. What if they were relatively long intervals of time? What if they were relatively short? Explain how the length of the time periods can affect the measures. ******************************************************** FIN 402 Week 3 Assignment Relative Performance Paper
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FIN 402 Week 3 Assignment Relative Performance Paper ******************************************************** FIN 402 Week 3 DQ 1 For more classes visit www.snaptutorial.com
What is the difference between systematic and unsystematic risk? How is the beta coefficient used to assess risk? Is it better to maximize return or minimize risk? Why? ******************************************************** FIN 402 Week 3 DQ 2
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What is the relationship between inflation and interest rates? How does this relationship affect asset prices? How does the unemployment rate affect interest rates?
******************************************************** FIN 402 Week 3 DQ 3
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What factors must be taken into consideration when creating an investment portfolio? How must a portfolio’s components be weighted? ******************************************************** FIN 402 Week 3 Individual Assignment CAPM Web Exercise
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FIN 402 Week 3 Individual Assignment CAPM Web Exercise Resource:Fundamentals of Investment Management Prepare a response to the following assignment: Web Exercise (Ch. 21) of Fundamentals of Investment Management, including calculations for each organization listed in Step 9 ********************************************************
FIN 402 Week 3 Weekly Problem Set
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The Problem Set is provided to you to enable you to practice the concepts outlined in the textbook. Select THREE completed problems from the assignment and post your solutions to those problems. In your solutions, provide an explanation as to why you choose the answer. 1. Which of the following are assumptions of the simple CAPM model? 2. Consider the CAPM. The risk-free rate is 6% and the expected return on the market is 18%. What is the expected return on a stock with a beta of 1.3? 3. The market portfolio has a beta of __________. 4. You have a $50,000 portfolio consisting of Intel, GE and Con Edison. You put $20,000 in Intel, $12,000 in GE and the rest in Con Edison. Intel, GE and Con Edison have betas of 1.3, 1.0 and 0.8 respectively. What is your portfolio beta? 5. You put up $50 at the beginning of the year for an investment. The value of the investment grows 4% and you earn a dividend of $3.50. Your HPR was 6. Rank the following from highest average historical return to lowest average historical return from 1926-2006. 7. Rank the following from highest average historical standard deviation to lowest average historical standard deviation from 1926-2006. 8. The geometric average of -12%, 20% and 25% is __________. 9. Suppose you pay $9,700 for a $10,000 par Treasury bill maturing in three months. What is the holding period return for this investment? ******************************************************** FIN 402 Week 3 Weekly Question
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Submit your Weekly Questions, with original questions, in a Microsoft Word or text file. Be sure to show your work to earn full credit. 1. (2 point) Use the expected return and Beta calculated in Week 2 Homework Questions #1 for the stocks listed: P&G, Microsoft, Macy’s, JP Morgan Chase and Southern Company. You will make three portfolios: a. Equal weight each of the stocks in the portfolio b. Select the two lowest beta stocks and weight them at 30% each, the two highest beta stocks at 10% each, and the last one at 20% (Low beta portfolio) c. Select the two highest beta stocks and weight them at 30% each of the portfolio, the two lowest beta stocks at 10% and the last one at 20% (high beta portfolio) For each of the portfolios, calculate the weighted average expected returns and the weighted average beta. Show your work for credit. 2. (1 point) Discuss the difference between systematic risk and unsystematic risk. Give two examples of each. (2 points) You are an analyst responsible for researching Macy’s. Part of your job is to keep up with changes in the economy and analyze how it will impact Macy’s. Choose two macroeconomic indicators (data that is regularly released only please) discussed in your textbook and discuss how these variables will influence Macy’s operations. ********************************************************
FIN 402 Week 4 Assignment Case Problem 10.1 Max and Veronica Develop a Bond Investment Program
