Question

Question 1

Part a

Assume that you have $10,000 to invest. Using the internet, newspapers, investing chapter presentation materials or other sources for in

ion, select at least 2 investments, starting on any date between Jan 21 - Feb 1. You may pick any investment instruments you wish including GICs, stocks (equities), bonds, mutual funds, gold, foreign exchange futures, keeping the funds under your mattress, or any other legitimate investment as long as there are at least TWO different types. In other words, don't pick 2 stocks, 2 mutual funds, or 2 GICs. If you wish, you may also "buy" and "sell" during the period to change what investments you hold, but if you do, assume a $10 transaction fee and include the detail. This is a learning exercise, so grading is based on what you think happened and what you learned. You are NOT being graded on whether your investments made or lost money, rather on what you learned in the process.

Part b

1. What is your investing objective?

2. List your original investments, amount and date "bought", and your reasons as to why each was chosen.

3. Value of investments on March 25.  

4. How did your investments perform against your expectations and why do you think that happened?  

5. With what you've seen and learned in class, what investment strategy would you use in the future? Include your earlier answers to questions 1 and 2

Answer 1

1. The objective is to maximize profit for every per unit risk taken. Profit here is net return from investment minus the transaction cost incurred.

2. Since any two asset types are to be selected, we go with a stock and gold as the historic correlation between the stock market and gold has been negative thus providing diversification benefits.

Therefore portfolio on Jan 21, 2018: 30 stocks of Apple(AAPL) :30*$167.07 =$5012.1(Total cost incurred =5022.1 including transaction cost)

Rest amount i.e $4977.9-$10(transaction cost) is invested in Gold. (Considering Gold price $1333.74/oz we get 3.724 oz)

3.March 26,2018 Share value=$172.70* 30+ $0.63*30=5199.9 (Close Price:$172.7; Dividend: $0.63)

Value of Gold: $1353.15*3.724 = $5040.19

Total Value= $5040.19+$5199.9= $10240.09

4. From the above calculated total value, we can easily see that our portfolio is making a profit of nearly $240 and even if we reduce transaction related to selling we are making a profit of $220. Investment yielded positive result as the market was quite bullish during the given period.