Question 1: Calculate the weighted average beta of the portfolio of stocks.
Question 2. Determine if and how the portfolio construction would change by using an alternative asset allocation strategy
QUESTION 1A with examples to reinforce your ideas.
Derivatives
Choose a publicly traded company, and discuss the use of derivatives as a means to manage risk and enhance returns. In your answer, discuss how options, forwards, and futures can be used to manage the risk of the selected company.
QUESTION 1B: Discuss the historical risk and return of various investments such as stock and bonds, precious metals and gems, real estate, and artwork in terms of the following:
• Asset return and total risk
• Return and systematic risk
• Return and unsystematic risk
Discuss the concept of investing including an explanation of various types of risk and return in the marketplace. To illustrate the development of a portfolio, construct a portfolio of investment securities by selecting 3 to 5 Fortune 500 stocks and 3 to 5 AAA rated corporate bonds. The goal is to diversify the portfolio as much as possible given the constraints on the number of securities used in this example. The criteria to be used include the investor demographics, asset allocation strategy and risk tolerance provided to each student individually by the instructor in the first week. Please list the characteristics provided along with your answer to the following:
Question 1. Calculate the weighted average beta of the portfolio of stocks.
Question 2. Determine if and how the portfolio construction would change by using an alternative asset allocation strategy.
Question 3. Assume your marital status has changed (i.e. if original single you are now married and if married you are now single), explain how this will impact your asset allocation, goals and the amount needed to invest for retirement?