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Risk and return analyis
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Bus655 Financial Investment Management Paper
693 Words2 Pages
Recommended: Risk and return analyis
Portfolio Construction
Teresa Grass
BUS655: Financial Investment Management
Instructor: Wayne Hollman
October 06, 2014
A investment that considers to be passive in securities that permits an investor to multiply his/her beginning capital investment on many securities all while earning profits.it consist of having power over securities by an investor along with active management by an investor over a certain period of time. The reason for the investment will be expected to be primarily for financial gain. During the course of this paper there will discussion trying to analyze a common portfolio including a beginning capital input of $10,000 given that the allocation to the portfolio. Also it will include certain investments started under the portfolio including their possible profit. This paper will consist of a table of their investment that has been offered for reference.
The beginning allocation of $10,000, the
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investor made a choice to invest 100 shares of a publicly listed company including all the share trading for $30. The business invested in a computer manufacturing company that in current years had went through an sales being increased because of sales being improved along with market share. The financial statements of the company said that the company professed a dividend because of its profitability being increased along with its earning per share was greatly boosted owing it to their financial performance. The investor are looking for the share price to rise at least by 10% occurring the first year of investment causing the investment to rise from $3000 to $3300. The investor second investment was made an choice to purchase bond worth $2000 from a financial institution. A bond that a corporation issues to raise funds successfully in order to increase its company is known as corporate bond. (Sullivan & Sheffrin, 2003.) The business is looking for to mature in a period of 5 year with a 5% p.a interest rate compounded yearly. This type of action will cause a return of $2552 to the investment. Regardless of their low return, the investment is known to be a low risk investment that is guaranteed possible for returns. The third investment concludes an allocation of $1000 for an investment in a low risk mutual fund that wills make an assurance financial security to the investment. A professionally managed collective of investments scheme that establish money from many investors to buy securities is mutual fund. (SEC, 2011). This type of fund will create an investment in the technology segment for businesses. The investors are looking forward on doubling their investment made in the beginning 4 years. So, after this time period the investment will be worth $2000. The last allocation was established was for an investment 100 puts along with call selection across the financial subdivision.
Money securities offer extremely investment that is eye-catching opportunities for investors looking to invest in put choices including calls. The investor made a choice to invest in stock at $30 at this time with a $30 strike price. In a period of two years the investor will be capable to purchase the stock at $30 in regards to expecting an increase of $150 per stock. So he will spend $3,000 as the beginning investment an expecting a returns of $15,000. The rest of the $1000, the investor made a choice to invest in a 6 month CD from a banking corporation. A six month certificate of deposit is a respected savings product as it produces assured interest of up to $250,000 per depositor (Bankrate.com, 2014). The investor will turn around a deposit $1000 that will make him have an interest including the money in the financial corporation. After the course of four years, the CD will cause him to have a profit of
$2000. The investor’s portfolio will be worth $24,852 including a profit of $14,842 in the table as following Reference Bankrate.com. (2014). Consider 6-month CD for short-term savings. Retrieved April 21, 2014, from Bank rate: http://www.bankrate.com/finance/investing/saving-tip-best-time-to-open-a-6-month-cd.aspx SEC. (2011, April 06). U.S Securities and Exchange Commision Information on Mutual Funds. Retrieved 2014, from U.S. Securities and Exchange Commision (SEC): http://www.sec.gov/answers/mutfund.htm Sullivan, A., & Sheffrin, S. M. (2003.). Economics: Principles in action. New Jersey: Pearson Prentice Hall.