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Investment and Portfolio Analysis
With the increasing economic downturn in the economy, the need of investment has increased considerable. The potential investors generally foregoes their current leisure and earnings and investment their earnings and expect to earn benefits in future for the same.
For analyzing the investment, we have taken into consideration a hypothetical investor who has $50,000 which needs to be invested in different, in different assets.
Investment is one of the most important aspect that is needed which helps in fulfilling different future needs of the investor. There are different assets in which an investor can invest so as to have a future benefits from the required investment. Every investment entails an amount of some risk which is associated. Investment helps in promising the return of the original amount along with an adequate return. So, investment is very important as it helps in fulfilling different future needs of…
For this client, the total investment is $100,000. This is not the sum total of the investor's assets, but it will be invested in a diversified portfolio. It is assumed that the time horizon is medium-to-long-term. The investment portfolio will be built using the top-down approach, whereby asset classes are first determined and then the individual securities within those classes are determined subsequent. The first step in this process is to determine the appropriate weights of the four asset classes -- cash, fixed income, U.S. equities and international securities -- as well as the objectives of the investor. The investor is generally risk neutral and does not anticipating needing this money for anything in particular.
Global Economic Situation
The first step is to determine the current U.S. economic situation. We will start with the stock markets. The current levels of the Dow Jones Industrial Average and NASDAQ are…
BEA.gov. (2014). National income and product accounts. Bureau of Economic Analysis. Retrieved March 6, 2014 from http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
Investopedia. (2014). Mutual funds: Different types of funds. Investopedia. Retrieved March 6, 2014 from http://www.investopedia.com/university/mutualfunds/mutualfunds1.asp
MSN Moneycentral. (2014). Retrieved March 6, 2014 from http://money.msn.com/
Spicer, J., Lopez, L. & Jones, M. (2014). Fed officials see high hurdle for changing course on QE taper. Reuters. Retrieved March 6, 2014 from http://www.reuters.com/article/2014/03/06/us-usa-fed-idUSBREA252A720140306
A common thread through these fifteen stocks is that they not only represent diversification as a group, but most of the companies chosen also have a range diversification within the company's operations. The companies are spread around the world, and include a number of sectors. For example, within technology the portfolio has access to the health care sector through Cerner; within ADRs there is exposure to the Internet, chemicals and pharmaceuticals. This level of diversification will only help the portfolio to achieve its objectives in the long run. Each of these stocks will have between 5-7% of the portfolio, totaling 90%. The remaining 10% will be held in a U.S. government Treasuries. The use of treasuries is to allow for some degree of safety in the portfolio, as Treasuries do little more than cover expected inflation. The current rate on 10-year federal government paper is 3.40% (Yahoo! Finance, 2011). The…
McClure, B. (2011). Modern portfolio theory: Why it's still hip. Investopedia. Retrieved March 25, 2011 from http://www.investopedia.com/articles/06/MPT.asp
Burtless, G. (1999) Returns and Risks of Stock Market Investments. Brookings Institute Retrieved March 25, 2011 from http://www.brookings.edu/testimony/1999/0511saving_burtless.aspx
Yahoo! Finance. (2011). U.S. Treasury bond rates. Yahoo! Finance. Retrieved March 25, 2011 from http://finance.yahoo.com /bonds' target='_blank' REL='NOFOLLOW'>
However, it will depend upon the impact that rising prices will have on consumer spending and corporate balance sheets.
Geopolitical tensions could have an impact upon the price of commodities most notably: oil and gold. As various uncertainties around the globe, could have an impact upon the availability of oil supplies, which will cause prices to increase. A good example of this can be seen with the different protests that are occurring in: the various Middle Eastern and North African countries. As the numerous acts of civil disobedience have caused a number of countries that are large exporters of crude oil (such as: Libya) to suspend production. The reason why, is because they are: having to wrestle with their own internal security situation. As a result, oil prices rose to above $100 per barrel, on concerns about available supplies. This would have an impact on gold prices, because many investors…
Amazon.com. Yahoo Finance, 2011. Web. 17 Mar. 2011
Baidu.com. Yahoo Finance, 2011. Web. 17 Mar. 2011
Caterpillar. Yahoo Finance, 2011. Web. 17 Mar. 2011
General Motors. Yahoo Finance, 2011. Web. 17 Mar. 2011.
The beta coefficient for Google, Inc. is 1.03 using the Excel Slope function (Christensen). Using the S&P 500 as a benchmark, this beta coefficient has a higher risk than the market (Christensen, How to Interpret a eta Coefficient). With this stock included in a portfolio, it would need to be diversified with less riskier investments in order to balance the overall portfolio risk and return on investment aspects of the portfolio. ecause the Google stock is at a higher risk, it could bring higher returns.
Using a CAPM calculator (Chimp), the cost of capital for Google, Inc. is 6.76%. The CAPM is a capital asset pricing model used to determine the cost of equity. The cost of equity is the return that stockholders require for a company and represents the compensation the market demands in the exchange for owning the asset and bearing the risks of ownership (Investopedia).…
Chimp, Money. CAPM Calculator. n.d. Article. 06 July 2012.
Christensen, D. How to Interpret a Beta Coefficient. n.d. Article. 05 July 2012.
-- . How to Use Excel to Calculate the Beta Coefficient. n.d. Article. 05 July 2012.
Investopedia. Cost of Equity. n.d. online dictionary. 06 July 2012.
Where, this strategy will help them to mirror the underlying amounts of volatility. Once this occurs, is when the risks have been reduced dramatically. As result, such a strategy can be used by international investors, to reduce their overall amounts of risk, while increasing their profits.
Artio International Equity. (2010). Retrieved June 19, 2010 from Yahoo Finance website: http://finance.yahoo.com/q/hl?s=JETAX+Holdings
Artio International Equity. (2010). Retrieved June 19, 2010 from Yahoo Finance website: http://finance.yahoo.com/q/rk?s=JETAX+Risk
Dodge and Cox International Stock Fund. (2010). Retrieved June 19, 2010 from Yahoo Finance website: http://finance.yahoo.com/q/hl?s=DODFX+Holdings
Dodge and Cox International Stock Fund. (2010). Retrieved June 19, 2010 from Yahoo Finance website: http://finance.yahoo.com/q/rk?s=DODFX+Risk
International Diversification. (2010). Retrieved June 19, 2010 from Financial Dictionary website: http://financial-dictionary.thefreedictionary.com/International+Diversification
T. Rowe Price International Equity Index. (2010). Retrieved June 19, 2010 from Yahoo Finance website: http://finance.yahoo.com/q/hl?s=PIEQX+Holdings
T. Rowe Price International Equity Index. (2010). Retrieved June 19, 2010 from Yahoo Finance website: http://finance.yahoo.com/q/rk?s=PIEQX+Risk
Artio International Equity. (2010). Retrieved June 19, 2010 from Yahoo Finance website: http://finance.yahoo.com /q/hl?s=JETAX+Holdings' target='_blank' REL='NOFOLLOW'>
Likewise, a young investor may hold mainly equities.
Investor risk tolerance is another impediment to achieving asset class diversification. Investors will low risk tolerance, for example, are unlikely to hold high equity positions and even less likely to utilize more obscure securities like hedge funds. Yet, portfolios without equities may be highly susceptible to changes in the prevailing interest rates and therefore lack diversification. Indeed, for many investors a fully-diversified portfolio across asset classes is not desirable for their investment objectives, time frame and risk tolerance.
Lastly, asset class diversification can be hampered by knowledge of asset classes. Even without considering emerging asset classes, many classes require specialized knowledge - commodities, forex, real estate to name a new -- that may dissuade investors from utilizing them. Even relatively common asset classes such as preferred shares, zero coupon bonds or mutual funds can be sufficiently confusing. The degree of willingness of…
Polakow, D. & Gebbie, T. (2008). How many independent bets are there? Journal of Asset Management. Vol. 9, 4, 278-288.
Rowland, P. (1996). Transaction costs and international portfolio diversification. Journal of International Economics. Vol. 49, 1, 145-170.
Stocks have considerable more risk. Equity is subordinated to debt, which means that if the company goes bankrupt the bondholders get paid out first, before shareholders get anything. There is always the risk, therefore, that a shareholder could receive nothing for their shares, and lose all of their money. Even a bondholder might receive something -- pennies on the dollar -- in the event of bankruptcy, but a stockholder receives nothing at all This risk is only mitigated through diversification (Damodaran, n.d). There is also the risk for any given stock that it drops below the purchase price and never recovers, so that the investor will need to take a loss in order to sell. This is also the case with mutual funds. While less risky because of their diversified nature, they still function like equities and there is no guarantee either of distributions or of capital gains to mutual…
Bodie, Z., Kane, a., & Marcus, a. (2010). Essentials of investments: 2011 custom edition (8th ed.). Boston, MA: McGraw-Hill.
