Final Assignment

Student Name: Safura Aliyeva

Student Number: 8124
Course Name: MBF 301- Financial Investments
Professor Name: Ferran Herraiz
Deadline: Sunday 14TH NOVEMBER 2021, 23:59 CEST

Barcelona, 2021
COURSE CODE: MBF301 COURSE NAME: FINANCIAL INVESTMENT Task brief & rubrics
Task: Final Assignment

1/ Choose a Company belong to S&P 500, YEAR 2021 selecting real Ticker instruments in official websites. Using Financial Investment Theory
background calculate (20p):
a. Company value using different methodologies (5p)
b. Estimate P/E ratio Stock performance evolution during the past 10 years and Forecast Future Stock Price (5p).
c. Calculate the value of these stock using dividend Valuation Model and considering dividend growth 1% and Required rate of Return=
2,5% (10p),

2/ Make fictive investment in 3 different Treasury bonds during one year (from year ago until now) selecting real Ticker instruments in official
websites. Answer this question: (30 points)

a. Compare carefully these 3 Treasury bons performance that you choose before including some official pictures and ticker
portfolio/holdings (10 points)
b. Explain clearly what are the benefits and reasons for investing in a Bonds. (10 points)
c. Compare these 3 Treasury Bonds by 2 Agencies Classification in 2020 attempt to explain to investors the nature of the risk the investor
incurs when buying bonds. (10 points)

3/Make fictive investment in Mutual Funds and ETFs during one year (from year ago until now) selecting real Ticker instruments in official
websites. Answer this question (20p):
a. Compare carefully Mutual Funds and ETFs performance that you choose before including some official pictures and ticker
portfolio/holdings (10 points)

b. Explain clearly what are the benefits and reasons for investing in a Mutual Fund and ETFs. (10 points)

4/ Make 2 fictive investment Stock Portfolio in 3 companies (Portfolio 1 Allocation: X1 Tech Company= 40%, X2 Petrol Company=30%, X3 Tourist
Company=30% . Portfolio 2 Allocation: X1 Pharma Company = 50%, X2 Food Company=30%, X3 Bank Company=20%), from Jan 2010 to Jan
2021 selecting real Ticker instruments in official websites. Answer (30p):
a. Evaluate performance of individual investment ( stock by stock) in this period (10p).
b. Calculate Sharpe Ratio Optimal Portfolio -Consider Risk Free rate= 1%. What kind of Portfolio do you recommend and why? (20p).
Formalities:
 Individual
 Wordcount: Max two pages per each question
 Cover, Table of Contents, References and Appendix are excluded of the total wordcount.
 Font: Arial 12,5 pts.
 Text alignment: Justified.
 The in-text References and the Bibliography have to be in Harvard’s citation style.
Submission: Week 13 – Via email to ferran.herraiz@euruni.edu . Deadline for submission is Sunday 14TH NOVEMBER 2021, 23,59 CEST.

Weight: This task is a 100% of your total grade for this subject.

It assesses the following learning outcomes:

o To validate that you know the The Investment Environment

o To demonstrate that you manage Return and Risk big concepts.
o To be able to manage official Common Stocks sources, kpi´s and Stock Valuation.
o Managing and understanding Bond Valuation
o To demonstrate that you know how to manage Mutual Funds and ETF´s.
o To validate that you apply some Portfolio investment Theories, instruments and Excel Templates.
Rubrics

Exceptional 90-100 Good 80-89 Fair 70-79 Marginal fail 60-69

Knowledge & Student demonstrates Student demonstrates Student understands the Student understands the
Understanding excellent understanding good understanding of task and provides task and attempts to answer
(20%) of key concepts and uses the task and mentions minimum theory and/or the question but does not
vocabulary in an entirely some relevant concepts some use of vocabulary. mention key concepts or
appropriate manner. and demonstrates use of uses minimum amount of
the relevant vocabulary. relevant vocabulary.
Application Student applies fully Student applies mostly Student applies some Student applies little
(25%) relevant knowledge from relevant knowledge from relevant knowledge from relevant knowledge from
the topics delivered in the topics delivered in the topics delivered in the topics delivered in
class. class. class. Misunderstanding class. Misunderstands are
may be evident. evident.
Critical Thinking Student critically Student critically Student provides some Student makes little or
(35%) assesses in excellent assesses in good ways, insights but stays on the none critical thinking
ways, drawing drawing conclusions surface of the topic. insights, does not quote
outstanding conclusions from relevant authors and References may not be appropriate authors, and
from relevant authors. references. relevant. does not provide valid
sources.
Communication Student communicates Student communicates Student communicates Student communicates
(20%) their ideas extremely their ideas clearly and their ideas with some their ideas in a somewhat
clearly and concisely, concisely, respecting clarity and concision. It unclear and unconcise way.
respecting word count, word count, grammar and may be slightly over or Does not reach or does
grammar and spellcheck spellcheck under the wordcount exceed wordcount
limit. Some misspelling excessively and
errors may be evident. misspelling errors are
evident.
Answers:
Summary Table
Questio Major Conclusion (copy paste your major conclusion for each question here) Grade Stude
n (Point nt
s) Grade
1 20
a 1. Book Value 5

