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BUS ADM 452: Applied Portfolio Management


The following assignment is one part of the term project. This assignment is due on November 8, 2011.

Assignment: A Post-midterm Status Report of your Investment Portfolio.

You are asked to report the value and compute the percentage return of every investment you have made for the term-project portfolio up to Friday, 10/28/11. You can use the information from Stocktraks My Portfolio panels for your account at the market close on 10/28/11 to construct a table for this report. We will get to the details shortly. Take this opportunity to review the progress you have made in your portfolio and to get better understanding of the institutions that issue (or manage, in the case of mutual funds) the securities, the nature of the instruments you have been using (such as options, futures, and spots contracts) and the factors that affect the returns. Summarize your experience so far and make appropriate remarks on your portfolio. Use the closing prices of October 28, 2011 to do your portfolio evaluation as assigned below. You are asked to construct a table of ten columns (using the MS Excel Program or its equivalents) listing the following information for each security you have brought into your account. (1) (2) (3) (4) (5) (6) Name of the security Date of purchase (or of sale, if it is a short sale) Quantity (# shares, units, or contracts; in case of short sales, impose a negative sign) Per unit price Total cost ( [item (3) item (4)] + commission) Date of record (if the security remains in the portfolio as of 10/28/11, enter 10/28/11. If it has been sold, enter the date of sale. If it was originally sold short and the security has been bought back, enter the date of buy-back.) (7) Per unit price on the date of record (the closing price of 10/28/11; in case the security has been sold, enter the price at which the security was sold, or in case of short sales, the price at which the security was bought back.) (8) Value of the position ( item (7) item (3), minus commission if the position has been closed) (9) Profit (or loss) (item (8) item (5)) (10) Percentage return (item (9) / |item (5)|; i.e., for short sales, item (5) is flipped to positive sign.) If only one part of the security position has been closed, separate the closed portion from the portion that is still being held as of 10/28/11 and list them separately in the table. For example, assume that you initially purchased 500 shares of IBM stock on 9/26/11. But you sold 200 shares on 10/10/11 and keep the remaining 300 shares through 10/28/11, the reporting date. In this case, the original lot of 500 shares is divided into two smaller lots, one having 200 shares, the other 300 shares. Then report the two lots as if they were two separate purchases on 9/26/11, and prorate the commission cost. List the Ending Cash and Accrued Interest (click on MY PORTFOLIO heading, then Portfolio Summary, under caption Account Details- the former item listed as Cash Balance, while the latter listed as Accrued Interest Earned on Bonds), if any, as of 10/28/11, at the bottom rows of column (8) (Value of Position) of your table, with the label Ending Cash and Accrued Interest displayed on column (1) (security name) of the same bottom rows. Also indicate beneath (but separated from) the performance table the total value of your portfolio on 10/28/11 and the overall percentage return. The total value of your portfolio is the number listed next to the item name Portfolio Value in the same block as the two numbers mentioned above. The overall percentage return is the percentage profit (loss) relative to the beginning value of the account ($1,000,000). In other words, divide the ending portfolio value by $1,000,000, and subtract 1 from the ratio. An example of the performance table is attached to this assignment.

You are also asked to write an essay (3 to 4 pages, 1.5 spaces) on the following subjects: 1. Brief reasons for securities selection. 1

2. Your understanding of the general economy, financial markets, and the securities you have invested in. 3. Experience so far in doing the Stocktrak exercise. 4. What you plan to do for the remainder of the trading period ending on December 9, 2011. If you are a hedge fund manager (I am not a hedge fund manager), it is particularly important that you have a good grasp of the macro-economic conditions the global financial system is subject to. Review and rethink the big picture of financial markets and prepare the investment strategy for the remainder of the trading period. Additional Notes There are some issues that you may encounter in compiling your table assigned above. The following remarks may help you resolve them. 1. If you have cash dividend incomes (listed on the dates of distribution in your Transaction History), add a footnote to the item Ending Cash (at near the bottom row of the table described above) indicating briefly the source(s) of the dividend(s), and the amount from each source. Your Stocktrak account automatically lumps all of your cash dividends into the Cash Balance pool (i.e. our Ending Cash). 2. Report, in addition to cash dividends, the amounts of Interest Earned on Cash and Interest Charged on Loan, if any, in the footnote to Ending Cash described in the point #1 above; they are also lumped into the Ending Cash. The amounts of Interest Earned on Cash and Interest Charged on Loan are listed in the Account Details block in Stocktraks Portfolio Summary panel previously mentioned. 3. Portfolio Value = (Ending Cash + Market Value of Long Positions + Interest Earned on Bonds + Credit Balance) (Loan Balance + Market Value of Short Positions) 4. When you sell short, pose a negative sign on the quantity (of securities) column (i.e., column (3)) for the security. The remaining columns associated with this security are constructed algebraically the same way (using the same formula in the Excel program) as for long positions. Just let the negative quantity (of number of units) replace the usual positive quantity in a long position. 5. Per unit prices of foreign securities are quoted in their local currencies, but your payments (for the original purchase) and position values at subsequent dates of record are expressed in U.S. dollars. So the seeming discrepancies in the numbers are because of different currency units. 6. The charge posted for a bond in Stocktrak accounts Transaction History is the sum of the total value of the bond position, $10 commission, and the accrued interest. The true cost of the bond position is the total bond value, equal to per bond price times the number of bonds, plus $10 commission; that is, it should exclude the accrued interest. So in the table that you are asked to construct, just enter the true cost of the bond. Accrued interests of all of the bonds held in your Stocktrak account are swept into a separate item (pool) listed as Accrued Interest Earned on Bonds in the Account Details block. Please attach a copy of the following statements from your Stocktrak account recorded at the market closing of 10/28/11: (i) MY PORTFOLIO- Portfolio Summary (ii) MY PORTFOLIO - Transaction History, and (iii) MY PORTFOLIO- Open Positions all categories; do not miss anyone you

have positions in.