Damodaran, a. (no date). Risk and return models: Equity and debt. Stern School of Business. Retrieved April 23, 2013 from http://people.stern.nyu.edu/adamodar/pdfiles/acf2E/presentations/risk&ret.pdf
Investopedia. (2013). Risk averse. Investopedia. Retrieved April 23, 2013 from http://www.investopedia.com/terms/r/riskaverse.asp
After that point, Ford's stock has risen significantly and to the point where the company is substantially outperforming the S&P 500 over the past three years. Ford's beta is 2.52, which confirms this trend towards high volatility. The comparable companies, Toyota and Honda, are significantly less volatile. One year ago, each were outperforming Ford but today Ford's performance has surpassed both. Ford has a better net margin than its industry peers, but a weaker gross margin. Ford turned a profit last year, so its returns are higher than most of its industry peers, who tended to lose money. Ford has a strong current ratio of 1.82, significantly higher than the industry average.
Citigroup has underperformed both the market and its competitors. Over the past three years, Citigroup stock has lost over 90% of its value. The S&P 500 has lost around 20% of its value in the same time. Among…
Data and charts from MSN Moneycentral. Retrieved April 11, 2010 from http://moneycentral.msn.com
Andrea Corbridge is an investor who is considering investing in the stock portfolios of the Adelphia Technologies and Kalama Corp. The paper uses the Excel software to calculate the possible investment combination of the two portfolios. Based on the expected returns and the standard deviations of the two equities, the paper calculates the optimal investment combinations from 0% to 100% and the findings reveal there will be 18.65% expected returns from the investments. Based on the information on the two portfolios, it is advisable for Andrea to investment 39% ($19,736.84) of his $50,000 in the Kalama Corp equity and 61% ($30,263.16) in the Adelphia Technologies equity to earn 19% expected returns. Major reason is that the returns of the equity of Adelphia Technologies are higher than the returns of the Kalama Corp equity. By using the 39% and 61% investment combination, Andrea is likely to earn 19% expected…
Graham, J. Smart, S.B. & Megisson, W.L. (2010). Corporate Finance: Linking Theory to What Companies Do, 3rd Edition. Cengage Brain.
Fox, J. (2009). Myth of the Rational Market. Harper Business.
Kieso, D.E., Weygandt, J.J. & Warfield, T.D. (2007). Intermediate Accounting (12th ed.). New York: John Wiley & Sons.
The portfolio I constructed consists of Google and Apple. The rationale for this seemingly simple portfolio is actually quite complex. The portfolio maximizes my long-run wealth, and this paper will explain how this will work. The bottom line for me is that no other portfolio was going to deliver the same benefits as a 50/50 portfolio of these two technology giants.
Description of the Portfolio
Portfolio theory holds that a diversified portfolio will perform in line with the market on a risk-adjusted basis. This means that when a portfolio is fully diversified it will have a beta of pretty close to 1.0. But the thing about understanding this portfolio theory is that you have to take into account a wide range of factors in constructing the optimal portfolio. This paper will in part walk through this process of constructing this very dynamic portfolio that will deliver me superior returns.…
Anderson, K. (2014). Why Googl is up following Google stock split. Money Morning. Retrieved May 27, 2014 from http://moneymorning.com/2014/04/03/why-googl-is-up-following-google-stock-split/
Beggs, J. (2014). The efficient market hypothesis. About.com. Retrieved May 26, 2014 from http://economics.about.com/od/Financial-Markets-Category/a/The-Efficient-Markets-Hypothesis.htm
Dilger, D. (2014). Why Apple decided to split its stock 7-to-1. Apple Insider. Retrieved May 27, 2014 from http://appleinsider.com/articles/14/04/29/why-apple-inc-decided-to-split-its-stock-7-1 -
Investopedia. (2014). Modern portfolio theory. Investopedia. Retrieved May 26, 2014 from www.investopedia.com/terms/m/modernportfoliotheory.asp
1. Explain the importance of net asset value (NAV) for mutual fund investing
Net asset value (NAV) is delineated as the value of assets of a mutual fund scheme less the value of liabilities for every unit. It is the price in which an investor can purchase the unit of a scheme and also at the same time can be price at which the investor can sell the unit, less any load fees that might be applicable. The net asset value is significant for mutual fund investing as it mirrors the composite prices of all the securities held within the portfolio together with the liquid cash. Imperatively, if the prices of a great deal of the securities within the scheme increase, then the net asset value will also increase and the other way round. In addition, the net asset value moves concurrently with the prices of securities that are held…
Danske Invest. (2017). Japanese Equity Fund. Retrieved from: https://www.danskeinvest.fi/web/show_fund.produkt?p_nId=1527&p_nFundgroup=61&p_nFund=2452
Investopedia. (2015). What are the advantages of foreign portfolio investment? Retrieved from: https://www.investopedia.com/ask/answers/061515/what-are-advantages-foreign-portfolio-investment.asp
Krueger, P. (2017). Active vs. Passive Investing. Investopedia. Retrieved from: https://www.investopedia.com/news/active-vs-passive-investing/
Nickolas, S. (2015). IWM: iShares Russell 2000 Index ETF. Investopedia. Retrieved from: https://www.investopedia.com/articles/investing/123115/iwm-ishares-russell-2000-index-etf.asp
Rastogi, A. (2016). Does Net Asset Value (NAV) really matter? The Economic Times. Retrieved from: https://www.google.com/amp/s/m.economictimes.com/mf/learn/fund-basics/does-net-asset-value-nav-really-matter/amp_articleshow/55435264.cms
Investment in company shares necessitates significant analysis and examination of different financial aspects to ascertain its prospective growth or deterioration in the financial market. Financial performance is key in determining the share price and value. Financial performance is delineated as a measure of a firm’s revenues, returns, in addition to increases in value as demonstrated by the increase in the firm’s share price. It is a particular measure of how well an organization can employ and utilize assets from its key means of business and generate revenues. In addition, it is employed as an overall measure of an organization’s general financial health over a certain period of time and can be used to compare comparable organizations across the similar industry or to compare industries or sectors in aggression (Weygandt et al., 2015). It is imperative to note that shares can lead to significant capital losses. This is largely for…
Brigham, E. F., Houston, J. F. (2012). Fundamentals of financial management. New York: Cengage Learning.
McClure, B. (2017). Beta: Know the Risk. Investopedia.
Moles, P., Parrino, R. and Kidwell, D. S (2011). Corporate finance. Hoboken: John Wiley & Sons.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & Managerial Accounting. Hoboken: John Wiley & Sons.
Investments are the assets or items purchased with the anticipation to generate the income in the future. In the economic sense, investments refer to the goods and services purchased and not consumed today for the purpose of generating wealth in the future. Similarly, going to a university or building a factory to produce goods and services are the examples of investments. Within a financial environment, investors purchase assets with the hope that they will appreciate in the future, thus, creating wealth for the investors. Examples of investment in the financial circle include purchasing of stocks, or real estate property with the anticipation that they will appreciate in the future. Despite the benefits that can be derived from the investment purpose, the investment is not something an individual can take lightly. Investors are to implement a careful planning to reap the benefits of an investment. Typically, an investor can lose his…
Costa, D. (2011). The Portable Private Banker Investing Efficiently through Mutual Funds and ETFs. UK. CreateSpace Independent Publishing Platform.
Morningstar (2014). Exchange Traded Funds, Morningstar website. Avaliable from:
Morningstar (2014). ProShares Ultra Nasdaq Biotechnology BIB, Morningstar website. Avaliable from: http://performance.morningstar.com/funds/etf/total-returns.action?t=BIB®ion=usa&culture=en-U.S .
nvestments: Stock Selection
On March 9, 2009 the stock market settled on a 12-year closing low with the Dow Jones ndustrial Average (DJA), a barometer of the economy and stock market trajectory, closing at 6,547.05. (Twin, A. March 9, 2009). The precipitous plunge for the DJA from an "all-time high of 14,164.53" (Twin, A. October 9, 2007) reached on October 9, 2007 marked the timeline of the country's worst recession since the Great Depression. From the historic lows however, the market has rebounded dramatically closing at 12,105.78 on February 23, 2011, a gain of over 75% from the March lows (CNBC.com. February 23, 2011). The vicissitudes of the stock market over the past three plus years limn the debate over whether an investor who is risk averse would choose to invest in a stock market in which all stocks rise and fall together, or a market in which individual stocks…
Investors are marked by two extremes, the active investor who tracks, analyzes, and disseminates information on the companies in their investment portfolio, the economy, and global financial news which may influence the direction of their stock investments. At the other extreme is the investor who is socking away their five percent contribution with company match into their 401K. This investor cedes to expert portfolio managers, or trusts in the long run upward trend of equities as defined in index funds: S&P 500, Wilshire, and DJIA. While there are investors at both extremes the vast majority fall at some point on the spectrum, engaged but not able to fully commit the time or resources to portfolio management.
