FINANCE

12

byStudent’s name

Coursecode+name

Universityname

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PartOne: Risk Assessment

RiskTolerance Quiz located at Rutgers Extension

Thescore from this quiz is 31, and according to the ratings, it is aboveaverage tolerance for risk.

PartTwo: Investigating Different Investment Options

Mutualfund, corporate bond and stock.

Investingin Mutual Funds

Mutual Fund# 1 (2 points, 25per item)

Mutual Fund # 2 (2 points, 25 per item)

Fund Name Fund Family Symbol

American Funds

Fidelity Investments

Fund Objective

Growth of principal amount invested.

Capital appreciation

Net Asset Value

$74.64B

$ 106.84B

Type of Fund

(i.e. income, growth, index, international)

Type of Fund:

Growth

Type of Fund:

Growth, value

Fees

-Load? What kind &amp how much?

– Expense Ratio

Load Front load: 5.75%

Expense Ratio: 0.6%

Load: No figures available

Expense Ratio: 0.67%

Asset Allocation of the Fund/ Funds Five largest Holding

Stocks 95.95%

Cash 2.77%

Other 1.28%

Bonds 0.00%

Stocks 98.17%

Cash 1.02%

Bonds 0.10%

Preferred 0.71%

Other 0.00%

Minimum Initial Investment (i.e. $1000)

# of mutual fund shares you can purchase with $5000 (shares)

$50

# of mutual fund shares one can purchase with $5000,

100 Shares

$ 500

# of mutual fund shares one can purchase with $ 5000

10 shares

Return on the Fund (% YTD)

-0.85%

+5.53%

Sources:(Refer to the reference page)

Investingin Corporate Bonds:

Bond Investment Choice (2 points, 25 items

Bond Name

Goldman Sachs

Fitch Rating for this Bond

A

Coupon Rate

Coupon payment Frequency

Coupon Rate: 5.125

Coupon Payment Frequency: monthly

Maturity Date

15-Feb-2015

Face Value/Price of the Bond

$101.02

Callable (yes or no)

No

Current Yield?

Yield to Maturity?

5.073%

-3.694%

Company Fundamentals (ex. Is this a good company to invest in? How do you know?)

The company is good for investment as the bonds are highly rated.

Source:Goldman Sachs Group Inc. com (Refer to the reference page)

Investingin Stocks

Stock (2points, 25 per item)

Name Symbol (i.e. Vanguard Total Stock market, ETF (VTI)

Vanguard Total Stock market ETF

Category of Stock

Growth

Price (at what time/date?)

$107.47 3/13/15

52 Week High/low

$ 93.58- 109.78

Dividend Yield

1.71

Evaluating your stock:

P/E Ratio

Beta

EPS

P/E Ratio: 20

Beta: 1.02

EPS: 16.2

Where is the stock trading? i.e. NYSE or NASDAQ)

NYSE

Company Fundamentals (ex. Is this a good company to invest in? How do you know?

This company is good to invest in as its stocks’ rates are edging up at the NYSE, while its investment portfolio shows positive growth in line to market fundamentals.

Source:The Vanguard Group, Inc. Company Profile (Refer to the referencepage)

PartThree: Analyzing Your Investment Options

Risktaking is typical of an aggressive and go getter investor. Given thesum that I have saved over the years, it is imperative that goodinvestment decisions are analyzed and reached. After taking the risktolerance quiz, I think I am an aggressive risk taker who wants toexplore opportunities where others see risks. The rationale behindthis determination is that, investing in any platform, be it mutualfund, stock or bonds needs one to be a risk taker and if you rateyourself as a conservative or moderate then it is not easy to investor totally you may not invest at all. Entrepreneurs are aggressiverisk takers who see opportunities where others see only pitfalls.

Question2.

Afterresearching on all the available investment options, an analysis ofthe options is the best way to find the strengths and weaknesses ofeach of these choices.

Mutualfunds like the American Funds and Fidelity have one big strengththese funds are relatively stable and consistent in their yield. Thisyield is also high at around 5% with Fidelity Funds. The fact thatthey invest in stocks means that they can rip off big and the nexttime if the stocks’ value nose dives, then the yields may take abeating. The prices of their shares are a big weakness for they areslightly higher for an individual investor and are only favorable inmy view to institutional investor.

Secondly,corporate bonds are exciting. However, they do not offer stability ascompared to government bonds. The market forces may lead to a drop inprice or value of a company and this may affect the ability of acompany to pay off investors and lenders like those who have thesebonds. Their yield period is not very attractive, especially overlonger period like one. On the flipside, they are a good avenue toearn more compared to savings account in banks. Additionally, theiryield rate is high, and can mature in a short period compared tomutual funds. This makes it easy to have access to the investment.Stocks are good if the markets are enjoying a bullish run. However,this run does not last long and eventually the stock prices fallleading to decrease in yield. Their dividend yield is also lowcompared to mutual funds and corporate bonds. Stocks provide an easyaccess to funds and this may not be a long term investmentdestination as the market fundamentals will trigger one to offloadtheir shares so as to avoid further losses. An analysis of investmentoptions is relevant for it is from this analysis that soundinvestment decisions are arrived at (Epstein &amp Westbrook, 2012).Researching on available investment platforms is informative and thebest way to use one’s risk tolerance in a smart way.

Question3

Fromthis research, I would rate mutual funds the highest. This optiongives stability, good yields and aims at growing the amount invested.The diversity of investment portfolio is what makes this option morestable. I would wish to know if they are considering getting moreallocation for bonds, especially government bonds, for they are morestable than stocks.

Icould not rate the other investment options because of low yield andthey have not diversified their investment portfolio. Every investorgoes for the best yielding option and more secure (Epstein &ampWestbrook, 2012). From this outlook, corporate bonds and stocks donot yield as high as mutual funds. Personal risk tolerance helped meknow my risk tolerance level and more fundamentally in evaluating thebest way to analyze investment options

Bibliography

Epstein,M. J., &amp Westbrook, R. A., 2012. Linking actions to profits instrategic decision making. ImagePublication.

Sourcesin Screen Shorts

AmericanFunds 1.

AmericanFunds. 2

FidelityFund

FidelityFund

GoldmanSachs

Vanguard1

Vanguard2.