Reference no: EM132936093
Your Aunty Catherine has some savings which she wants to invest in shares. She has asked for your advice because she knows you are doing a financial management unit in your university degree. Aunty thinks you are brilliant! She wants to invest all her savings in shares of the company which she has selected. She asked you to some research and give her your views and recommendations accordingly (choose a listed company on Australian Stock Exchange (ASX) as per Appendix - selected share's name to be furnished to lecturer prior to the commencement of assignment). Your Aunty is ignorant on what and how to invest. You also know that investing in only one asset can be risky. You will need to explain this to Aunty. Your advice and explanations to her should cover:
Problem 1. Possible macro-economic (country) and industry factors and risks of her (share) selection. Top down approach views and recommendations.
Problem 2. Firm specific factors and risks that may be associated with the performance of her (share) selection. Bottom up views and opinion of the firm and management etc.
Problem 3. Indicate the historical and the expected return of her selection (try to distinguish between capital and yield or dividends components, if possible)
Problem 4. What is the past trend of prices (3, 5 or 10 years) of the selection?
Problem 5. Is your selection volatile over the period? Indicate the high-low price variation for the selection over the period. Is the stock also adequately liquid?
Problem 6. Explain the concept of diversification to Aunty. [In doing so, you should also explain using examples and refer to relevant charts or graphs to illustrate your point. Quote your sources of reference. You can use recent news releases about the company from Internet.
Problem 7. Indicate to Aunty she can also invest in other asset classes; you need to tell her the other alternatives.
Problem 8. Beta Coefficient is the measure of a share's volatility relative to the overall market. Indicate the selection's Beta. Briefly explain to your Aunty what it means and give an example, assuming the expected market return is forecast to fall by 10% in the coming year. Explain to her what is the volatility index (VIX) of a stock market.
Problem 9. Make your recommendations or views accordingly on the selected stock. (Note there is no right or wrong answer - just your supporting arguments thereof.)
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