In this context the risk-averse investor will likely fall in with the preponderance of investors who have investment portfolios but are not actively managing them. The investor's portfolio may have individual stocks, mutual funds, or index funds. Which leads to the question, which environment would an investor desire to be in to attain their goal of reduced risk concomitant with acceptable return? The answer ironically comes from the same source, yet at bifurcated ends of an investment philosophy.
Warren Buffett considered the world's most accomplished and successful investor for over fifty years posits that a risk-averse individual could reach their investment objectives in either economic environment. In 2009, Warren Buffett entered into an agreement to purchase the remaining shares of Burlington Northern Railroad which his firm Berkshire Hathaway did not already own. His rationale for the purchase was simple "I basically believe this country will prosper and you'll have more people moving more goods 10 and 20 and 30 years from now, and the rails should benefit; it's a bet on the country, basically" (Crippen, A. November 3, 2009). This statement defines an investment strategy which suggests that over the long-term the stock market will generally move higher, the rising tide lifts all boats metaphor. Yes, stocks will fall, sometimes dramatically, across
financial assets in order to recommend the appropriate investment vehicle for the client. Analysis of different investment vehicles shows that ETFs are the best investment option for our clients. The ETFs are the basket of securities that combine stocks, bonds, cash, commodities and other securities. The report diversifies our investment options choosing the stocks, bonds and cash from different industries. Based on the historical data, our average annual returns are 38% revealing EU 32,997 as our annual returns from our initial investment capital of EU 100,000. After 3 years, the net worth of our investor will be EU 457,901, which include the cumulative returns and the capital. However, the net worth of our investor will be EU 5.38 Million after 10 years. The report also carries out the sensitive analysis on the investment option assuming that our investment choice is affected by the macroeconomic forces. The report reduces our annual…
Costa, D. (2011). The Portable Private Banker Investing Efficiently through Mutual Funds and ETFs. UK. CreateSpace Independent Publishing Platform.
Costa, D. (2011). The Triumph of Intelligence. UK. CreateSpace Independent Publishing Platform.
David White & Associates (2011).The Benefits of Diversification. USA.
Justice, P. (2013). ETF Investor Recommendations for commonsense ETF investing. Morningstar Investment Report .
When the market crashes, turns bearish, or severely corrects, investors not only lose objective things such as money, they also lose the sustaining functions of which the investing process (and/or money, which may psychologically represent self-esteem, independence, power, etc.) has been the source. That means, in addition to objectively not having the money to buy that new house or car, self-esteem drops, and the investors capacity to calm themselves down is diminished, motivation wanes, confidence is shaken, and vitality ebbs. A down market represents an injury to our total sense of self and all the functions that sustain it. In a general way it represents a hope or fantasy lost.
For the young investor, with a large amount of earning power remaining in his life, the ups and downs of the market are small obstacles to the long-term objective of amassing a financial nest egg on which to…
Block Sandra. Stable value funds low-cost, reliable investments., USA Today, 11-30-1998, pp 20A.
McEwen David, Best to find out your risk tolerance., The Daily News (Taranaki, New Zealand), 10-08-2001, pp 6.
Luke, Robert. Staff, Step 1: Investors should evaluate tolerance for risk Finance professor's quiz helps determine the asset allocation each individual is most comfortable with.., The Atlanta Journal and Constitution, 04-03-2000, pp S26.
These types of investments are often illiquid, so the investor needs to view them as long-term investments. However, the lack of liquidity also means that for the most part they have low levels of correlation with the broad market.
Derivatives are another possibility, and their potential impact on the portfolio will be discussed in the next question. They can either increase risk or decrease risk, depending on the type of derivative and how it is used.
Overall, the impact of alternative investments is to reduce the degree to which the portfolio is subject to the equity and fixed income markets. Alternative investments are often used as an ancillary component of the portfolio, to reduce the portfolio's overall volatility but with the hopes that returns will not suffer as a result.
3. Derivatives can be used for a couple of different purposes in a portfolio. The first is to increase leverage…
De Santis, R. & Sarno, L. (2008). Assessing the benefits of international portfolio diversification in bonds and stocks. European Central Bank working paper. Retrieved May 6, 2010 from http://www.ecb.int/pub/pdf/scpwps/ecbwp883.pdf
Driessen, J. & Laeven, L. (no date). International portfolio diversification benefits: Cross-country evidence from a local perspective. International Monetary Fund. Retrieved May 6, 2010 from http://www.luclaeven.com/papers_files/Diversification_JBF_final.pdf
Lhabitant, F. (2000). Derivatives in portfolio management: Why beating the market is easy. EDHEC. Retrieved May 6, 2010 from http://www.edhec-risk.com/edhec_publications/RISKReview1055927251987929638/attachments/EDHEC_WhyBeatingTheMarketIsEasy.pdf
Schweizer, D. (2008). Portfolio optimization with alternative investments. European Business School. Retrieved May 6, 2010 from http://www.wbiconpro.com/339-Schweizer, D.pdfYavas, B. (2007). Findings indicate that co-movements among the U.S., Germany and Japan markets are significant. Pepperdine University. Retrieved May 6, 2010 from http://gbr.pepperdine.edu/072/diversification.html
74). This dearth of information was likely caused by a reluctance to examine investment decisions on the part of investors themselves; nobody likes finding out that their "thought-out" considerations are not any more accurate than gut choices, and in fact, those gut choices likely had more influence than all of their mental work.
In the last decade, however, strides have been made in the study and analysis of investment behavior, revealing surprising details about what goes in to making stock trades. The first important work in the study of individual investment behavior was the realization that human beings do not always act rationally in regards to financial decisions, because according to the previously quoted Brad Barber and his co-author Terrance Odean, "the field of modern financial economics assumes that people behave with extreme rationality, but they do not" (Barber & Odean, 1999, p.41). Although "differences in investor literacy about financial…
Barber, Initials, & Odean, Initials. (1999). The courage of misguided convictions. Financial Analysts Journal, 55(6), 41-55.
Dhar, R, & Zhu, N. (2006). Up close and personal: investor sophistication and the disposition effect. Management Science, 52(5), 726-740.
Grinblatt, M, & Keloharju, M. (2001). What makes investors trade?. The Journal of Finance,
In the future, this could result in some kind of major restructuring to deal with these issues. The problem is that these changes will occur when the company is facing greater challenges. This will hurt their competitive position, profit margins, stock performance and brand image. The above information will impact an investor's decision, by making them more cautious about purchasing the company over the long-term. ("The Coca Cola Company," 2012) ("Pepsi Co," 2012)
As far as Pepsi Co is concerned, the management has taken a continuing focus on expanding into new areas. This has resulted in the company owning different food, beverage and snack manufacturers. In these situations, the firm is concentrating on the impact that key acquisitions will have on Pepsi and its ability to enter new markets. ("The Coca Cola Company," 2012) ("Pepsi Co," 2012)
This strategy has proven to be highly successful. As the company is able…
The Coca Cola Company. (2012). Yahoo Finance. Retrieved from: http://finance.yahoo.com /q/pr?s=KO+Profile' target='_blank' REL='NOFOLLOW'>
41 in the next three years. The current price for al-Mart implies strong growth prospects. The company does have a sound strategy to retain its new customers and refocus growth efforts on less-saturated markets overseas.
In short, while there can be little doubt as to al-Mart's operational excellence, it is not necessarily a great investment. Growth has in recent years been of the slow and steady variety. The company's present valuation may be symptomatic of its status as a safe haven for investors during tough economic times. This means that the growth implied by its current share price may not be justified. Therefore, while al-Mart is a great company to own, it may not be the best investment at its current price and with the market beginning to show signs of recovery. The 0.20 beta and historic low volatility mean that al-Mart shareholders will not reap the benefits of market…
Wal-Mart 2009 Annual Report. Retrieved June 7, 2009 from http://walmartstores.com/sites/AnnualReport/2009/
Some financial data and ratios from MSN Moneycentral. Retrieved June 7, 2009 from http://moneycentral.msn.com /investor/invsub/results/statemnt.aspx?Symbol=WMT
Cheng, Adriana. (2009). Wal-Mart needs to prove it's more than a recession play. Marketwatch. Retrieved June 7, 2009 from http://www.marketwatch.com/story/wal-mart-needs-to-show-legs-beyond-recession-play
Loth, Richard. (n.d.) Financial Ratio Tutorial. Investopedia. Retrieved June 7, 2009 from http://www.investopedia.com/university/ratios/
Investment returns are the amount that the investment is worth (upon sale), net of taxes, over and above the price paid for the investment. The returns can be expressed either in absolute terms, or in annualized terms. The return on an investment that cost $1,000 and is sold for $1,060 a year later is as follows:
This graph shows that the odds of an outcome increase as the expected return approaches 6%. If there were an infinite number of scenarios, the graph would look like this, but the tails on the y axis would by fully extended infinitely as the probability of an outcome approaches zero.
