Question: Final Assessment: Case Study Analysis | Deadline: 24 April 2021 at 11:55PM (ECT) FINA2004 Portfolio Management Semester 2, 2020-2021 Final Assessment Case Study Analysis (60%)
Final Assessment: Case Study Analysis | Deadline: 24 April 2021 at 11:55PM (ECT)
FINA2004 Portfolio Management
Semester 2, 2020-2021
Final Assessment Case Study Analysis (60%)
You are an Investment Manager for an asset management company, Big Rock Fund Management. Big Rock is a Caribbean based firm that offers a range of products and services which include brokerage services, registered retired savings plans, mutual funds, portfolio management and financial planning.
In your role, you have seen first-hand that investment decisions for your investor clients are largely driven by their personal goals, and the amount of risk they are willing to take. Factors such as the amount of time clients have set for achieving specific goals, are critical to determining the level of risk to be taken on in an effort to achieve these goals.
Not many clients like to hear the truth all investments have some elements of risk, and even doing nothing is also risky.
The Client
Your manager asked you to review the investment portfolio of Michelle Williams, a young woman in her mid-thirties. Ms. Williams is a long-standing customer of the company, but her investment needs have changed over the last few years. When she started her investment portfolio in 2011, she was still a student at university. She lived with her parents and was working a part-time job that helped to pay off her student loan. She put off updating her investment goals through the years and did not pay too much attention to her investment account.
However, she believes that given the following changes in recent years, its time to update her investment goals and objectives.
- 2011: Graduated from the University of the West Indies with an undergraduate degree in Accounting
- 2012: Landed a job as a Student Finance Officer at the local polytechnic
- 2012: Started the ACCA designation
- 2012: Moved into a one-bedroom apartment
- 2013: Paid off undergraduate student loan
- 2014: Purchased a car from a local dealership via a 7-year loan from the credit union
- 2015: Moved back home with her parents in an effort to save money
- 2016: Acquired land via a 10-year loan from the bank
- 2018: Completed the ACCA designation
- 2019: Gave birth to healthy twin boys
- 2021: Accepted a new position as Finance Manager at the local community college
- 2021: Applied for a mortgage to build a home
Even though she is a conservative investor, Michelle has $75,000 in savings that she is willing to invest with a time horizon of seven years.
Big Rock Fund Management
The company has identified the following stocks, bonds and cash investments which should be considered when creating portfolios.
| STOCKS | |||||
| COMPANY | INDUSTRY | CURRENT PRICE | EXPECTED RETURN (%) AFTER: | ||
| 1 YEAR | 3 YEARS | 5 YEARS | |||
| Collymore Rock Trust | Financial Services | 22.16 | 9.9 | 24.7 | 42.1 |
| Brimstone Technology | Telecommunications | 18.04 | 5.6 | 12.0 | 26.0 |
| Tunapuna Petroleum | Energy | 36.86 | 10.0 | 22.8 | 41.9 |
| Lethem Entertainment | Media/ Entertainment | 108.25 | 1.2 | 2.4 | 4.2 |
| Montego Realty | Real Estate | 40.92 | 6.5 | 20.4 | 40.0 |
| Hermitage Wholesale | Retail/ Wholesale | 31.77 | 7.5 | 25.5 | 33.8 |
| Bolands Bath and Body | Consumer Goods | 2.21 | 3.1 | 7.6 | 16.3 |
| Kingstown Software | Technology | 11.47 | 6.3 | 12.4 | 24.6 |
| Gouyave Energy | Utilities | 6.04 | 3.3 | 10.9 | 20.7 |
| Portsmouth Medical | Healthcare | 19.62 | 7.7 | 14.2 | 36.1 |
| Basse-Pointe Foods | Food & Beverages | 8.41 | 5.7 | 11.8 | 24.6 |
| Pinneys Products | Industrial Goods | 15.54 | 3.4 | 11.2 | 28.8 |
| Goat Point Logistics | Transportation | 19.75 | 5.8 | 12.2 | 24.5 |
| Hamilton Farms | Agriculture | 44.15 | 3.0 | 6.1 | 13.5 |
| Bouillante Vehicles | Automotive | 172.72 | 15.5 | 15.9 | 20.2 |
| BONDS | |||
| BOND/ ISSUER | COUPON | YIELD | MATURITY DATE (mmddyyyy) |
| Exuma Re | 5.7500% | 37.88% | 04/18/2025 |
| Labadie Life | 7.1250% | 23.33 | 10/27/2026 |
| Mount Scenery MD | 0.0693% | 5.04% | 06/06/2023 |
| Portsmouth XS | 3.3750% | 1.34% | 10/01/2022 |
| Long Bay Quota Share | 5.1550% | 5.16% | 10/22/2028 |
| Batibou Re | 4.0000% | 3.97% | 09/01/2025 |
| Couva Health | 4.6000% | 4.60% | 09/30/2034 |
| Martha Brae | 0.0693% | 5.04% | 06/06/2023 |
| Davy Hill Bank | 3.1250% | 2.78% | 01/09/2027 |
| Sandy Point ML | 1.0000% | 0.68% | 01/12/2024 |
| Gouyave AXXX | 2.2500% | 0.72% | 01/25/2023 |
| Buccoo ML | 7.6250% | 40.85% | 04/18/2037 |
| Argyle AXXX | 5.0200% | 0.48% | 12/04/2026 |
| Micoud MD | 4.6500% | 2.88% | 03/11/2030 |
| Belleplaine Re | 1.1600% | 0.93% | 11/07/2026 |
| CASH | ||||
| INSTITUTION | INVESTMENT TYPE | MINIMUM DEPOSIT | INTEREST RATE | MINIMUM PERIOD |
| Goat Point Finance | High Interest Savings | 10,000.00 | 7.5% | 3 years |
| Castara Bank | Savings Account | 100.00 | 0.10% | N/A |
| Pinneys Credit Union | Term (Fixed) Deposit | 5,000.00 | 3.5% | 1 year |
| Big Rock Fund | Money Market | 1,000.00 | 1% | 90 days |
Questions
1. Using the information above, create a portfolio for Michelle that consists of stocks, bonds and cash. [5 marks]
2. Outline your rationale for the composition of the portfolio by explaining:
- The strategy used to allocate assets;
- The factors that influenced your approach;
- The importance of asset allocation to Michelles situation. [25 marks]
3. Identify five risks that could impact the portfolio. Explain the nature of each risk (e.g. how the risk could come about) and the potential impact(s). [30 marks]
| FINA2004 - Final Assessment - 2020-2021 - UPDATED.pdf 19 April 2021, 7:48 PM |
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