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Case Problem 10.1 Max and Veronica Develop a Bond Investment Program Max and Veronica Shuman, along with their teenage sons, Terry and Thomas, live in Portland, Oregon. Max is a sales rep for a major medical firm, and Veronica is a personnel officer at a local bank. Together they earn an annual income of around $100,000. Max has just learned that his recently departed rich uncle has named him in his will to the tune of some $250,000 after taxes. Needless to say, the family is elated. Max intends to spend $50,000 of his inheritance on a number of long-overdue family items (like some badly needed remodeling of their kitchen and family room, the down payment on a new Porsche Boxster, and braces to correct Tom’s overbite). Max wants to invest the remaining $200,000 in various types of fixed-income securities. Max and Veronica have no unusual income requirements or health problems. Their only investment objectives are that they want to achieve some capital appreciation, and they want to keep their funds fully invested for at least 20 years. They would rather not have to rely on their investments as a source of current income but want to maintain some liquidity in their portfolio just in case. Questions ******************************************************** FIN 402 Week 4 Assignment Case Problem 10.1, 10.2, 11.1, 11.2
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FIN 402 Week 4 Assignment Case Problem 10.1 Max and Veronica Develop a Bond Investment Program FIN 402 Week 4 Assignment Case Problem 10.2 The Case of the Missing Bond Ratings FIN 402 Week 4 Assignment Case Problem 11.1 The Bond Investment Decisions of Dave and Marlene Carter
FIN 402 Week 4 Assignment Case Problem 11.2 Grace Decides to Immunize Her Portfolio ********************************************************
FIN 402 Week 4 Assignment Case Problem 10.2 The Case of the Missing Bond Ratings
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Case Problem 10.2 The Case of the Missing Bond Ratings It’s probably safe to say that there’s nothing more important in determining a bond’s rating than the underlying financial condition and operating results of the company issuing the bond. Just as financial ratios can be used in the analysis of common stocks, they can also be used in the analysis of bonds—a process we refer to as credit analysis. In credit analysis, attention is directed toward the basic liquidity and profitability of the firm, the extent to which the firm employs debt, and the ability of the firm to service its debt. The financial ratios shown in the preceding table are often helpful in carrying out such analysis. The first two ratios measure the liquidity of the firm; the next two, its profitability; the following two, the debt load; and the final two, the ability of the firm to service its debt load. (For ratio 5, the lower the ratio, the better. For all the others, the higher the ratio, the better.) The table lists each of these ratios for six companies. ********************************************************
FIN 402 Week 4 Assignment Case Problem 11.1 The Bond Investment Decisions of Dave and Marlene Carter
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Case Problem 11.1 The Bond Investment Decisions of Dave and Marlene Carter Dave and Marlene Carter live in the Boston area, where Dave has a successful orthodontics practice. Dave and Marlene have built up a sizable investment portfolio and have always had a major portion of their investments in fixed-income securities. They adhere to a fairly aggressive investment posture and actively go after both attractive current income and substantial capital gains. Assume that it is now 2016 and Marlene is currently evaluating two investment decisions: one involves an addition to their portfolio, the other a revision to it. The Carters’ first investment decision involves a short-term trading opportunity. In particular, Marlene has a chance to buy a 7.5%, 25-year bond that is currently priced at $852 to yield 9%; she feels that in two years the promised yield of the issue should drop to 8%. The second is a bond swap. The Carters hold some Beta Corporation 7%, 2029 bonds that are currently priced at $785. They want to improve both current income and yield to maturity and are considering one of three issues as a possible swap candidate: (a) Dental Floss, Inc., 7.5%, 2041, currently priced at $780; (b) Root Canal Products of America, 6.5%, 2029, selling at $885; and (c) Kansas City Dental Insurance, 8%, 2030, priced at $950. All of the swap candidates are of comparable quality and have comparable issue characteristics. ******************************************************** FIN 402 Week 4 Assignment Case Problem 11.2 Grace Decides to Immunize Her Portfolio