The expected rate of return on the Treasury bonds is the weighted average of the probabilities and returns listed in the table. Thus:
The expected return therefore is 6%…
Investopedia (2015). CFA level 1. Investopedia. Retrieved August 5, 2015 from http://www.investopedia.com/exam-guide/cfa-level-1/securities-markets/weak-semistrong-strong-emh-efficient-market-hypothesis.asp
Investopedia (2015). Standalone risk. Investopedia Retrieved August 5, 2015 from http://www.investopedia.com/terms/s/standalone_risk.asp
How important is it for you to diversify your investment portfolio?
An investment portfolio is extremely important to diversify primarily because it shows a unique approach towards business. A diversified portfolio will ensure that the individual or company is not only smart in their investment but it will also show other companies that wide array of knowledge of the industry that the investor has. The importance of a diversified portfolio lies in the fact that it provides the investor a wise perspective on the market and allows him to handle the entire range of investments in a calculative and profitable manner. A diversified portfolio also portrays an image that the investor is skilled in assessing and reacting positively to the different market and investment sectors (Allen, 2008).
The biggest advantage of having a diverse portfolio is the fact that the risk factor decreases to a level that is…
Gandhi, P. (2006). The Importance of a Diverse Portfolio. Accessed on September 20, 2012 from: http://EzineArticles.com/?expert=Primrose_Gandhi
Allen, P.S. (2008). How To Build A Diverse Portfolio. Accessed on September 20, 2012 from: http://EzineArticles.com/?expert=Paul_S._Allen
Some investment assets have a diversifiable risk and some have an undiversifiable risk involved. Diversifiable risk is specific to a particular security or sector, so its impact on a diversified portfolio is limited to that particular security (moneyterms.co.uk). For example, a financial crisis in a country can cause diversifiable risk on the investments pertaining to the financial institutions. Undiversifiable risk is the tendency of stock prices to decrease, which is caused by something that affects returns on all stock in the same manner, such as war or an interest rate change (Legal).
A substantial unexpected increase in inflation would be an undiversifiable risk because it is common to an entire class of assets or liabilities, or all the stock on the market. It is also considered a market risk or a systematic risk. The economy expects prices to rise slowly over a period of time. That goes along…
Investopedia. A Beginner's Guide to Hedging. 19 Feb 2010. article. 07 July 2012.
Legal, U.S.. Undiversifiable Risk Law & Legal Definition. n.d. Article. 08 July 2012.
moneyterms.co.uk. Diversifiable Risk. n.d. blog. 08 July 2012.
Portfolio theory is a venture advance that permits investors to approximate both the expected risks and returns, as calculated statistically, for their investment portfolios (Investment Portfolio Management and Portfolio Theory, 2011). This is a very good technique that those in the investment field use in order to get the most out of their investments. This technique can also be used in the human resources arena in order for a company to get the most return on their employees.
H professionals in today's business world act as a partners with line management in order to resolve vital issues and add optimistically to the organizations bottom line. This H-business unit partnership guarantees that H goals are in line with the companies' general plan. The position of the human part of the company and its strategic goals makes sure that the company sustains its competitive edge by dealing with key matters…
Frederickson, Valerie. (n.d.). Risk Management and the HR Executive. Retrieved from http://www.vfandco.com/resources/PDFs/Risk_Management.pdf
Investment Portfolio Management and Portfolio Theory. (2011). Retrieved from http://www.greekshares.com/index-6.php
Ropella, Patrick B. (2009). The competitive advantage.(Human Capital Management). Retreived
In Discussions week, project portfolio management selecting projects. Explain meaning statement. The books suppose additional resources: Kerzner, H. (2010) Project management practices: achieving global excellence.
"Project portfolio management is more than selecting projects"
Managing a project portfolio can be analogized to managing an investment portfolio. While the selection of the component entities of the portfolio are certainly important, it is not enough to merely select good investments -- these 'investments' or projects must be managed. "By optimizing, balancing and continually fine-tuning their portfolios, active investors try to maximize short- and long-term returns and reduce overall risk, thereby achieving larger financial and/or business objectives" (Hays 2011). Similarly, the managers of the project "can identify, evaluate and rank investment opportunities. They can direct resources to the highest-payback projects and cull marginal ones. They can target expenditures more effectively to the most worthwhile initiatives and optimize their performance and execution" (Hays…
Hays, Ian S. (2011). Managing the project. Consulting Services. Retrieved:
Kerzner, H. (2010) Project management best practices: achieving global excellence. 2nd ed.
Hoboken, NJ: John Wiley.
Alternative investment is an investment or an asset that falls outside the conventional types of investment such as stocks, bonds, and cash (Athanassiou, 2012). Examples of alternative investments include real estate, derivatives, hedge funds, private equity, venture capital, commodities (e.g. precious metals), peer-to-peer lending, and collectibles (e.g. art). Compared to conventional assets, alternative investments are subject to fewer or less stringent regulations. Additionally, most alternative investments involve higher minimum investments, more complex fee structures, and lower transaction costs (Lee, 2015). Other features that distinguish alternative investments from conventional investments include lesser liquidity, lack of provable performance information, and valuation difficulties. Due to these characteristics, an individual considering alternative investments must carefully consider the available options and their associated conditions before making the final decision. In this paper, I compare different forms of alternative investments and justify the investment I would choose.
Since alternative investments often have little or no correlation…
Anson, M., Fabozzi, F., & Jones, F. (2011). The handbook of traditional and alternative investment vehicles: investment characteristics and strategies. Hoboken: Wiley.
Athanassiou, P. (2012). Research handbook on hedge funds, private equity and alternative investments. UK: Edward Elgar Publishing.
Lee, S. (2015). 7 common alternative investments that all investors should know. Retrieved from https://www.thestreet.com/story/13155301/1/7-common-alternative- investments-that-all-investors-should-know.html
investment management in the financial sector. The paper highlights the world's present macroeconomic situation. It further details the macro economic situation and the way it affects investment decisions in several investors. In addition, the paper describes a sample investment programme and provides critical decisions to investors as well as investment vehicles used by the investment moguls. The paper summarises practical exercises in compound investment management growth and the use of capital investment.
Investment management is an important part of the global financial sector, which is key in financing vast business empires. Investment management is incorporated under state laws employing several individuals and creating revenue to key players in the financial market. It is the management of several securities and assets to meet specific objectives for the benefit of the investors. The products used known as investment vehicles can be of minimal risks such as government bonds; carry high risks such…
Development Policies and Anaysis Division. (2012). World Economic Situation and Prospects. Retrieved May Friday, 2012, from www.un.org: http://www.un.org/en/development/desa/policy/wesp/index.shtml
B.P.Eregha. (2010). Interest Rate Variation and Investment Determination in Nigeria. International Business Management Journal, 41-46.
Blume, M. (1978). Inflation and Capital Markets. Cambridge: Ballinger.
Contrarian Investor's Journal. (2008, July 6). Effects of inflation on value of investment. Retrieved May Friday, 2012, from www.cij.com: http://cij.inspiriting.com/?p=482#
After the economic Collapse, precious metals like Gold and Silver have become the safe heaven investment for the investors. Investors know that they will get a high return by investing in these precious metals. The performance of the Gold can be judged from the below mentioned Gold graph.
The red line indicated that the Gold has completed almost a 100% ride in just 3 years because of the intentions of the people to get out their money from other investment option and park in the precious metals. There are risk provisions attached with the investment in these precious metals. Actually the price of the precious metals has been overbought now after the factor of safe heaven investment associated with it. Cautious must be taken by the investors while taking a buying position in the precious metal's investment. Tool like performance indicator of the precious metal will be used by the…
Chance, D & Brooks, R (2009), Introduction to Financial Institutions, Prentice Hall Publications
Chisholm, A, (2010), Introduction to Financial Instrument, Pearson Group Publications
Donald, J, (2004), Commodity Prices and Precious Metals Analysis, Oxford University Publications
In general, Product Development at Ford involves three major stages, all leading up to the manufacture of the vehicle: Plan, Design, and Verify -- then manufacture. To do this, though, functional areas need to manage costs, plan marketing programs, ensure that needed parts are available, plan manufacturing schedules, hiring (if needed), shift changes, and numerous other data (a/p, a/r, payroll, etc.). The model for Ford is:
(ource: Murthy and Desai)
Thus, on a daily, or ongoing basis, employees in numerous functional areas are able to pull up historical data on models, features, issues; find out stages of development for new models or new programs; chart advertising effectiveness using detailed database parameters, preplan tooling, resource, and supplier needs; access accounting and invoice functions, and, system wide, use the available information for appropriate levels of knowledge management (Maynard 2004).