According to balance sheet, this year, total assets of Avnet Inc. is 8.93B U.S. dollars. And it
means book value of Avnet Inc. is 8.93 billion U.S dollars.

2. Discounted Cash Flows

Cost of Capital= 1%=0,01

Free Cash Flow= 40.59M

Formula: Discounted Cash Flow =Terminal Cash Flow / (1 + Cost of Capital) # of Years in
the Future

Calculation: = 40,59M/ (1+0,01)^1= 40,18811881

3. Market Capitalization

Share price of Avnet Inc. on 09.11.2021 date is $39.31 (previous close)

Avnet Inc. total number of shares is 99.22M

Formula: Market Capitalization = Share Price x Total Number of Shares

Calculation: 39.31x99.22=3,900,3382M U.S dollars

4. Enterprise Value

Avnet Inc. Balance Sheet (09.11.2021)

Source: https://www.wsj.com/market-data/quotes/AVT/financials

Cash=199.69M
Total debt= 1.51B
Total equity=4.08B

Formula: Enterprise Value = Debt + Equity – Cash

Calculation: 1.51B + 4.08B – 199.69M= -194.1

5. EBITDA

https://www.marketwatch.com/investing/stock/avt/financials

In 2020, according to income statement, annual EBITDA of Avnet Inc. was 464.23M
For this year, annual EBITDA is 554.5M.

6. Present Value of a Growing Perpetuity Formula

Cash Flow:

Source: https://www.marketwatch.com/investing/stock/avt/financials/cash-flow

The cost of capital is the cost of a company's funds (both debt and equity)
Total debt= 1.51B
Total equity=4.08B
Cost of capital= 1.51+4.08=5.59B

Growth Rate:

Source: https://www.zacks.com/stock/quote/AVT/detailed-estimates

Formula: Value of a Growing Perpetuity = Cash Flow / (Cost of Capital - Growth

Rate)

Calculation: 61.2 / (5.59B – 160.42%) = 61.2 / (5.59B – 1, 6042) = 57,2142

b This graph shows P/E ratio Stock performance of Avnet Inc. evolution during the 5
2011-2021 years.

Source: https://www.macrotrends.net/stocks/charts/AVT/avnet/pe-ratio
Source: https://www.nasdaq.com/market-activity/stocks/avt/revenue-eps

Source: https://ir.avnet.com/stock-information/historic-stock-lookup
 Formula:

P/E Ratio = Stock Price/EPS

Calculation: 38.99 / 1.93 = 20.20, it means that, P/E Ratio of Avnet Inc. is 20.20

c 1
0

Source: https://finance.yahoo.com/quote/AVT/
Formula:

Dividend growth 1% = 0.01

Required rate of Return 2,5% = 0.025

Calculation: 0.96 / (0.025 – 0.01) = 0.96/0.015 = 64

2 a 1 30
0

Source: https://www.marketwatch.com/investing/Bond/TMBMKES-10Y?
countryCode=BX

Source: https://www.marketwatch.com/investing/Bond/TMBMKIT-10Y?countryCode=BX
 Source: http://www.worldgovernmentbonds.com/bond-historical-data/united-kingdom/10-
years/

b What is a Bond? - A bond is a fixed-income security that represents a loan made to a 1

borrower by an investor. A bond can be regarded of as an I.O.U. between the lender and the 0
borrower that outlines the loan's terms and instalments. Bonds are used to finance projects
and operations by corporations, municipalities, states, and sovereign governments. Owners
of bonds are debt-holders, or creditors, of the issuer.

Investors buy bonds because:

 They give a steady stream of money. Bonds usually pay interest twice a
year.
 Bondholders receive their entire investment back if the bonds are held to
maturity, therefore bonds are a good way to save money while investing.
 Bonds can help to mitigate the risk of stock investments that are more
volatile.
Bonds can help you save money while still generating a regular return. Bond investments
provide consistent revenue streams from interest payments made before the maturity date.
Municipal bond interest is normally tax-free on a federal level, and it may also be tax-free on
a state and local level for citizens of the states where the bond is issued. These are all
benefits for investing in bonds.

