Assignment A: Sources of Investment Information
Many investors, especially when they are starting out, cannot afford to hire professional managers or pay for expensive financial advice. Yet they need help as much as or more than those with greater means. Libraries subscribe to many financial publications and services and making this information available to the public. The purpose of this assignment is to acquaint you with some of the sources of investment information and advice available at the library and those available on the internet.
Use the following data sources to obtain information about each firm:
Complete the exercises below for one company with Value Line data available.
I. Do you feel that investors can use this data to make "economic profits"?
(Note: "economic profits" are the rate of return in excess of the opportunity costs for funds employed in projects of equal risk.) If so, what information can be used to result in "economic profits"? If you do not feel that this information will lead to "economic profits," then how can this information be used by rational investors?
II. Fill in the information required for each company in Table A1 (handout)
III. Internet Requirement
The internet is an alternative source of investment information.
As educated business professional your career or your investment decisions
may depend on your ability to obtain current data from the internet. Print
out some current price or financial data on one of the companies in this
assignment from an internet sites that has market data.
Assignment B: Ability to read a stock price
quote from The Wall Street Journal
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Name ______________________
The purpose of this assignment is to allow the student to become more aware of the different types of investment vehicles and their respective quotes as found in The Wall Street Journal, The Interactive WSJ and other internet sources. This is accomplished by answering the following questions regarding AT&T and a second company.
From The Wall Street Journal PUBLICATION DATE __________
Date of Closing Prices __________
DATA FOR AT&T DATA in blanks to the left and a second company ________________
1. _______________ _________________ Exchange listed on?
2. _______________ _________________ Ticker symbol?
3. _______ _______ ________ _________ Common stock's 52 week high and low?
4. _______________ _________________ Common stock's dividend yield?
5. _______________ _________________ Common Stock's P/E?
6. _______________ _________________ Common stock's closing price?
7. _______________ _________________ Common stock's previous day closing price?
8. _______________ _________________ Estimate of the latest annual EPS
9. _______________ _________________ Common stock's annual dividend payment?
10. _______________ _________________ Common stock's latest quarterly dividend?
Fixed Income Securities for AT&T only::
11. _______________ How many fixed income securities are reported?
12. _______________ What is the closing price of the bond maturing in 2005?
13. _______________ What is the current yield on the bond 8 5/8 31?
14. _______________ What is the stated interest rate on the bond maturing in 2025?
15. _______________ What year does the bond with the 7.0% coupon bond mature?
16. _______________ What does the s indicate in the bond quote 7s05?
17. _______________ Are AT&T's bonds selling at a premium or a discount ?
Treasury Securities
18. _______ ________ What is the ask price and asked yield on the 30 year Treasury bond?
19. __________ What is the coupon rate on the Treasury bond that matures in August of 2015?
20 ___________ What is the asked price of the 8% Treasury bond due in November of 2021?
New sources of information become available everyday in a variety of formats. The internet provides the electronic dissemination of information. As business professionals you will be challenged during your career to learn new processes and procedures without detailed instruction or direction.Using your favorite internet browser open a location with stock price data and search for the current price data for ATT and one of your favorite firms.
Print out a graph of each firm's price history or price data. Turn
in the graphs along with this answer sheet.
Assignment C: Prediction of the Level of the DJIA
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Name____________________________________________________
The purpose of this assignment is to provide the student with an understanding of the basic market indexes and to provide an opportunity for predicting the level of The Dow Jones Industrial Average (DJIA). The student will also become familiar with the various indexes reported by The Wall Street Journal.
1. Fill in the following blanks.
Date of WSJ Using _______________
a. _________ _________ _________ ________ Dow Jones Industrial Average (30 equities)
b. _________ _________ _________ ________ S&P 500 (500 stocks)
c. _________ _________ _________ ________ NASDAQ Composite Index (5,354 stocks)
d. _________ _________ _________ ________ DJ World Index (ex U.S.)
e. _________ _________ _________ ________ London (FT-100) (100 stocks)
f. _________ _________ _________ ________ Nikkei 225 Index (225 stocks)
g. _________ _________ _________ ________ NYSE Composite Index (3,104stocks)
h. _________ _________ _________ ________ S&P 400 MidCap 400 stocks
i. _________ _________ _________ ________ AMEX Index (787 stocks)
j. _________ _________ _________ ________ Value Line Average (geom.) 1,695 stock
k. _________ _________ _________ ________ Russell 2000 (2000 stocks)
l. __________ _________ _________ __________ in $ DJ Europe/Africa (ex South Africa)
m. ___________ _________ _________ ________ in $ DJ World [2200 securities]
n. ___________ _________ _________ ________ YTD %CHG Lehman Brother Long T-Bond
2. What is the name of the most comprehensive U.S. market index (NOT listed above) that includes firms trading on the NYSE and AMEX plus actively traded OTCstocks?_______________________________
3. The weighting of companies in the Standard and Poor's indexes is by ________________ while weighting by companies in the DJIA is by ________________.