By department, a needs analysis shows that each individual department has both similar…
Sources: Ford Motor Annual Reports: www.ford.com; http://online.wsj.com/mdc/public/page/2_3022-autosales.html ).
It is important to note, from the onset, that a lot has been said about efficient markets, behavioral finance, and investment strategy in the past. The approach Kevin Daly uses could be used to build a case against efficient markets whereby all there is to know about a firm’s value can be derived from the available information about the prevailing stock prices. This is more so the case given that he has been successful relying on a wide range of metrics, apart from current stock price, to identify opportunities. Like Daly, Kenneth French does not believe in efficient markets theory. He is convinced that the markets can be incredibly noisy and driven by emotion such as overconfidence. As a matter of fact, French, like Eugene Fama, is skeptical of the skill most active money managers proclaim to have. He is convinced that in some instances, performance is misinterpreted,…
Over the last several years, the markets have faced a tremendous amount of volatility. Part of the reason for this, is because the global financial crisis and subsequent recession caused the Dow Jones Industrial Average to decline to 6,547. Then, it would climb over 68% to cross above 12,000. This is important, because it is showing how there are tremendous opportunities for investors. However, in order to attain above average returns requires that you are using a strategy that is: embracing growth and minimizing risks as much as possible. To achieve this objective requires having: an asset allocation strategy that will incorporate balance and value. Once this takes place, it will provide the greatest insights as to how we should structure a portfolio that will maximize the total return investors are receiving in the year ahead.
The Portfolio Philosophy
The basic strategy that we will be using is to…
The China Fund. (2011). Yahoo Finance. Retrieved from: http://finance.yahoo.com /q/ks?s=CHN+Key+Statistics' target='_blank' REL='NOFOLLOW'>
Three -- Steel Dynamics, Alcoa and IE DuPont fell in excess of 6% for the week. The drop in the first two can be attributed to weakness in commodities. The other outlier was Pfizer, which was the only stock to gain this week, up 0.49%. Even fellow pharmaceutical firms JNJ and MRK dropped, indicating specific strength in Pfizer, most likely tied to merger talks. Most stocks in the portfolio, however, roughly tracked the market, which slumped on generally discouraging sentiment with regards to economic recovery, spurred by weak new home sales and durable goods sales, two key economic indicators (Perman, 2009).
Close Sept 18
Close Sept 25
All stock quotes from MSN Moneycentral. Retrieved September 25, 2009 from http://moneycentral.msn.com /home.asp
No author. (2009). Stock index futures point to higher open. Reuters. Retrieved September 25, 2009 from http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20090925&id=10373441
Gibson, Nevil. (2009). Wall Street Stocks Fall as Fed Keeps Interest Rates Down. National Business Review. Retrieved September 25, 2009 from http://www.nbr.co.nz/article/wall-street-stocks-fall-fed-keeps-interest-rates-down-111655
No author. (2009). Merck Seeks EU Approval to buy Schering-Plough. Associated Press. Retrieved September 25, 2009 from http://news.moneycentral.msn.com/ticker/article.aspx?symbol=U.S.:JNJ&feed=AP&date=20090921&id=10408829
alternative investment vehicles have been using by the investors to reduce the risk and maximize the profit. In this paper, we will discuss alternative investments opportunities and reducing the risk of portfolio by using the stock index future. Buying or selling the stocks is highly risky because of weak economic conditions. Investors should include various types of assets in the portfolio so that portfolio will not suffer the impact of a decline of any one security. For example; if an investor uses stocks and bonds in his/her portfolio, if stock price decline due to market fall then, the bonds would get higher return and it will eliminate the risk of decline. In the portfolio management it says that "not putting all eggs in one basket," it means investor should not invest in only one asset; they should construct the portfolio containing various types of assets. Thus, the portfolio must be…
Sushant, Portfolio management, "Tips for diversifying your portfolio," retrieved through; http://www.portfoliomanagement.in/tips-for-diversifying-your-portfolio.html
Hedged your portfolio using stock index future (2002), published by Chicago Mercantile Exchange (pp-1, pp23).
"The Case for Hedge funds," Tremont Advisors Inc. & Tass Research, 3rd edition, Feb 2003 (pp 9)
Absolute Returns: The Risks and Opportunities of Hedge Fund Investing," byAlexander M. Ineichen, published by John Wiley & Sons, 2002,-Page 36.
Portfolio diversification as a form of risk management is one of the cornerstones of modern investment theory. According to the theory, the ideally-diversified portfolio is 'deeply diversified' within each asset class and also 'broadly diversified' across all the asset classes within the portfolio (Simon 2010:2). Asset classes consist of "stocks, bonds, real estate, commodities, precious metals and collectibles;" forms of market capitalization (micro-, small-, mid- and large-cap); style; sectors; industry types; and geography (Portfolio diversification, 2012, Investing in mutual funds). The objective of diversification is that "risk has virtually been eliminated within each class" by combining lower and higher-risk assets (Portfolio diversification, 2012, Investing in mutual funds). Theoretically, the perfectly diversified portfolio should incur no additional risks to the investor greater than what is posed by the general market conditions. There is always risk in investment, but portfolio management is designed to minimize the risk.
To achieve this objective,…
Buffet, Warren. 1965. Letter to partners. Value Investing World. Accessed:
http://www.valueinvestingworld.com/2007/08/warren-buffett-on-diversification-1966.html [17 Aug 2012]
Calmar ratio definition. 2012. Investopedia. Accessed:
http://www.investopedia.com/terms/c/calmarratio.asp#axzz23nrArUdJ [17 Aug 2012]
This also implies inadequacies in fiscal sustainability, which influences investments in private sectors.
The second channel happens through the level, composition and quality involved within the public investment, which shows the level at which the public investment replaces the private investments (Schmidt- Hebbel, Serven, & Solimano, 1996).
The final channel regards the level of taxation on the corporate earnings and the rules applicable in depreciations.
There have been arguments that fiscal policy and public expenditure reduces the private investments in two different manners. These include increasing the interest rates or lowering the private funds involved in financing the investments.
According to the neoclassical theory, the interest rate is also an imperative variable in finding the level of investment. Consequently, it results into a negative effect because it upsurges the interest payable in investments. Concurrently, McKinnon and Shaw, contends that this is likely to cause a positive relationship between the investment…
Shrestha, M.B. (2005), "ARDL Modelling Aproach to Cointegration Test," Proceedings of the 46th Annual Conference of New Zealand Association of Economists, Paper
No. 13, Wellington, July 2005.
Keynes, J.M. (1936). General Theory on Employment, Interest and Money., London,
Target's chart, however, shows that the company has tracked the market and GDP fairly closely, indicating that perhaps it does not trade the way a discount retailer should.
Johnson & Johnson
JNJ is a pharmaceutical and consumer products company. It competes in pharmaceuticals, consumer products in the health and beauty segment and in medical devices. The company was founded in 1886 and today is a multinational conglomerate with operations in 57 countries and with approximately 250 subsidiaries.
To a certain extent, JNJ's product line is price inelastic. Pharmaceutical demand is tied to overall consumer demand and the state of the economy, but not to the same extent that many other consumer products are. As a result, JNJ would be expected to have less significant swings in its stock price relative to the GDP, other macroeconomic indicators, or the Dow Jones. The stock, however, has traded roughly in line with the…
Yahoo! Finance, various pages. (2009). Retrieved November 25, 2009 from http://finance.yahoo.com
Federal Reserve. (2009). Money Stock Measures. Federal Reserve. Retrieved November 25, 2009 from http://www.federalreserve.gov/releases/h6/Current/
Bureau of Economic Analysis. (2009). National Economic Accounts. BEA. Retrieved November 25, 2009 from http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
Bureau of Labor Statistics. (2009). Employment Situation Summary. BLS. Retrieved November 25, 2009 from
Theory (MPT) and its role in asset allocation and diversification. The paper reviews arguments in favor of and against MPT, in addition to reviewing how MPT affects portfolio management.