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Case Problem 11.2 Grace Decides to Immunize Her Portfolio Grace Hesketh is the owner of an extremely successful dress boutique in downtown Chicago. Although high fashion is Grace’s first love, she’s also interested in investments, particularly bonds and other fixed-income securities. She actively manages her own investments and over time has built up a substantial portfolio of securities. She’s well versed on the latest investment techniques and is not afraid to apply those procedures to her own investments. Grace has been playing with the idea of trying to immunize a big chunk of her bond portfolio. She’d like to cash out this part of her portfolio in seven years and use the proceeds to buy a vacation home in her home state of Oregon. To do this, she intends to use the $200,000 she now has invested in the following four corporate bonds (she currently has $50,000 invested in each one). 1. A 12-year, 7.5% bond that’s currently priced at $895 2. A 10-year, zero-coupon bond priced at $405 3. A 10-year, 10% bond priced at $1,080 4. A 15-year, 9.25% bond priced at $980 (Note: These are all noncallable, investment-grade, nonconvertible/straight bonds.) Questions a. Given the information provided, find the current yield and the promised yield for each bond in the portfolio. (Use annual compounding.) b. Calculate the Macaulay and modified durations of each bond in the portfolio and indicate how the price of each bond would change if interest rates were to rise by 75 basis points. How would the price change if interest rates were to fall by 75 basis points? c. Find the duration of the current four-bond portfolio. Given the seven-year target that Grace has set, would you consider this an immunized portfolio? Explain. d. How could you lengthen or shorten the duration of this portfolio? What’s the shortest portfolio duration you can achieve? What’s the longest?
e. Using one or more of the four bonds described above, is it possible to come up with a $200,000 bond portfolio that will exhibit the duration characteristics Grace is looking for? Explain. f. Using one or more of the four bonds, put together a $200,000 immunized portfolio for Grace. Because this portfolio will now be immunized, will Grace be able to treat it as a buy-and-hold portfolio-one she can put away and forget about? Explain. ******************************************************** FIN 402 Week 4 DQ 1
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What are examples of active and passive portfolio management techniques? Why would a portfolio manager pursue active instead of passive techniques? ******************************************************** FIN 402 Week 4 DQ 2
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Does international diversification enhance risk reduction? Why or why not? What measures may be taken to reduce risks of international portfolio investing? ********************************************************
FIN 402 Week 4 DQ 3
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What are unique risks associated with foreign investments? How might an investor protect his or her portfolio against such risks? Is it possible to protect a portfolio from all risk? ********************************************************
FIN 402 Week 4 Individual Assignment Risk and Return Tradeoff Memo (2 Papers)
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This Tutorial contains 2 Different Papers
FIN 402 Week 4 Individual Assignment Risk and Return Tradeoff Memo Resources: Constructing and Managing a Portfolio Simulation, Electronic Reserve Readings, University Library Complete the Constructing and Managing a Portfolio simulation on the student website. Conduct research concerning the risk and return tradeoff, and the relationship between investment strategy and performance. Prepare a 1,050- to 1,400-word memo to Rainier Ekstrom, Casa Bonita’s chief executive officer, in which you analyze risk and return tradeoffs associated with the organization’s investment portfolio. Address the following: Decisions you made in the simulation A discussion of how the Sharpe ratio helps make investment decisions ******************************************************** FIN 402 Week 4 Individual Assignment Risk and Return Tradeoff Memo
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FIN 402 Week 4 Individual Assignment Risk and Return Tradeoff Memo Resources: Constructing and Managing a Portfolio Simulation, Electronic Reserve Readings, University Library Complete the Constructing and Managing a Portfolio simulation on the student website. Conduct research concerning the risk and return tradeoff, and the relationship between investment strategy and performance.
