Focus Of The Final Project: Students Will Construct A Well-D

Focus Of The Final Projectstudents Will Construct A Well Diversified P

Focus of the Final Project Students will construct a well-diversified portfolio using an initial investment stake of $50,000 (the portfolio should use at least 95% of the initial investment, but they may not use more than $50,000). Students may include stocks, common or preferred; bonds, corporate or U.S. Treasury bonds; mutual funds, and futures contracts, or options. Students will use the closing prices from the first day of the class to determine the price of each issue. Only whole lots of any issues may be acquired; that is, no less than 100 shares of common or preferred stock, no less than five corporate bonds or $10,000 for U.S. Treasury Bonds, no fewer than the minimum required investment for any mutual fund, and no fewer than five contracts for any option or futures position. The settlement date will be the first day of Week Three. Students do not have to use all of the above-mentioned securities, but they must use more than one class of security. Transaction costs are ignored in the creation of the portfolio. The Final Project is to be written in accordance with APA guidelines as outlined in the Ashford Writing Center.

Explains their investment strategy, including an assessment of their willingness to bear risk. Describes the securities in the portfolio, including a description of the historical information for each firm. Calculates a quarterly and annualized return on the portfolio, and the expected return for the portfolio (students may use the closing prices as of December 31st of last year). Computes the beta of the portfolio (MERGENT, in the Ashford Online Library, can be used to find the historical betas of each security) using concepts learned within the course. Summarizes the risks of their portfolio and determines any areas where they might consider reinvesting portions of their portfolio to achieve either less risk or higher expected return.

Paper For Above instruction

The objective of this final project is to construct a well-diversified investment portfolio that employs a strategic blend of various asset classes within a specified initial investment limit of $50,000. This project not only emphasizes the selection of diverse securities to mitigate risk but also involves rigorous analysis of investment strategies, risk assessment, and performance measurement. Through this exercise, students will demonstrate their understanding of portfolio management concepts, including asset allocation, risk-return tradeoffs, beta calculation, and the evaluation of expected versus actual portfolio returns.

The first step in creating the portfolio involves selecting a mix of securities—stocks, bonds, mutual funds, futures, or options—that aligns with the student's investment goals and risk appetite. To ensure diversification, students must combine at least two different classes of securities but are not required to utilize all asset types. For instance, a student might allocate funds chiefly among stocks and bonds or include mutual funds and options to diversify further. The portfolio construction adheres to specific constraints, such as purchasing whole lots—100 shares for stocks, five corporate bonds, or minimum investments for mutual funds—while ignoring transaction costs in the calculation of returns.

An important aspect of the project is the initial valuation of securities using closing prices from the first day of the course, which establishes the baseline for subsequent performance measurement. The portfolio's settlement date is designated as the first day of Week Three, aligning purchase decisions with this timeline. Students are encouraged to use historical data, including closing prices as of December 31st of the previous year, to analyze past performance and estimate future expectations.

Risk assessment constitutes a core component of the project. Students must justify their investment choices considering their risk tolerance, perhaps using qualitative or quantitative measures. Calculating beta, a measure of systematic risk, involves utilizing resources such as MERGENT available in the Ashford Online Library to determine the historical beta of each security. This data allows students to assess the overall beta of their portfolio, providing insight into its sensitivity to market fluctuations. The portfolio's expected return, calculated through weighted averages of individual asset returns, provides an estimate of future performance, allowing comparisons with actual performance to evaluate effectiveness.

Furthermore, students should analyze the portfolio's risk profile by identifying potential areas of vulnerability and exploring rebalancing strategies. For example, if the portfolio exhibits high beta values indicating elevated market risk, students might consider reallocating investments toward less volatile assets to reduce exposure. Conversely, if the goal is higher expected returns, reallocating funds into higher-risk, higher-return securities could be considered. A balanced assessment of risk versus reward aligns with investment theory and personal risk preferences.

The paper must be between eight to ten pages, double-spaced, and adhere to APA formatting guidelines. Its structure should include an introductory paragraph with a clear thesis statement, a comprehensive discussion of the investment strategy, detailed descriptions of selected securities and their historical performance, calculations of returns and beta, and a critical evaluation of the portfolio's risk profile. The conclusion should reaffirm the thesis and highlight key insights gained through the analysis.

In addition to empirical analysis, the project requires integrating scholarly perspectives on portfolio diversification, risk management, and investment strategies. At least four scholarly sources are necessary, with a minimum of two from the Ashford University Library. Proper APA citations and formatting are mandatory throughout, including in-text citations and a references page. The final submission must demonstrate critical thinking, analytical rigor, and application of financial principles learned in the course.

References

• Fama, E. F., & French, K. R. (2015). A five-factor asset pricing model. Journal of Financial Economics, 116(1), 1–22.
• Markowitz, H. (1952). Portfolio selection. Journal of Finance, 7(1), 77-91.
• Bodie, Z., Kane, A., & Marcus, A. J. (2014). Investments. McGraw-Hill Education.
• Ross, S. A. (1976). The arbitrage theory of capital asset pricing. Journal of Economic Theory, 13(3), 341–360.
• Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. Journal of Finance, 19(3), 425–442.
• Jensen, M. C. (1968). The performance of mutual funds in the period 1945–1964. Journal of Finance, 23(2), 389–416.
• Lintner, J. (1965). The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets. Review of Economics and Statistics, 47(1), 13–37.
• U.S. Department of the Treasury. (2020). Treasury Bonds: Historical Data. https://fiscaldata.treasury.gov
• Morningstar. (2023). Mutual Fund Overview. https://www.morningstar.com
• Yahoo Finance. (2023). Stock Market Data. https://finance.yahoo.com