MPT describes a theory on how risk-averse investors can build portfolios that optimize or maximize expected return based on a given level of market risk, while emphasizing that risk is an inherent factor of higher reward. MPT posits that it is possible to construct an "efficient frontier" of optimal portfolios that offer the maximum possible expected return for a given level of risk (Modern portfolio theory, 2011).
Modern Portfolio Theory
Typically, an investor looking for the ideal investment, would choose one whose attributes included high returns coupled with low risk. The ideal investment probably does not exist, but the search for it has caused financial managers and investment analysts to spend time to develop methods and strategies, many of which are…
Bernstein, W.J. (1996). The expected return of precious metals equity. Retrieved May 31, 2011 from http://www.efficientfrontier.com/ef/197/preci197.htm
McClure, B. (2011). Modern portfolio theory: why it's still hip. Investopedia Web site. Retrieved May 31, 2011 from http://www.investopedia.com/articles/06/MPT.asp
Modern portfolio theory: Dynamic diversification for today's investor. Vision Financial Markets. Retrieved May 31, 2011 from http://www.usafutures.com/modernportfoliotheoryinvesting.pdf
Modern portfolio theory -- MPT. (2011). Investopedia Web site. Retrieved May 31, 2011 from http://www.investopedia.com/terms/m/modernportfoliotheory.asp
This is significant because it shows how some critics of contrarian investing will often point to the various instances of speculation and assume that it is contrarian investing. In some cases the psychology of consumers can become so extreme, that the definition of what is speculative expands greatly. As a result, using contrarian investing in conjunction with other indicators / tools can help prudent investors and traders, be able to identify when the market condition are becoming more extreme.
Contrarian Indicators and Tools
When using the different contrarian indicators / tools in conjunction with one another, you can begin to see how this strategy can be used, to effectively determine if the market conditions are overbought or oversold. There are number of different tools that can be utilized to indentify major changes that are occurring in the trend of a stock or the market averages. These would include: headlines…
"3M Historical Prices," Yahoo Finance, http://finance.yahoo.com /q/hp?s=MMM&a=00&b=2&c=1970&d=04&e=25&f=2010&g=v&z=66&y=0
"3M Reports First Quarter Results," 3M, http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjA2NjEwOHxDaGlsZElEPTMzNDE0MXxUeXBlPTI=&t=1
"3M Reports Fourth Quarter and Full Year 2008 Results," 3M, http://library.corporate-ir.net/library/80/805/80574/items/322063/054431D4-6347-45F1-AF4D-85CCA5F89C52_mmmQ4release.pdf
"American Depository Receipt." Investopedia, http://www.investopedia.com/terms/a/adr.asp
Moller ended up becoming the most profitable stock in my portfolio during the first week of investing, with a gain of over 10%. Throughout the month, Moller has continued to outperform any other stock in my portfolio, so my investment risk paid off. So far, my least performing stock was Zoltek, another energy company.
My overall investment strategy, I discovered, was more high-risk than I had initially thought. However, I did need to balance my portfolio with some more stalwart stocks, in order to ensure that I would not lose all of my investment capital. I bought 1000 more shares of Citigroup, 100 shares of Deutche Bank, and 1000 shares of Home Depot. Many of these companies have not been performing well recently, but they are good long-term investments.
Then, because Moller continued to perform well, I purchased 5000 more shares, which increased my immediate profit percentages considerably. If the…
Because of this, I would expect that U.S. Energy would have performed better, but that has not been the case. None of the individual holdings are overly dependent upon energy costs, such as we would see in the airline industry, so the performance of the portfolio does not seem to have been overly affected by the rise in energy prices.
The proper approach to investing involves diversifying, not only across different companies, but also across different sectors of the economy. In a given year, one sector of the economy will be up and another will be down. One-year large cap growth stocks will be up and foreign stocks will be down. The next year real estate will be up and large cap growth may be down. If we knew in advance which sectors would be on top, investing would be easy, but we don't. As a result, diversification across different…
The John Deere Health Pan was conceived of to provide quality health care at reasonable costs for its many employees, and also for its non-employees in Deere and Company in the states of Illinois and Iowa and Tennessee and Virginia. (McCollum, John Deere Health cultivates successful IT Project Management)
What Michael McCollum felt was that his IT department was like the IT Department at many other corporations, with many more projects than appropriate resources for them, and no practical and effective method with which to prioritize them, and to make a definitive analysis of which project would have a greater impact on the company, and which the least. In the same way, the organization lacked the means by which a particular project could be assigned with appropriate resources to the appropriate person, and more often than not, priority was decided on the requestor's persistent efforts, or on his management skills…
Portfolio assessment is an increasingly popular tool in the field of education, both among programs in primary, tertiary, secondary and higher education. The tool is especially good for tracking progress, as it does not just show the results of a group of work or project it also demonstrates the evolution of thought and learning throughout a series of works.
Instead of merely showcasing what the author believes to be his or her best work, the assessment portfolio provides a panoramic view of that person's professional development experiences -- and thereby also serves to measure the contribution to those experiences made by the educational institution from which that individual hopes to graduate. (Christ, 1994, p. 131)
The challenges of the portfolio driven project or term is to allow adequate time for matriculated assessment and review, by self, peers and instructors. If the portfolio is appropriately structured and planned to…
Anderson, J.O. Bachor, D.G. (November 1998) A Canadian Perspective On Portfolio
Use in Assessment, Assessment in Education: Principles, Policy & Practice, 5(3),
0969594X Retrieved February 9, 2005, Professional Development Collection
However, the Thai government's guidance on growth has been conservative; if we take the orld Bank's pre-crisis estimate of 6.2% (Thailand Business News) and factor in Chatikavanij's warning, Thailand's near-term growth potential comes in at a healthy 4.2%.
From a pure value perspective, Thai stocks are already trading at relatively cheap levels (Reuters). The SET is valued at roughly 12 times estimated 2010 earnings, which makes it the second-cheapest market in Asia (behind Pakistan) and significantly undervalued compared to Indonesia (14 times 2010 earnings) or Malaysia (15.7 times 2010 earnings). hile it may be time to reconsider our sector weightings in order to take advantage of bargains in Bangkok (and dump stocks that are looking rich or in danger of deteriorating further as the political crisis continues), it would probably not be prudent to move money away from the market entirely.
The idea of reallocating some or all of the…
Peck, Grant. "Emergency Declared in Thailand Protests." The Associated Press. 7 Apr. 2010. Web. 27 Apr. 2010.
Plessis, Prieur de. "Mobius Sees Value in Thailand." Daily Markets. 26 Apr. 2010. Web. 27 Apr. 2010.
Price of bond= 0.385543*1000 +6.144567*100= $385.54.64+$614.45
Price of bond= $1,000
So, price of bond B. is $1,000 b. For market interest rate equal to 12%:
Price for bond a:
Market interest rate is equal Coupon rate is equal Face value Frequency Number of years to maturity Number of Periods Discount rate annually Discount rate per period n, periods r, per period 12%
10% $1,000 Annual 20-20-12.00% annual 12.00% 20-12.00%
Now we need to calculate PVIF and PVIFA.
For calculation of PVIFA (i, n) and PVIF I is equal to 20 periods and n=12%
PVIFA= (1- 1/(1+.12)^20)/.12
Price of bond= 0.103667*1000+7.469444*100=$851
Price of bond a = $851
Price of bond B:
Market interest rate is equal Coupon rate is equal Face value Frequency Number of years to maturity Number of Periods Discount rate annually Discount rate per period n, periods r, per period 12%…
Finance: Financial Investment
Today's investment environment is more dynamic than it was a decade ago. This is particularly the case given that today's global economy is much more complex. Further, with information moving faster than it used to, the ripple effects of events happening in any given place are often felt in far away economies. Essentially, some of the challenges investors encountered a decade or so ago are not the same ones they encounter today. One of the key challenges in today's investment environments is sluggish global economic growth. As Connolly (2014) points out, although the trend could be changing (going by recent performance), "the U.S. economic growth rate has been relatively sluggish." Slow rate of economic growth causes significant uncertainty which is not ideal for investment. Next, it is also important to note that the volatility of equity markets has been rather extreme in the recent past. This…
Connolly, M. (2014). The Stock Market in 2014: Up, but Volatile. Retrieved from www.nhbr.com/The-stock-market-in-2014-up-but-volatile/
Gold, M. (2011). Fiduciary Finance: Investment Funds and the Crisis in Financial Markets. Massachusetts: Edward Elgar Publishing.
