...Building Global Portfolios Apollo D. Lupescu, PhD, Vice President This information is provided for registered investment advisors and institutional investors, and is not intended for public use. Dimensional Fund Advisors is an investment advisor registered with the Securities and Exchange Commission. Consider the investment objectives, risks, and charges and expenses of the Dimensional funds carefully before investing. For this and other information about the Dimensional funds, please read the prospectus carefully before investing. Prospectuses are available by calling Dimensional Fund Advisors collect at (512) 306-7400 or at www.dimensional.com. Dimensional funds are distributed by DFA Securities LLC. Dimensional Funds COMPONENT STRATEGIES US Large Company US Large Cap Equity Enhanced US Large Company International Large Cap Emerging Markets US Large Cap Value International Value Emerging Markets Value World ex US Value World ex US Targeted Value US Large Cap Growth International Large Cap Growth US Small Cap US Micro Cap International Small Company Emerging Markets Small Cap US Small Cap Value US Targeted Value International Small Cap Value US Small Cap Growth International Small Cap Growth As of August 31, 2013 CORE EQUITY STRATEGIES US Core Equity 1 US Core Equity 2 US Vector Equity International Core Equity International Vector Equity Emerging Markets Core Equity World ex US Core Equity SPECIALIZED CORE EQUITY STRATEGIES ...
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... asset management B. long-term solvency C. short-term solvency D. profitability E. market value 4. What is the future value of the following cash flows at the end of year 3 if the interest rate is 7.25%? The cash flows occur at the end of each year. A. $8,758.04 B. $8,806.39 C. $10,073.99 D. $10,314.00 E. $10,804.36 \ 5. The possibility that more than one discount rate will make the NPV of an investment equal to zero is called the _____ problem. A. net present value profiling B. operational ambiguity C. mutually exclusive investment decision D. issues of scale E. multiple rates of return 6. The Liberty Co. is considering two projects. Project A consists of building a wholesale book outlet on lot #169 of the Englewood Retail Center. Project B consists of building a sit-down restaurant on lot #169 of the Englewood Retail Center. When trying to decide whether to build the book outlet or the restaurant, management should rely most heavily on the analysis results from the _____ method of analysis. A. profitability index B. internal rate of return C. payback D. net present value E. accounting rate of return 7. A project which is designed to...
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...An investor’s portfolio is simply their collection of investment assets. Once the portfolio is established, it is updated by selling existing securities using the proceeds to buy new securities, by investing additional funds to increase the overall size of the portfolio, or by selling securities to decrease the size of the portfolio. Investment assets can be categorized into broad asset classes, such as stocks, bonds, real estate, commodities, and so on. Investors make two types of decisions in constructing their portfolios. The asset allocation decision is the choice among these broad asset classes, while security selection decision is the choice of which particular securities to hold within each asset class. You may choose to invest your savings in safe assets, risky assets or a combination of both. It is important to invest in order to be able to retire in the distant future. The earlier you start investing and the more you invest the more money you will have to be able to retire. Since social security is not a guarantee for many of us in the future, it is now more important than ever to invest and to know how and where to invest your money. There are many of other ways to invest money other than common stock. Since this is the only type Judd knows of, the investment class would be a very good choice for him. Another way to invest your money is bonds. A bond is a security issued by a borrower that obligates the issuer to make specified payment to the holder over...
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... D C C C 11 12 13 14 15 C B B D B 16 17 18 19 20 D D D B B D 9 5 A 10 Question 1 (60 points): 1. Real assets in the economy include all but which one of the following? A. Land B. Buildings C. Consumer durables D. Common stock 2. ____ is not a derivative security. A. A share of common stock B. A call option C. A futures contract D. All of the above are derivative securities. 3. Active trading in markets and competition among securities analysts helps ensure that __________. I. security prices approach informational efficiency II. riskier securities are priced to offer higher potential returns III. investors are unlikely to be able to consistently find under- or overvalued securities A. I only B. I and II only C. II and III only D. I, II and III 4. The material wealth of society is determined by the economy's _________, which is a function of the economy's _________. A. investment bankers, financial assets B. investment bankers, real assets C. productive capacity, financial assets D. productive capacity, real assets 5. Asset allocation refers to the _________. A. allocation of the investment portfolio across broad asset classes B. analysis of the value of securities C. choice of specific assets within each asset class D. none of the answers define asset allocation 6. An investor in a T-bill earns interest by _________. A. receiving interest payments every...
