E Summit Street
Kent, Ohio 44240

February 1, 2007

Ms. Alex Sharpe
Rhodes Rd
Columbus, Ohio 43201

Dear Ms. Shape:

I’m writing to give you some recommendations on your investment strategy on behalf of the College of Business Administration of Kent State University.

From the information that you provided to us, I found that you want to pursue a more active investment strategy by adding stocks to your current equity portfolio in the Vanguard 500 Index Fund. And you are interested in the Hasbro and Reynolds. So I have done some analysis on the possible combination of these stocks.

First, I did a summary statistics of the three assets base on the latest five years’ worth of monthly returns for Vanguard S&P 500 Index Fund, R.J. Reynolds and Hasbro. Among those return data, the Vanguard has a maximum return of 34.46% and a minimum return of -10.14. The Reynolds has a maximum return of 112.49 and a minimum return of -31.48. The Hasbro has a maximum return of 71.03 and a minimum return of -15.36. The result turns out that the Reynolds has the highest average return as 1.87% with a highest stand-alone risk measured by the standard deviation which is 8.116, while the Vanguard has the lowest average return as 0.57% with a lowest standard deviation 3.602 which means the lowest stand-alone risk. The sum of the five years’ returns for Vanguard is 34.46%, 112.49% for Reynolds, and 71.03% for Hasbro. So we can see that Reynolds has higher return together with a higher risk than Hasbro. And the increase amount of return is more significant than the increase amount of the risk.

The correlations of either two of these three assets are all positively related. And the correlation between Hasbro and Vanguard is higher than the correlation between Reynolds and Vanguard, which means that under the circumstance that if Vanguard’s return increased, both Reynolds and