Students will construct a well-diversified portfolio using an initial investment stake of $50,000 (the portfolio should use at least 95% of the initial investment, but they may not use more than $50,000). Students may include stocks, common or preferred; bonds, corporate or U.S. Treasury bonds; mutual funds, and futures contracts, or options. Students will use the closing prices from the first day of the class to determine the price of each issue. Only whole lots of any issues may be acquired; that is, no less than 100 shares of common or preferred stock, no less than five corporate bonds or $10,000 for U.S. Treasury Bonds, no fewer than the minimum required investment for any mutual fund, and no fewer than five contracts for any option or futures position. The settlement date will be the first day of Week Three. Students do not have to use all of the above mentioned securities, but they must use more than one class of security. Transaction costs are ignored in the creation of the portfolio.
The Final Project is to be written in accordance with APA guidelines.
1. Explains their investment strategy, including an assessment of their willingness to bear risk.
2. Describes the securities in the portfolio, including a description of the historical information for each firm.
3. Calculates a quarterly and annualized return on the portfolio, and the expected return for the portfolio (students may use the closing prices as of December 31st of last year).
4. Computes the beta of the portfolio (MERGENT, in the Ashford Online Library, can be used to find the historical betas of each security) using concepts learned within the course.
5. Summarizes the risks of their portfolio and determines any areas where they might consider reinvesting portions of their portfolio to achieve either less risk or higher expected return.