Middle School Student Case Study Handout 2

Handout 2 Middle School Student Case Studystudent A Class Schedulepe

Handout #2: Middle School Student Case Study Student A Class Schedule Per Course Name Room Absences Tardies Grade 01 Choir 5 6 0 A- 02 Science C 03 English Grade 7 G 10 7 0 B- 04 Physical Ed Grade 7 Gym 3 3 B 05 Math 7 Accelerated 15 7 3 C- 06 World History 3 7 1 D Simple GPA: 2.5 Student Portfolio Entries: MUTUAL FUNDS PROJECT INSTRUCTIONS You have formed an investment club and solicited your friends to join. The club sold 500 shares at $10 each to members to raise money for you to invest. The total amount of money the investment club has to invest is $5,000. Below there are six different stocks available for you to invest in. You must invest the entire $5,000 in a minimum of 4 different stocks.

You may invest in as little as 4 stocks or spread the money over all 6 stocks. You will fill out the chart below showing your investment decisions.

Stock Options

1. American Cellular, $7 per share

This is a new cellular company that features high-tech services such as phones that send streaming video. So far, the company has not made a profit but expects to do very well soon.

2. Big Box Stores, $25 per share

Big Box Stores is one of the leading discount retailers in the country. Same-store sales have increased steadily in each of the last five years.

3. Biotech Industries, $12 per share

Biotech Industries is a pharmaceutical company that specializes in developing cutting-edge drugs. It has some profitable products, but so far its profits are small.

4. General Grocery, $22 per share

This is a leading grocery store chain. Sales are generally steady and do not change much with the economy’s ups and downs. However, some experts predict that the growing trend toward eating out in restaurants will hurt future sales.

5. Giant Auto, $12 per share

Giant Auto is one of the three leading automobile manufacturers in the world. The company’s profits depend on economic conditions. Profits are high in times of strong economic growth and poor in bad times or recessions.

6. Gold Mining Group, $5 per share

GMG is a gold-mining company. The price of gold often rises in bad times or recessions and falls in good times.

Investment Chart

Company | Price Per Share | Number of Shares Purchased | Amount Invested

American Cellular | $7 | ___ | ___

Big Box Stores | $25 | ___ | ___

Biotech Industries | $12 | ___ | ___

General Grocery | $22 | ___ | ___

Giant Auto | $12 | ___ | ___

Gold Mining Group | $5 | ___ | ___

Total Investment | | | $5,000

Investment Value (Add last column. Must equal $5,000): ___

Paper For Above instruction

The objective of this assignment is to develop an understanding of investment principles, diversify investment portfolios, and apply decision-making strategies based on financial data and economic conditions. This exercise involves selecting appropriate stocks for investment, considering their respective prices, risks, and potential growth or decline, and calculating the optimal distribution of $5,000 across at least four stocks, with the goal of maximizing return while managing risk.

First, students should analyze each of the provided stock options, considering their price per share, industry outlook, and the relationship between economic conditions and company performance. The key aspect is to diversify the investment to minimize risks associated with individual stocks while striving for a profitable portfolio.

Investing $5,000 requires strategic allocation based on stock prices and the total number of shares purchased. For example, some stocks like Gold Mining Group are priced low at $5 per share, which allows for purchasing a larger number of shares with minimal capital, potentially balancing higher-priced stocks such as Big Box Stores or General Grocery.

Strategic diversification would involve selecting stocks from different sectors to mitigate sector-specific risks. For instance, a mix could include a high-growth potential stock like American Cellular, a stable utility or retail company like Big Box Stores or General Grocery, and a commodity like Gold Mining to hedge against economic downturns.

In practical terms, students should calculate the maximum shares they can purchase for each stock within their $5,000 budget, ensuring the total does not exceed or fall short of this amount. They should also verify that their portfolio involves at least four different stocks, as per the instructions.

The final step involves summing up the total investment and verifying it equals $5,000. The investment value of each stock can then be computed by multiplying the number of shares by current stock prices, facilitating an overall assessment of potential returns.

While this simulation is structured for educational purposes, it also underscores fundamental concepts of investing such as risk diversification, market analysis, and allocation decisions, which are vital skills for any emerging investor.

References

  • Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management (15th ed.). Cengage Learning.
  • Damodaran, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset (3rd ed.). Wiley.
  • Mock, E. A. (2004). Investments. Pearson.
  • Reilly, F. K., & Brown, K. C. (2012). Investment Analysis and Portfolio Management (10th ed.). Cengage Learning.
  • Sharpe, W. F., Alexander, G. J., & Bailey, J. V. (1999). Investments (6th ed.). Prentice Hall.
  • Elton, E. J., & Gruber, M. J. (2010). Modern Portfolio Theory and Investment Analysis (9th ed.). Wiley.
  • Fabozzi, F. J., & Markowitz, H. M. (2002). The Theory and Practice of Investment Management. Wiley.
  • Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7(1), 77-91.
  • Graham, B., & Dodd, D. L. (2008). Security Analysis: Principles and Technique. McGraw-Hill Education.
  • Chandan, J. S. (2018). Stock Market Investing for Dummies. Wiley.

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