1200-1500

Part 1 Tasks

In general terms, discuss how the following should be taken into consideration when constructing an investment portfolio:

• Age
• Income
• Debt level and assets
• Marital status
• Parental status
• Risk tolerance
• Time horizon
• General economic conditions

Part 2 Tasks

Task 1

Discuss the efficient market hypotheses, and answer the following question:

• Does this hypothesis support active trading or buying a passive stock index fund?

Task 2

• Discuss several pieces of legislation that were enacted to protect against unethical investing practices.

Task 3

To illustrate your knowledge of portfolio construction, design a portfolio based on the following scenario:

• Robert and Susan Jenkins have inherited $200,000. They are aggressive investors with a joint annual income of $100,000, no debt, and an additional $500,000 in assets other than the $200,000 inheritance.

Design 2 separate $200,000 portfolios based on the following scenarios:

• The couple has 3 children between the ages of 9 and 17 years old, and they will use this money to pay for their college education.
• The couple will use the money to help fund retirement in 35 years.

When designing your portfolios, be sure to keep the following in mind:

• Each portfolio should contain at least 3 common stocks, 1 American Depositary Receipt (ADR) that you researched, and 3 bonds.
• Leaving a portion of the portfolio in cash is an option if you feel that is it appropriate.
• Charts and graphs should be used where appropriate.
• Portfolio models should be based on the Jenkins’ demographic profile and time horizon.

Be sure to include the following in your discussion:

• Reasons for your investment choices
• Stock and bond investment risk and return factors
• The security market line
• Beta and standard deviation
• Bond duration and interest rates