Prepare a 1,050- to 1,400-word memo to Rainier Ekstrom, Casa Bonita’s chief executive officer, in which you analyze risk and return tradeoffs associated with the organization’s investment portfolio. Address the following: Decisions you made in the simulation A discussion of how the Sharpe ratio helps make investment decisions ******************************************************** FIN 402 Week 4 Learning Team Assignment Risk and Return Analysis Paper (Portfolio Risk Analysis)
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FIN 402 Week 4 Learning Team Assignment Risk and Return Analysis Paper Complete the following activities: Conduct a risk assessment and return analysis on the investment vehicles in your portfolio. Select the weights of each vehicle in your portfolio; for example, the percentage of the portfolio each vehicle makes up. Locate the beta for each security. Use .3 beta for bonds and 0 for money market instruments. Calculate the weighted average risk and return of your portfolio. Then, change the weights of the vehicles to emphasize high-return performers.Perform another risk assessment, using these weightings. Change the weights of the vehicles to emphasize low-risk performers. Perform another risk assessment using these weightings. Prepare a 1,750- to 2,450-word paper in which you present your risk assessment and return analysis, and summarize your findings. Include an explanation of the relationship between risk tolerance levels and macroeconomic variables.
******************************************************** FIN 402 Week 4 Learning Team Assignment Risk and Return Analysis Paper
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FIN 402 Week 4 Learning Team Assignment Risk and Return Analysis Paper Complete the following activities: Conduct a risk assessment and return analysis on the investment vehicles in your portfolio. Select the weights of each vehicle in your portfolio; for example, the percentage of the portfolio each vehicle makes up. Locate the beta for each security. Use .3 beta for bonds and 0 for money market instruments. Calculate the weighted average risk and return of your portfolio. Then, change the weights of the vehicles to emphasize high-return performers. Perform another risk assessment, using these weightings. Change the weights of the vehicles to emphasize low-risk performers. Perform another risk assessment using these weightings. ********************************************************
FIN 402 Week 4 Weekly Problem Set
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The Problem Set is provided to you to enable you to practice the concepts outlined in the textbook. Select THREE completed problems from the assignment and post your solutions to those problems. 1. The weak form of the EMH states that ________ must be reflected in the current stock price. 2. When the market risk premium rises, stock prices will ________. 3. Proponents of the EMH typically advocate __________. 4. Choosing stocks by searching for predictable patterns in stock prices is called 5. In a recent study, Fama and French found that the return on the aggregate stock market was __________ when the dividend yield was higher. 6. Even if the markets are efficient, professional portfolio management is still important because it provides investors with 7. Suppose that in 2006 the expected dividends of the stocks in a broad market index equaled $210 million when the discount rate was 9.5% and the expected growth rate of the dividends equaled 6.5%. Using the constant growth formula for valuation, if interest rates increase to 10.5% the value of the market will change by ______. 8. Conventional finance theory assumes investors are _______ and behavioral finance assumes investors are _______ 9. If investors are too slow to update their beliefs about a stock's future performance when new evidence arises they are exhibiting _______ and if they overweight recent performance in forecasting the future they are exhibiting _______. 10. Trading activity and average returns in brokerage accounts tends to be ******************************************************** FIN 402 Week 4 Weekly Question
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1. (2 point) Go to Morningstar.com. Find the listed mutual funds’ profiles on the website. Under Ratings & Risk, find and submit the Sharpe Ratio for each fund. Then discuss, using the ratio, which fund you believe provides a better investment. Funds: ARTVX BPAIX BOSOX MFCFX 2. (2 point) List two pros and two cons of investing internationally. Do not focus on the investment vehicles, but rather having investments that are not domiciled/does business in the U.S. (1 points) Explain how you can use the forward markets to hedge. Be sure to discuss what you are hedging, what instrument you would purchase, and how this helps you hedge. ******************************************************** FIN 402 Week 5 Assignment Case Problem 14.1 The Franciscos’ Investment Options