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...Energy Portfolio management (Like Financial Portfolio management) is the Key to solving today’s and the future’s energy issues….. by Doug Story I believe it has been determined and accepted by almost everyone in the financial management industry and by those of us that invest or have our jobs supply financial instruments such as IRAs, Roth IRAs, 401Ks, etc for our retirement that it is imperative that our financial portfolio be diversified in such a manner that when part of the portfolio drops in value other parts of the portfolio will climb so that we may maintain, protect and continue to grow our funds in preparation for retirement. For example, why was the ENRON collapse such a disaster to most of the employees at ENRON? ENRON management had put pressure on everyone in the company retirement program to put all of their retirement savings into ENRON stock, so when the stock collapsed from its record highs these employees lost everything. If many of the employees at ENRON had invested in a diversified portfolio most of the money they placed in their retirement accounts may have been protected from the collapse of the ENRON stock. What does “Diversified Retirement or Stock Portfolio” mean? Simply put it means having a retirement account that is spread out over a range of stocks, bonds, cash and even precious metals. If the stock market goes down, in theory the bonds and precious metals will stabilize or go up at a rate that equals or reduces the losses due to the stock...
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...Financial Markets Table of Contents Introduction 1 Overall Canadian Economy 1 Equity Market Analysis: 2 Bond Market 3 Money Market 4 Portfolio Allocation 5 Risk Analysis 5 Appendix 1: 6 Appendix 2: 6 Appendix 3: 9 Introduction The objective of this paper is to determine how market institutional portfolio managers should properly allocate their funds amongst the different financial markets. We will focus only on the Canadian money, bond and stock markets over the following year until the second quarter of 2014. Following a top-down approach, we will first discuss the strengths and weaknesses of the overall Canadian economy. We will then perform a similar analysis of the 3 financial markets and will conclude by choosing an appropriate asset allocation and determining the return and risk forecasts of the portfolio. Overall Canadian Economy According to the Bank of Canada, the Canadian economy is experiencing material slack, heightened competitive pressures in the retail sector and slower increases in regulated prices, resulting in a total and core CPI inflation of 1.2% in the second quarter of 2013. As the economy returns to full capacity, inflation is projected to rise gradually to 1.8% by the second quarter of 2014 (refer to appendix 1). The Bank of Canada also mentions that the exchange rate of the CAD is expected to remain at around USD$0.98 over the following year. This constant exchange rate will not cause any change in the competitiveness...
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...Chapter 01 Investments: Background and Issues Multiple Choice Questions 1. Financial assets represent _____ of total assets of U.S. households. A. over 60% B. over 90% C. under 10% D. about 30% 2. Real assets in the economy include all but which one of the following? A. Land B. Buildings C. Consumer durables D. Common stock 3. Net worth represents _____ of the liabilities and net worth of commercial banks. A. about 50% B. about 90% C. about 10% D. about 30% 4. According to the Flow of Funds Accounts of the United States, the largest single asset of U.S. households is ___. A. mutual fund shares B. real estate C. pension reserves D. corporate equity 5. According to the Flow of Funds Accounts of the United States, the largest liability of U.S. households is ________. A. mortgages B. consumer credit C. bank loans D. gambling debts 6. ____ is not a derivative security. A. A share of common stock B. A call option C. A futures contract D. All of the above are derivative securities. 7. According to the Flow of Funds Accounts of the United States, the largest financial asset of U.S. households is ____. A. mutual fund shares B. corporate equity C. pension reserves D. personal trusts 8. Active trading in markets and competition among securities analysts helps ensure that __________. I. security prices approach informational efficiency II. riskier securities are priced to offer higher...
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................................................................................................... 4 1.1.1: Low risk ............................................................................................................................ 4 1.1.2: Mid risk ............................................................................................................................. 5 1.1.3: High risk ........................................................................................................................... 5 1.2 Evaluate a range of investments available from banks, building societies, insurance companies and national savings. ..................................................................................................... 7 1.2.1: Bank .................................................................................................................................. 7 1.2.1: Building society ................................................................................................................ 8 1.2.3: National savings. ............................................................................................................... 9 1.2.4: Insurance company ......................................................................................................... 11 1.3 Analyze the suitability of these products for different...
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...importance of nominal bonds in investment portfolios, and in the design and execution of fiscal and monetary policy, financial economists and macroeconomists need to understand the determinants of nominal bond risks. This is particularly challenging because the risk characteristics of nominal bonds are not stable over time. In this paper the authors ask how monetary policy has contributed to these changes in bond risks. They propose a model that integrates the building blocks of a New Keynesian model into an asset pricing framework in which risk and consequently risk premia can vary in response to macroeconomic conditions. The model is calibrated to US data between 1960 and 2011, a period in which macroeconomic conditions, monetary policy, and bond risks have experienced significant changes. Findings show that two elements of monetary policy have been especially important drivers of bond risks during the last half century. First, a strong reaction of monetary policy to inflation shocks increases both the beta of nominal bonds and the volatility of nominal bond returns. Positive inflation shocks depress bond prices, while the increase in the Fed funds rate depresses output and stock prices. Second, an accommodating monetary policy that smooths nominal interest rates over time implies that positive shocks to long-term target inflation cause real interest rates to fall, driving up output and equity prices, and nominal long-term interest rates to increase, decreasing bond prices. The paper...