MSN. (2014). Apple Inc. (NASADAQ: AAPL). Retrieved from http://investing.money.msn.com/investments/stock-ratings/?symbol=AAPL
In both of these situations, better information technology and information systems will give the advisers the tools they need to attract new business and to outperform competing wealth management services. These tools will then drive business to the individual advisers, resulting in the super growth that was the original challenge the company wanted to address.
Assessment of Alignment
At present, the it function provides a substantial amount of information to BT, but there are still opportunities to improve linkages between business units. The it department is strong, but not as proactive as it could be in finding new ways to help deliver competitive advantages to the advisers. Marketing is the key way in which it can help BT to grow -- there are hundreds of thousands of customers scattered throughout Westpac's different companies and the more access BT's advisers have to these clients and their information the better they will…
BT.com.au website, various pages. (2011). Retrieved April 4, 2011 from http://www.bt.com.au
Business Wire. (2007). PMC targets key challenges facing investment advisors. Business Wire. Retrieved April 4, 2011 from http://findarticles.com/p/articles/mi_m0EIN/is_2007_Sept_24/ai_n20512884/
ental Investment May Seem Safer than it eally Is" offers counsel regarding the pros and cons of venturing into rental property investments (Bernard, 2013). The article explains the appeals of using rental investments to create a new profit stream -- low interest rates, low home prices, potential for supplemental income and the potential for rents to rise in the future. With a turbulent stock market and fickle returns on mutual funds and other investments, many people have come to view owning and operating rental properties as a safer alternative.
However, the piece also warns about the other considerations that many fail to take into account -- tenant issues, unforeseen expenses and competition for the best deals. Many new investors may underestimate the amount of work required to successfully manage and maintain a property. As the article points out, screening tenants, collecting rents, or evicting when a tenant loses a job…
Bernard, T. (2013, March 30). Rental Investment May Seem Safer That It Really Is. New York Times. pp. B1-B5.
Birger, J., Caplin, J., & Feldman, A. (2004). Getting Real About Real Estate Investing. Money, 33(12), 122-128.
Neuman, W. (2005, April 17). Seeking Nest Eggs, Investors Buy Nests.New York Times. pp. 1-5.
The Big Long. (2012). Economist, 405(8813), 77-78.
"Pension reform in several emerging market countries has been associated with rapid growth in assets under management and a positive impact on the development of local securities markets." (Roldos, 2004) Finally, the stability of many international securities, located in Britain, Switzerland, or Germany, to take only a few examples, means that using the diverse potential of international investment opportunities does not necessarily entail a high risk.
However, many international sources of revenue tend to be more unpredictable in their returns. A pension fund's security, especially for an older man or woman with retirement on the horizon must be of primary importance. Secondly, international developments can be difficult to predict in the long-term. And finally, international securities may be less tightly regulated in terms of their ethical scrutiny by the local governments, leading to "price distortions, bubbles," and hence greater investment risks. (Roldos, 2004)
China's Pension Fund to Invest…
China's Pension Fund to Invest Abroad." (10 October 2006) International Business
Times. Retrieved 25 Nov2006 at http://www.ibtimes.com/articles/20061010/china-039-s-state-pension-fund.htm
Roldos, Jorge. (Sept 2004). "Pension Reform, Investment Restrictions, and Capital
Markets." IMF Policy Discussion Paper. Retrieved 25 Nov2006 at http://www.imf.org/external/pubs/ft/pdp/2004/pdp04.pdf
company's investment success especially in relation to other companies. The paper aims at establishing how a company's competitiveness can be calculated in relation to others in the same industry and the factors that hinder the calculations or hinder a true picture of the same
Compare industry average and a main competitor
For convenient comparison of industry average, majority of companies place Industry average values next to a company's financial measures for convenient comparison. To get a clear picture, a company can obtain industry average from its competitor by carefully examining (its competitors) stock screen results. (Gray, 2004)
However it is notable that various industries have their peculiarities with some operating under very heavy debts which would companies in other industries. For instance, software companies enjoy high profit margins that other companies envy and that all software companies must attain to stay in the game.
For that case, to see whether…
Gray, A. (2004) Introduction to Marketing, 7th Edition, New York, Prentice Hall
Riahi, A. (2003) The Capital Structure Paradigm: Evolution of Debt? Equity Choices; New York, Praeger
Riahi, A. (1999) Capital Structure: Determination, Evaluation and Accounting
Titman, S (1988) Journal of Finance, Volume 43, Issue: 1, Publisher: American Finance Association; Blackwell publishing
S. billion in 1998. eported as the dominant source of inward FDI in China is that of Hong Kong, followed by Japan, the U.S. And Taiwan.
Summary and Conclusion
This study set out to examine Foreign Direct Investment in China by the multinational enterprise. At present China is a primary source for foreign direct investment due to the favorable laws and regulations governing Foreign Direct Investment in China and the attempt to make location siting of the organization equitable and fair. China has been attempting to pull the company in line with their own expectations as have the multinational enterprises who desire to directly invest foreign funds into China.
Investment (2008) Multinational Corporations. Cush & Wakefield. etrieved from: http://www.cushwake.com/cwglobal/jsp/audienceDetail.jsp?audienceId=18&Country=900095&Language=EN&groupBy=audience
Kroll, CA and Bardhan, a. (2007) Globalization and the eal Estate Industry: Issues, Implications, Opportunities Haas School of Business, UC Berkeley, Paper Prepared for the Sloan Industry Studies Annual Conference.…
Investment (2008) Multinational Corporations. Cush & Wakefield. Retrieved from: http://www.cushwake.com/cwglobal/jsp/audienceDetail.jsp?audienceId=18&Country=900095&Language=EN&groupBy=audience
Kroll, CA and Bardhan, a. (2007) Globalization and the Real Estate Industry: Issues, Implications, Opportunities Haas School of Business, UC Berkeley, Paper Prepared for the Sloan Industry Studies Annual Conference. Cambridge, April 2007. Retrieved from: http://web.mit.edu/sis07/www/kroll.pdf
MULTINATIONAL CORPORATIONS (nd) Cush and Wakefield. Retrieved from:
learning experiene. The writer demonstrates how to put together a prior learning and prior experiene portfolio for the purpose of demonstrating urrent knowledge due to that prior experiene.
A omprehensive look at the management of one's personal finanes; overs budgeting, use of and ost of redit, life and property insurane, inome and state taxation, housing, wills, trusts, estate planning, and savings and investments.
You must reall and write one or more "learning events" for eah of the key terms listed on the ourse desription you have obtained. By using Kolb's model to guide your storytelling, you will assist your faulty assessor, the person who will evaluate your PLA portfolio for redit, to loate and appreiate your learning outomes.
In short, your task in writing your PLA portfolio essay is to address all listed ourse ontent areas and to do so via speifi stories told in terms of the Kolb Model.…
cited in Tennant 1996) highlights, there is a need to take account of differences in cognitive and communication styles that are culturally-based. Here we need to attend to different models of selfhood - and the extent to which these may differ from the 'western' assumptions that underpin the Kolb and Fry model.
The idea of stages or steps does not sit well with the reality of thinking. There is a problem here - that of sequence. As Dewey (1933) has said in relation to reflection a number of processes can occur at once, stages can be jumped. This way of presenting things is rather too neat and is simplistic - see reflection.
Empirical support for the model is weak (Jarvis 1987; Tennant 1997). The initial research base was small, and there have only been a limited number of studies that have sought to test or explore the model (such as Jarvis 1987). Furthermore, the learning style inventory 'has no capacity to measure the degree of integration of learning styles' (Tennant 1997: 92).
The relationship of learning processes to knowledge is problematic. As Jarvis (1987) again points out, David Kolb is able to show that learning and knowledge are intimately related. However, two problems arise here. David Kolb doesn't really explore the nature of knowledge in any depth. In chapter five of Experiential Learning he discusses the structure of knowledge from what is basically a social psychology perspective. He doesn't really connect with the rich and varied debates about the nature of knowledge that raged over the centuries within philosophy and social theory. This means that I do not think he really grasps different ways of knowing. For example, Kolb focuses on processes in the individual mind, rather than seeing learning as situated. Second, for David Kolb, learning is concerned with the production of knowledge. 'Knowledge results from the combination of grasping experience and transforming it' (Kolb 1984: 41). Here we might contrast this position with Paulo Freire. His focus is upon informed, committed action (praxis).
Given these problems we have to take some care approaching David Kolb's vision of experiential learning. However, as Tennant (1997: 92) points out, 'the model provides an excellent framework for planning teaching and learning activities and it can be usefully employed as a guide for understanding learning difficulties, vocational counselling, academic advising and so on'.
Open communication is key to organizational success, and this openness can be demonstrated to employers through honesty and forthrightness (within the bounds of professionalism, of course) during the interview process.