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Case Problem 14.1 The Franciscos’ Investment Options Hector Francisco is a successful businessman in Atlanta. The boxmanufacturing firm he and his wife, Judy, founded several years ago has prospered. Because he is self-employed, Hector is building his own retirement fund. So far, he has accumulated a substantial sum in his investment account, mostly by following
an aggressive investment posture. He does this because, as he puts it, “In this business, you never know when the bottom will fall out.” Hector has been following the stock of Rembrandt Paper Products (RPP), and after conducting extensive analysis, he feels the stock is about ready to move. Specifically, he believes that within the next six months, RPP could go to about $80 per share, from its current level of $57.50. The stock pays annual dividends of $2.40 per share. Hector figures he would receive two quarterly dividend payments over his six-month investment horizon. In studying RPP, Hector has learned that the company has six-month call options (with $50 and $60 strike prices) listed on the CBOE. The CBOE calls are quoted at $8 for the options with $50 strike prices and at $5 for the $60 options. Questions ******************************************************** FIN 402 Week 5 Assignment Case Problem 14.1, 14.2, 15.1, 15.2 For more classes visit www.snaptutorial.com
FIN 402 Week 5 Assignment Case Problem 14.1 The Franciscos’ Investment Options FIN 402 Week 5 Assignment Case Problem 14.2 Luke’s Quandary To Hedge or Not to Hedge FIN 402 Week 5 Assignment Case Problem 15.1 T. J.’s Fast-Track Investments Interest Rate Futures FIN 402 Week 5 Assignment Case Problem 15.2 Jim and Polly Pernelli Try Hedging with Stock Index Futures ********************************************************
FIN 402 Week 5 Assignment Case Problem 14.2 Luke’s Quandary To Hedge or Not to Hedge
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Case Problem 14.2 Luke’s Quandary: To Hedge or Not to Hedge A little more than 10 months ago, Luke Weaver, a mortgage banker in Phoenix, bought 300 shares of stock at $40 per share. Since then, the price of the stock has risen to $75 per share. It is now near the end of the year, and the market is starting to weaken. Luke feels there is still plenty of play left in the stock but is afraid the tone of the market will be detrimental to his position. His wife, Denise, is taking an adult education course on the stock market and has just learned about put and call hedges. She suggests that he use puts to hedge his position. Luke is intrigued by the idea, which he discusses with his broker, who advises him that the needed puts are indeed available on his stock. Specifically, he can buy three-month puts, with $75 strike prices, at a cost of $550 each (quoted at $5.50). Questions a. Given the circumstances surrounding Luke’s current investment position, what benefits could be derived from using the puts as a hedge device? What would be the major drawback? b. What will Luke’s minimum profit be if he buys three puts at the indicated option price? How much would he make if he did not hedge but instead sold his stock immediately at a price of $75 per share? c. Assuming Luke uses three puts to hedge his position, indicate the amount of profit he will generate if the stock moves to $100 by the expiration date of the puts. What if the stock drops to $50 per share? d. Should Luke use the puts as a hedge? Explain. Under what conditions would you urge him not to use the puts as a hedge?
******************************************************** FIN 402 Week 5 Assignment Case Problem 15.1 T. J.’s Fast-Track Investments Interest Rate Futures
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Case Problem 15.1 T. J.’s Fast-Track Investments: Interest Rate Futures T. J. Patrick is a young, successful industrial designer in Portland, Oregon, who enjoys the excitement of commodities speculation. T. J. has been dabbling in commodities since he was a teenager—he was introduced to this market by his dad, who is a grain buyer for one of the leading food processors. T. J. recognizes the enormous risks involved in commodities speculating but feels that because he’s young, he can afford to take a few chances. As a principal in a thriving industrial design firm, T. J. earns more than $150,000 a year. He follows a well-disciplined investment program and annually adds $15,000 to $20,000 to his portfolio. Recently, T. J. has started playing with financial futures—interest rate futures, to be exact. He admits he is no expert in interest rates, but he likes the price action these investments offer. This all started several months ago, when T. J. met Vinnie Banano, a broker who specializes in financial futures, at a party. T. J. liked what Vinnie had to say (mostly how you couldn’t go wrong with interest rate futures) and soon set up a trading account with Vinnie’s firm, Banano’s of Portland. ******************************************************** FIN 402 Week 5 Assignment Case Problem 15.2 Jim and Polly Pernelli Try Hedging with Stock Index Futures
