The student will construct a well-diversified portfolio using an initial investm

Question

The student will construct a well-diversified portfolio using an initial investment stake of $50,000 (the portfolio should use 95% of the fund, but they may not use more than $50,000). The student may include stocks, common or preferred; bonds, corporate or U.S. Treasury bonds; mutual funds; and futures contract or options. The student will use the closing prices from the first day of the class to determine the price of each issue. Only whole lots of any issues may be acquired, that is no less than 100 shares of common or preferred stock; no less than 5 corporate bonds or $10,000 for U.S. Treasury Bonds; no fewer than the minimum required investment for any mutual fund; and no fewer than 5 contracts for any option or futures position. The settlement date will be the first day of Week 3. The student does not have to use all of the above mentioned securities, but they must use more than one class. Transaction costs are ignored in the creation of the portfolio.

Explanation / Answer

You're creating a portfolio using at least 95% of $50,000. The returns you earn depend on your investment decisions. Generally, more risky investments earn higher returns. Thus, stocks earn high returns than U.S. Treasury Bonds. The purpose of the exercise is for you to familiarize yourself with the various assets available for investment and dabble a bit, with imaginary money. Keep track of your progress (price changes, purchases and sales of your portfolio's assets, etc.), to submit for your assignment. It's fun! Try it! Good luck!

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