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...and risk tolerance and evaluate my comfort zone in taking risk. However, as I have 1 millions dollars (money paper) to invest, so I have intention to buy high beta stocks with high risk. In this case, I will choose the stock with beta above 1 (riskier than the market). Before you buy stock in a company, you need to do a little light – reading and doing research. Investing in stock without checking out the company beforehand is a recipe for disaster. In this case, I will do a research online like Yahoo Finance, MSN Money, Investor Guide and The Street to find the most volatile stocks with high risk and high return. Investing in volatile stocks is like riding a roller coaster. When the market is on a roll, taking on more risk in your portfolio can have big rewards, but you will have stomach to deal with potential losses. I chose to buy 2,000 shares of Netflix with a market price $91.84 and the beta is 1.32. Netflix is an amazing success story both in entertainment industry and stock investment. Within 3 years, the company stock price has been increasing from $20 a share to over $100 a shares. Investing in Netflix either I can get a lot of money return or lost a lot of money. I also research for most traded stock on Wall Street Survivor to see which popular investing company is. Amazon, Microsoft, Apple and Ford Motor are most traded stock on market. Then I can narrow down the type of stocks and figure out which company has more potential gain. Stock chart is also really...
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...School of Banking and Finance FINS 2624 Portfolio Management Course Outline Semester 2, 2012 Part A: Course-Specific Information Part B: Key Policies, Student Responsibilities and Support Table of Contents 0 PART A: COURSE-SPECIFIC INFORMATION 1 2 2.1 2.2 2.3 2.4 2.5 3 STAFF CONTACT DETAILS COURSE DETAILS Teaching Times and Locations Units of Credit Summary of Course Course Aims and Relationship to Other Courses Student Learning Outcomes LEARNING AND TEACHING ACTIVITIES 1 1 1 1 1 1 2 2 3 3 4 4 4 5 6 6 5 6 7 1 2 2.1 2.2 2.3 2.4 2.5 3 4 COURSE RESOURCES COURSE EVALUATION AND DEVELOPMENT COURSE SCHEDULE ACADEMIC HONESTY AND PLAGIARISM STUDENT RESPONSIBILITIES AND CONDUCT Workload Attendance General Conduct and Behaviour Occupational Health and Safety KeepingInformed SPECIAL CONSIDERATION AND SUPPLEMENTARY EXAMINATIONS STUDENT RESOURCES AND SUPPORT 7 7 8 1 1 1 1 1 2 2 2 2 4 3.1 Approach to Learning and Teaching in the Course 3.2 Learning Activities and Teaching Strategies 4 ASSESSMENT 4.1 Formal Requirements 4.2 Assessment Details 4.3 Late Submission PART B: KEY POLICIES, STUDENT RESPONSIBILITIES AND SUPPORT PART A: COURSE-SPECIFIC INFORMATION 1 STAFF CONTACT DETAILS Lecturer-in-charge: Joakim Bang Room 311 Phone No: 9385 55484 Mobile: 04 0870 7830 (please keep it roughly within office hours) Email: j.bang@unsw.edu.au Consultation Times: Mondays 15:00 to 17:00, ASB 311. That's in my office in the west wing of the ASB building. Please use the intercom to get in. Other...
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...factor is the return on the broad market index such as S&P 500. This market return is one of the factors in the model. Other factors include the following: • GDP growth rate. This factors shows overall macroeconomic conditions that tend to affect a stock’s performance. • Risk free rate of return. • 10 year T-bond interest rate that shows the required return on 10-year government bonds. • A company’s ROE as an indicator of its profitability. Therefore, the model will look like this: [pic], where betas show the sensitivity of return to the factor, rm is the market rate of return, rf is the risk-free rate, T-bond is the 10-year T-Bond rate and ROE is the return on equity (ROE). Generally, GDP has a positive effect on a stock return. Higher economic growth leads to more business opportunities and potentially higher profits. This positively affects a stock’s return. Market rate of return has a positive effect assuming a positive beta. Risk-free rate has a negative impact on a stock’s performance. Higher rate leads to lower return on a company’s stock. The same effect comes from 10-year T-Bond rate. Higher rate leads to lower expected return on a stock. A company’s ROE has a...