In addition to these directly employment-related knowledge and skill areas, the course I took in Personal Finance will have a substantial positive impact on the way I approach my profession and my attractiveness to potential employers. Not only have I been provided with information on how to spend wisely, save appropriately, and even gauge investment opportunities in my personal life -- all of which will give me enhanced stability and security, which will be seen as a benefit by potential employers -- but these skills will also transfer to my profession in terms of assisting home health care recipients and practitioners alike in reducing their own expenses and thus providing additional value to expected services and relationships. In addition, appropriate…
Direct investment / Political risk
A distinction between the project and parent perspectives when capital budgeting in a global situation
There are two different viewpoints in capital budgeting known as project and parent. The project is a locally addressed perspective that is child to the parent. The parent is the main organization in which the projects financial and operating cash flows will be directed. The project perspective is very useful in local purposes. However, it is subordinated to the evaluation from the parent's viewpoints (Moffett, Stonehill & Eitemen, 2012). A project evaluation will guarantee cash returns based on the host-governments bonds. In case a project were to fail in receiving cash equal to the bond yield, a parent firm should buy host government bonds instead of investing in a risky project or investing somewhere else. Multinational firms should invest only if they can earn a risk-adjusted return greater than locally-based…
3. A contrast of the various factors that impact foreign direct investment
Foreign direct investment is an investment made by a company and/or entity that is based in one region into another company and/or entity based in another one. There are many things that differ from direct and indirect investments such as the portfolio flow (Moffett, Stonehill & Eitemen, 2012). Therefore, overseas institutions invest in equities listed on a nation's stock exchange. Entities that make direct investments will typically have significant degrees of influence and control over the company into which the investment is made. Nevertheless, the open economies that consist of well-trained workers and project good growth prospects will tend to attract a larger amount of foreign direct investment than the closed economies which are highly regulated economies. Determining the best method that a company will adopt may make its overseas investment encounter different depending on the circumstances of the economic environment.
Some examples would be to set up a subsidiary or associate company in the foreign country, by acquiring shares of an overseas company, through a merger, or joint venture. The regulated threshold for a FDI relationship (defined by the OECD) is at least 10% (Moffett, Stonehill & Eitemen, 2012). In other words, the foreign
Intel Capital - the Berkeley Networks Investment" in analysis, questions answered: 1) Why Intel Berkeley Networks form partnership? 2) Did firm achieve goals? If, ? If, ? 3) What
Intel Capital: The Berkeley Network investment
The Intel Corporation is the largest company in the industry of computer microprocessors and its success has been based on a strong managerial model which emphasized not only the technical aspects -- such as resource management or operational efficiency -- but also the non-technical aspects of the business, such as the role played by the staff members in attaining overall corporate objectives, or the importance of learning and development to achieving pre-established goals.
The partnership with Berkeley represented the perfect mechanism by which Intel could develop and expand both its technical skills, as well as its non-technical skills. In other words, Intel would benefit from the technical expertise of the Berkley staff, and would also…
Chesbrough, H.W., 2003, Open innovation: the new imperative for creating and profiting from technology, Harvard Business Press
2000, Intel Capital: The Berkeley Networks Investments, Harvard Business School
Financial Management - Personal Investment Decision for a Public Company
ationale for Toyota
Stock price analysis
Toyota Motor Corporation, which is recognized as is one of the most exhilarating productions in the automobile business these days. The company is one of the most economical corporations all over the world and has appreciated a record setting achievement for a very long time. In the previous years, the worldwide automobile industry has been overwhelmed by soaring gas prices, and hard-hitting environmental protection laws. With that even being said, it has not been a walk in the park for Toyota, but to no gain the company has been one of the most effective establishments so far. Toyota Motor Corporation has also been one of the manufacturing leaders in creating new and innovative technologies that take advantage of the productions existing barriers. There are a lot of things…
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Elliot, S. (2014). Toyota Motor Corporation. The New York Times, 34(9).
Herrold, C.Y. (2012). "How to Carve a Pie." Foundation News and Commentary,. Foundation News and Commentary, 41(4), 45-67.
asset classes, setting out their characteristics and risks.
Australian shares are shares in the market of publicly traded companies that range from small to medium to large-cap stocks. Shares can or cannot provide dividends to shareholders, depending on their makeup. Shares can increase or decrease in value, depending on a number of factors ranging from fundamental valuation to market or sector conditions, to laws of supply and demand to market psychology, momentum and stop-hunting algorithms. Trading shares in today's market conditions can be viewed as more perilous than ever before because of the inherit risk of losing to HFTs, of improperly hedging one's investment and being exposed to downside risk, and of improperly diversifying or investing in the wrong sector or company at the wrong time (for example, as it is poised to pull back, collapse, or be diluted through toxic debt).
Australian bonds can come in the form of…
Anderson, E. (2016). Investors 'go bananas' for gold bars as global stock markets tumble. Telegraph. Retrieved from http://www.telegraph.co.uk/finance/personalfinance/investing/gold/12151770/Investors-go-bananas-for-gold-bars-as-global-stock-markets-tumble.html
Chen, W., Chung, H., Ho, K., Hsu, T. (2012). Portfolio optimization models and mean-
variance spanning tests. In Handbook of Quantitative Finance and Risk Management. NY: Springer.
Collum, D. (2015). Year in Review. Peak Prosperity. Retrieved from http://www.peakprosperity.com/blog/95808/2015-year-review
International Equity Markets
esidential investment property performed better than all investments in the last decade. Australian bonds were the second best performing asset class returning 6.4% p.a. Australian shares were the third highest with 6.1% p.a (Australian Securities Exchange, 2012). Within the same period, the Global eal Estate Investment Trust (EITS) outperformed the Australian EITs. Unhedged oversea shares achieved the lowest return of any asset class over the 10-year period. Had any investor hedged his overseas shares investment he would have received 3.7% p.a. And 6.7% p.a. over the past 10 and 20 years (Australian Securities Exchange, 2012). These were the results before tax but after costs. The results after tax and after costs for the past decade indicated that the residential property outperformed all other asset classes at the lowest and highest marginal tax rates with returns of 7.2% and 5.8% p.a. respectively (Australian Securities Exchange, 2012). Within that…
Australian Securities Exchange (2012). Long-Term Investing Report. Retrieved from http://www.asx.com.au/documents/products/ASX_Report_2012.pdf
Dwinnel, T. (2007). Self-Directed Portfolio Advantages/Disadvantages. Retrieved from http://selfinvestors.com/tradingstocks/news/self-directed-portfolio-advantagesdisadvantages/
Piotrowski, T. (2013). Australian Stock Market. Retrieved from http://www.comsec.com.au/Public/NewsAndResearch/AusStockMarketreports.aspx
risk and return for an investment portfolio that includes five asset categories: stocks, bonds, mutual funds, options, and precious metals. The purpose of diversified portfolio investment is to maximize portfolio expected return for a given level of risk, or to minimize risk for a specific level of expected return. This paper reviews mathematical formulae for modeling risk and return which provide a rationale for investment strategies and portfolio management. The paper also discusses risk and return objectives and expectations, along with investment risk profiles.
Risk vs. Return Measurement
In an ideal world, the typical investor would select investments whose attributes include high returns coupled with low risk. In reality, there are few of these kinds of investments available, consequently financial managers have gone to great lengths to develop methods and strategies that allow them to come as close as possible to selecting the ideal investment. One such financial theory for…
Piazza, J. (n.d.). Objectives and risk. Sensible Investment strategies Web site. Retrieved May 26, 2011 from http://www.seninvest.com/objectives.htm
Risk Measures. (2011). Investopedia Web site. Retrieved May 26, 2011 from http://www.investopedia.com/terms/r/riskmeasures.asp
Wan, S.P. (n.d.). Modern portfolio theory. Investment Funds Advisors Web site. Retrieved May 26, 2011 from http://www.ifa.com/media/images/pdf%20files/mpttextbook.pdf
How important is it for you to diversify your investment portfolio? How would you diversify your investment portfolio?
Although 'the stock market' is often spoken of as a collective entity, in reality it is made up of a many different types of industry subsets. Furthermore, stocks are not the only assets investors should have: bonds, CDs, and more conservative and risky investments make up the full 'buffet' of available ways to allocate funds. The right 'menu' of investments will vary depending upon the investor's age, comfort with risk, goals, and other factors. "To build a diversified portfolio, an investor should look for assets whose returns haven't historically moved in the same direction, and, ideally, assets whose returns move in the opposite direction. This way, even if a portion of your portfolio is declining, the rest of your portfolio is designed to be growing. Thus, you can potentially offset the…
The pro's guide to diversification. (2013). Fidelity Investments. Retrieved from:
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