Assume that you have $500,000 to invest in equities and want to establish a new portfolio that includes ten (10) stocks to be selected from the Dow Jones Industrial Average of 30 companies.\u00a0 It is also desired to start with nearly equal dollar values of each issue.\u00a0 Use current market prices to compute the number of shares required.\t\u00a0\tYou are bullish on the markets in the long-term; however, you have read analyst predictions that over the next 18 months the market will likely stay flat with some downside potential.\u00a0 Despite these predictions, you want to make some money in the short-term, and at the same time avoid any downside spikes in the markets.\u00a0 A hedging strategy using options and\/or futures seems appropriate.\u00a0 Please develop a plan to accomplish your goal and give a detailed explanation, with numerical computations, of the upside opportunities and the downside risks for each chosen position.\t\u00a0\tIn addition to your investment in equities, you also have $1 million dollars to invest conservatively in U.S. Treasury issues and money market securities.\u00a0 Select four T-bonds and\/or T-notes ranging in maturity from two years to five years and purchase equal dollar amounts with a total of approximately $500,000.\u00a0 Invest the remaining $500,000 in the money market. \u00a0You need not select individual money market issues; just assume that the money market investments are secure and return the risk free rate.\u00a0 Please discuss the how the inclusion of the fixed income securities affects the risk in your total portfolio.\t\u00a0\tTo begin the project you need to select 10 stocks and fixed income issues.\u00a0 When buying large quantities of stocks, it is most usual and convenient to issue orders in round lots (rounded to 100 shares).\u00a0 You should do this for your analysis. When you sum the value of the rounded lots, the result will almost certainly not be exactly $500,000.\u00a0 Ignore that difference and use the sum of the rounded lots as your equity investment.\u00a0 The same holds true for the fixed income selections.\u00a0 A spreadsheet is provided in Doc Sharing to help you do the required computations.\t\u00a0\tGeneral Guidelines\t\u00a0\tThis project is about quality and substance, not about volume.\u00a0 Your narratives should be concise, comprehensive, and easy to read.\u00a0 APA format is required.\u00a0 Your pricing numbers for derivatives must be expressed in a spreadsheet format.\u00a0 Your presentation should be in the following order:\t\u00a0\t \ufffd \ufffd\u00a0 1.\u00a0 Executive Summary\t \ufffd \ufffd\u00a0 2.\u00a0 Explanation of Hedging Strategy\t \ufffd \ufffd\u00a0 3.\u00a0 Spreadsheet\t \ufffd \ufffd\u00a0 4.\u00a0 Explanation of the strategy’s risks and rewards\t \ufffd \ufffd\u00a0 5.\u00a0 Conclusion\t\u00a0\tExecutive Summary\t\u00a0\tThis narrative should be a brief explanation of the objective, strategy, and conclusion.\u00a0 There need only be enough information to provide a reader an overview of the issue, your approach, and your perceptions on how you will benefit.\t\u00a0\tSpreadsheet\t\u00a0\tFor every derivative security you select as a part of your strategy, there should be a spreadsheet entry identifying the derivative, and all purchasing or selling elements, e.g. strike price, expiration, and costs.\u00a0 You should also show possible outcomes.\u00a0 Example, if you recommend selling a call option, then show the net results if the underlying stock moves down, stays flat, and rises above the strike price.\u00a0 The net results should be expressed in net dollars (actual return or loss), actual percentage gain or loss, and annualized percentage gain or loss.\t\u00a0\tRisks and Rewards\t\u00a0\tThis is a narrative based on the probabilities shown in your spreadsheet.\u00a0 You should provide a brief explanation of the outcomes should the market decline, stay flat, or rise.\t\u00a0\t\u00a0\tConclusion\t\u00a0\tThis is your opportunity to express your professional opinion that your strategy will enhance your portfolio.<\/p>\n","protected":false},"excerpt":{"rendered":"
Assume that you have $500,000 to invest in equities and want to establish a new portfolio that includes ten (10) stocks to be selected from the Dow Jones Industrial Average of 30 companies.\u00a0 It is also desired to start with Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-216972","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/216972","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=216972"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/216972\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=216972"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=216972"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=216972"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}