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FN 480 Unit 3 Assignment Investment Portfolios.........................




Question;Ready Razor is a small producer of shaving supplies in the United States. It has a defined-benefit pension plan. Consider the following facts (A-F), then answer the questions (1-5) that follow:A. The company?s balance sheet shows a low debt/equity ratio, and the company is currently profitable. Since shaving supplies are a consumer staple, the profitability of the company tends to remain stable regardless of the state of the economy.B. The average age of Ready Razor?s workforce is somewhat higher than average at 45 years old.C. Currently, the pension plan is fully funded, with $500 million in assets against $500 million in liabilities, using 6.5% as a discount rate to calculate the present value of the liabilities.D. The pension plan?s assets have averaged a 6.5% return in recent years, so that the company has not had to make contributions to the plan.E. The company has relatively few retired workers, with the pension fund currently paying out $10 million annually.F. The normal retirement age at the company is 65, but workers have the option of retiring at 60 and taking a smaller pension. When workers retire, they do have the option of taking their pension in one lump sum.1. Identify the letters (A-F) of the statements that would indicate a greater than average ability to take risk in the pension plan.2. Identify the letters (A-F) of the statements that would indicate a lower than average ability to take risk in the pension plan.3. State an appropriate risk objective for the plan. (Note that a risk tolerance level is not the same as a risk objective. See the examples in the text).4. State the return requirement for the plan. Give a specific percentage if possible.5. Identify one statement that shows a low liquidity need, and one statement that shows a potentially higher liquidity need. Explain these answers.Match the institutional investors/investment plans (A-E) to the statements (6-10) that follow. You can just type the matching letter after each statement.A. defined-benefit planB. defined-contribution planC. endowmentD. foundationE. life insurance6. Main investment issue is that sponsor must offer diversified investment options to participants.7. Most types are required to spend a certain percentage of assets each year toward charitable activities.8. Primary return objective is to maintain purchasing power in perpetuity while making stable distributions to specific programs.9. Promises to provide members with a specific level of retirement income.10. Risks, return objectives, and investment decisions are all largely dependent on interest rates.Review the following information:? The instructions for the course project that were attached to Unit 1.? The feedback that you received on the Unit 2 Assignment.? Exhibit 2-8 (starting on page 48) and Example 2-1 (starting on page 51).Using that information as well as the concepts you have learned in the course so far, write Part A, sections II, III, and IV of your investment policy statement for the course project. These items are copied below for your convenience. Remember to demonstrate that you understand the material in the text. You can type the information below as you do for other assignment questions.II. Return Objectives: Include both qualitative descriptions (explanations in words) and matching quantitative objectives (numbers with supporting math). Explain these objectives.III. Risk Tolerance: Discuss your willingness to take risk, and your ability to take risk. Include qualitative descriptions and the numerical risk measures we have learned about. List and explain specific factors that increase or decrease your risk tolerance.IV. Constraints: Discuss and explain your liquidity requirements, time horizon, tax concerns, and any other constraints or unique circumstances.Maginn, J., Tuttle, D., McLeavey, D., & Pinto, J. (2007). Managing investment portfolios: A dynamic process (3rd ed.). Hoboken, New Jersey: John Wiley & Sons.


Paper#48251 | Written in 18-Jul-2015

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