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Case Problem 15.2 Jim and Polly Pernelli Try Hedging with Stock Index Futures Jim Pernelli and his wife, Polly, live in Augusta, Georgia. Like many young couples, the Pernellis are a two-income family. Jim and Polly are both college graduates and hold high-paying jobs. Jim has been an avid investor in the stock market for a number of years and over time has built up a portfolio that is currently worth nearly $375,000. The Pernellis’ portfolio is well diversified, although it is heavily weighted in high-quality, mid-cap growth stocks. The Pernellis reinvest all dividends and regularly add investment capital to their portfolio. Up to now, they have avoided short selling and do only a modest amount of margin trading. ******************************************************** FIN 402 Week 5 Assignment Investment Portfolio Paper (2 Papers)
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This tutorial contains 2 Different Papers Prepare a paper, not to exceed 5 pages, in which you assess the performance of your portfolio, using William Sharpe’s and Harry Markowitz’s modern portfolio theories. Address the following: Calculate your portfolio’s performance using the Sharpe, Jensen, and Treynor indices. Describe the importance of these indices and interpret how your portfolio performed against the market index. Discuss how you would revise your portfolio. Format your paper consistent with APA guidelines. Click the Assignment Files tab to submit your assignment. ********************************************************
FIN 402 Week 5 Assignment Investment Portfolio Paper For more classes visit www.snaptutorial.com
FIN 402 Week 5 Assignment Investment Portfolio Paper ********************************************************
FIN 402 Week 5 DQ 1
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What are different types of alternative investment vehicles? Which is preferable? What factors could affect the choice of such a vehicle? ********************************************************
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What is an individual retirement account? Is it important to have an individual retirement account? ******************************************************** FIN 402 Week 5 DQ 3
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What are derivatives? How may they be used to manage a portfolio? ********************************************************
FIN 402 Week 5 Individual Assignment Investment Enhancement Paper
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Prepare a 1,050- to 1,750-word paper in which you address the following:
Analyze effects of international portfolio diversification on an investment portfolio. Examine alternative investment vehicles. ********************************************************
FIN 402 Week 5 Weekly Problem Set
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1. You purchase one IBM July 125 call contract for a premium of $5. You hold the option until the expiration date when IBM stock sells for $123 per share. You will realize a ______ on the investment. 2. You purchase one IBM July 120 put contract for a premium of $5. You hold the option until the expiration date when IBM stock sells for $123 per share. You will realize a ______ on the investment. 3. You write one IBM July 120 call contract for a premium of $4. You hold the option until the expiration date when IBM stock sells for $126 per share. You will realize a ______ on the investment. 4. Longer term European style options with maturities of up to three years are called ___________. 5. A futures call option provides its holder with the right to ____________. 6. Advantages of exchange traded options over OTC options include all but which one of the following? 7. You buy a call option and a put option on General Electric. Both the call option and the put option have the same exercise price and expiration date. This strategy is called a __________. 8. The value of a listed call option on a stock is lower when ________________. 9. The value of a listed put option on a stock is lower when ________________.
10. The potential loss for a writer of a naked call option on a stock is __________. ******************************************************** FIN 402 Week 5 Weekly Questions For more classes visit www.snaptutorial.com
Submit your Weekly Questions, with original questions, in a Microsoft Word or text file. Be sure to show your work to earn full credit. Do not use Investopedia, About.com, Wikipedia, or other generic internet websites as sources. Use credible sources only. Also, do not use quotes in lieu of a response in your own words. (2 point) For the following alternative investment vehicles, discuss: a. Describe the investment b. Benefits of the investment c. Risk of the investment Example: Real Assets – investment in tangible assets, such as timber. Benefits – provides higher risk adjusted returns over financial assets Risk – highly illiquid, difficult to value Investment Vehicles to discuss: A. Commodities B. Real estate (not REITs) C. Call option D. Put option (1 point) Discuss the futures market. What types of investments are traded in the futures market? Name two reasons why investors use the futures market.
(2 points) Discuss two pros and two cons of using your employer provided 401(k)/403(b). ********************************************************