4. What is the weighting scheme used to calculate the Value Line Composite Average?______________________
5. Is it possible to have a trading day where the Value Line Composite Average has increased and the DJIA has declined? ______ If yes, why can this occur? If no, why can this not occur? (Please respond on back.)
6. ___________ What is your prediction of the DJIA for August 5, 1999 ?
___________ What is your prediction of the 30-year Treasury Bond yield for August 5, 1999?
___________ What is your prediction of the DJIA for December 31, 1999 ?
___________ What is your prediction of the 30-year T-Bond yield for December 31, 1999?
7. Cite and briefly summarize (one paragraph) an article
from the current financial press that supports your predictions.
Provide citation for the article.
28-732 Assignment D Dr. Huffman Review of Financial Press Articles
Purpose: The purpose of this assignment is to provide an additional incentive for students to read the financial press. This is achieved by discussing two articles from the financial press.
Requirements:
1. Select and photocopy one current article from the financial press (copies are to be turned in).
Requirement: the topic of the articles chosen is to be a current investment topic that you find interesting. You may want to have an article will be used in your project.
2. Briefly explain why each article is interesting to you.
3. Write a brief summary of the articles (one paragraph each).
4. Answer the following questions for each article.
5. Be prepared to discuss the articles in class, either on the day that the assignment is due or on the day that the assignment is returned.
6. Submit answers to the above questions, photocopies of the articles, and citations for the articles. Citation examples are in the syllabus.
Write three essay questions from Chapters covered on the exam. Two questions are from the text material and the other question is from current events article that was discussed by the class.
Turn in the following for each question:
1. Question
2. Source of the question (Text, chapter and pages or article)
3. Concepts being tested
4. Brief outline of how the question should be answered
The purpose of this assignment is to provide some additional feedback on each student's term projects. Each student is required to read and critique the term paper of another student. The instructor will distribute term papers to critique in an area different from the student's own term paper. Thus, students will obtain additional investment information from reading a paper that is different from their own. The critique should include the following:
1. Brief description of the content.
2. Description abd listing of the strengths of the paper.
3. Areas of the paper that could be improved.
4. A brief description/outline of what you would of done differently.
5. What did you learn from reading the paper that you did not know prior to reading the paper?
Modern portfolio theory emphasizes using beta to measure the relevant risk of a firm and then find its expected or required return, but little is said about where to obtain beta values. The purpose of this project is to introduce you to sources of beta values that are generally available in your library and on the internet.
I. One source of beta values for individual companies is the Value Line Investment Survey. The internet provides a variety of sources of beta too e.g., example, http://nasdaq.com.. Either go to the library or to a web site that has beta values and find the most recent betas published by Value Line for one company in each of the following industries:
a. Drug
b. Electric Utility
c. Automobile Manufacturer
d. Clothing Manufacturer
e. Brokerage Firm
Note: If you don't know the names of any companies in these industries you should first consult Value Line's industry listings or a similar source.
II. When you have obtained the betas for each company, construct a Table that ranks the companies (include both company name and industry) their betas and note which of the listed industries are probably most risky, and which are probably least risky. (1= Low and 5 = high) Include a listing of the source of your beta values.
III. Now calculate a required rate of return for each company assuming an expected market rate of return of 12% and a risk-free rate of return as quoted for 30 year U.S. Treasury bonds at the time you do the assignment. Use CAPM, Expected Return = Risk-free rate + beta(Expected Return of Market less Risk-free Rate). You can find the current 30 year T-bond yield in TheWall Street Journal or the daily newspaper.) (1= Low and 5 = high)
A In the previously constructed Table rank each of the companies in terms of required return and compare this ranking to the rankings based on beta prepared earlier. Also, include required returns in the Table.
B. Repeat the above process assuming the expected market rate of return is negative 12%.
C. Describe and explain the resulting relationship between risk and return. Which industry has the most risk? Which industry has the least risk? Does the ranking of industries seem reasonable?
IV. In LearningSpace have a Team discussion in the CourseRoom about the industry betas.
A. How do your industry rankings compare to those in your TEAM?
B. What is the range for each industry in your TEAM?
C. What industry in your TEAM has the highest (lowest) risk?
V. Compare beta's for each of your companies found in Value Line
to those found on the internet? What are some reasons that the beta
values can be different?
VI. Complete the LearningSpace CourseRoom TEAM discussion for the industry with the highest beta.