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...PC=c(1+y1) +c(1+y2)2+ c+FV(1+y3)3 140.51=20(1+0.05) +20(1+0.06)2+ 20+100(1+y3)3 Y3=5% PD=FV(1+y4)4 85.48=100(1+y4)2 Y4=4% 2) PE=c(1+y1) +c+FV(1+y2)2 FV=100 C=25 PE=25(1+0.05) +25+100(1+0.06)2=135.06 Build a replicating portfolio because arbitrage opportunity only available when selling bonds E and buying a replicating portfolio. So XA CF1A+XB CF1B=CF1c, XA*100+XB*10=25 XA CF2A+XB CF2B=CF2C, XA+0+XB*110=125 XA=0.1364 XB=1.1364 Arbitrage profit is 136-135.06=0.94 In conclusion, the arbitrage profit is $0.94 when building replicating portfolio whih consist of buying 0.1364 bond A and 1.1364 bond B. 3) P=c(1+y1) +c+FV(1+y2)2 105.6=10(1+y1) +10+100(1+y2)2 123.86=20(1+y1) +20+100(1+y2)2 (1+y2)2= 120123.86-20(1+y1) So, 105.6=10(1+y1) +10+100120123.86-20(1+y1) Y1=4.98% 123.86=20(1+0.0498) +20+100(1+y2)2 Y2=7% 4) FV=100 Coupon rate=10% A, if 1 year. CF1=C1+P1 CF1=C1+10+100(1+1Y2)2 Finally, we do not know 1Y2 so that we can’t make sure at what price need to sell the bind. This will lead the customer to liquidity risk. B, if 3 years. Cause is a 2 years bond. CF1=10*(1+1Y3)2+110*(1+2Y3) The investor will face reinvestment risk when they don’t not what rate their cahs flow will reinvested because the question have 2 unknow rate which is 1Y3 and 2Y3. 5) Suppose we have spot rate Ys ,Yt(t>s) and forward...
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...uance proces Participan in Govern ss; nts nment bond markets; Co onstituent SG accounts; GL Concept of P Primary dealers, Satellite dealers; Se e econdary markets for Gov vernment bonds; Settlem ment of trades in G G-Secs; Clea aring corpora ation; Negoti iated Dealing System; Liq g quidity Adjus stment Facilit ty (LAF). vernment Se ecurities: Tr reasury Bills s Central Gov Issuance pro ocess; Cut-O yields; Inv Off vestors in T-B Bills; Second dary market a activity in T-b bills. State Gover rnment Bon nds Gross fiscal deficit of sta Governm ents and its financing; Vo ate olume, Coup rates and ownership pon d pattern of St tate Governm ment bonds. Call Money Markets Participants in the call markets; Call rates m Debt: Bonds s Corporate D Market segm ments; Issue process; Iss managem sue ment and Book building; Terms of a debenture iss d sue; Credit rating g. Commercia Paper & Certificate of Deposits al C f Guidelines fo CP Issue; Rating notc or ches for CPs; Growth in th CP marke Stamp du Certificat of ; he et; uty; tes deposit. Repos Calculating settlement am mounts in Re transactio epo ons; Advanta ages of Repo Recent os; Repo rate; C issues in rep market in India; Secon po ndary market transactions in Repos; R t Repo accoun nting. Bond Marke Indices an Benchma et nd arks I-Bex: Sover reign bond in...
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...equal to the sum of _________. A. all financial assets B. all real assets C. all financial and real assets D. all physical assets E. none of the above Financial assets do not directly contribute the productive capacity of the economy. 13. _______ are financial assets. A. Bonds B. Machines C. Stocks D. A and C E. A, B and C Machines are real assets; stocks and bonds are financial assets. Difficulty: Easy 14. An example of a derivative security is ______. A. a common share of General Motors B. a call option on Mobil stock C. a commodity futures contract D. B and C E. A and B The values of B and C are derived from that of an underlying financial asset; the value of A is based on the value of the firm only. 17. An example of a primitive security is __________. A. a common share of General Motors B. a call option on Mobil stock C. a call option on a stock of a firm based in a Third World country D. a U.S. government bond E. A and D A primitive security's return is based only upon the earning power of the issuing agency, such as stock in General Motors and the U.S. government. Difficulty: Easy 19. _________ financial asset(s). A. Buildings are B. Land is a C. Derivatives are D. U.S. Agency bonds are E. C and D A and B are real assets. Difficulty: Easy 20. The value of a derivative security _______. A. depends on the value of the related primitive security B. can only cause increased risk. C. is unrelated to the value of the related primitive security D. has...
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