Source: https://www.investor.gov/introduction-investing/investing-basics/investment-
products/bonds-or-fixed-income-products/bonds

Advantages and Disadvantages

Advantages:

-When the bond matures, you will get a predetermined rate of interest and your principle
will be refunded. You know exactly how much money you'll make.
-Bondholders are paid first over shareholders in the case of liquidation, in addition to
obtaining predetermined investment returns.
- The value of a bond can fluctuate depending on current interest and inflation rates, but
they are generally more stable than stocks.
- Bonds, unlike equities, are rated by credit rating agencies such as Standard & Poor's and
Moody's. Although this offers investors more confidence when choosing a bond, you should
still do your own research and due diligence before investing.

Disadvantages:

- While this provides greater security for investors, it also has a downside in that you forego
the larger potential gains that would be available if you invested in stock.
- While some bonds can be bought for as little as $1,000, others may demand greater
quantities, putting them out of reach for certain investors.
- Some bonds, such as those issued by the US Treasury and significant firms, are extremely
liquid, but bonds issued by a smaller, less financially solid company may be less liquid since
fewer individuals are prepared to buy them. Bonds with extremely high face values are also
less liquid since the pool of possible buyers is fewer.
- Bonds are more directly affected by interest rates than stocks. This may not be a problem if
you only plan on receiving interest payments and holding the bond until it matures.
Bondholders, on the other hand, are more vulnerable to interest rate risk.

Source: https://fifthperson.com/pros-cons-investing-bonds/
c 1
0

Source: https://countryeconomy.com/ratings

Source: https://countryeconomy.com/bonds

I would like to compare 3 Treasury Bonds by 2 Agencies Classification, which are

United Kingdom, Spain and Italy. The United Kingdom 10Y Government Bond has
a 0.922% yield. Central Bank Rate is 0.10% (last modification in March 2020). The
United Kingdom credit rating is AA, according to Standard & Poor's agency. Spain's
yields are lower than United Kingdom's. The Spain 10Y Government Bond has a
0.449% yield. The Spain credit rating is AA, according to Standard & Poor's agency.
According to Moody’s agency, Spain and UK bond ratings are Baa1 and Aa3
respectively.Baa1 credit rating means that, an obligor has adequate capacity to meet
its financial commitments. Negative economic conditions or shifting circumstances,
on the other hand, are more likely to result in the obligor's ability to satisfy its
financial obligations being diminished. The Italy 10Y Government Bond has a
0.953% yield. Central Bank Rate is 0.00% (last modification in March 2016). The Italy
credit rating is BBB, according to Standard & Poor's agency. BBB' ratings indicate
that expectations of default risk are currently low. Although the capacity to pay
financial obligations is considered adequate, poor business or economic situations
are more likely to erode it. According to Moody’s agency, Italy bond rating is Baa3
and obligations with a Baa3 rating have a moderate credit risk. They are classified
medium-grade, thus they can have some speculative qualities.
Interest rate risk is the most well known risk in the bond market. Bond prices and
interest rates have an inverse connection. When you purchase a bond, you agree to
receive a fixed rate of return (ROR) for a specific length of time.

Source: https://www.marketwatch.com/investing/Bond/TMBMKES-10Y?
countryCode=BX
Source: https://www.marketwatch.com/investing/Bond/TMBMKIT-10Y?
countryCode=BX
 Source: http://www.worldgovernmentbonds.com/bond-historical-data/united-
kingdom/10-years/

3 a Ticker: VENAX- Vanguard Energy Index Fund 1 20

0
Portfolio
Source: https://www.marketwatch.com/investing/fund/venax?mod=mw_quote_tab
Holdings:
Source:https://www.marketwatch.com/investing/fund/venax/holdings?
mod=mw_quote_tab

This low-cost index fund (Vanguard Energy Index) invests in the energy sector of the US
stock market, which includes equities of firms involved in the discovery and production of
energy goods like oil and natural gas. The fund's major risk is its limited investment horizon
—it only invests in energy stocks. The fund's high volatility should be expected by investors,
and it should only be used as a tiny part of a well-diversified portfolio. In 2020, the
minimum initial investment was $100.000. The fund’s expense ratio was 0.10 percent.
Ticker TDVG: T. Rowe Price Dividend Growth ETF
Portfolio
Source: https://www.marketwatch.com/investing/fund/tdvg
Holdings:
 Price T. Rowe Dividend Growth aims to provide investors with one of the most
important things in today's economy: current income. The fund has almost $20.87
billion in assets invested in 105 distinct holdings as of August 18, 2021. Its portfolio
is mostly comprised of dividend-paying stocks. In the last year, the fund has returned
32.72 percent, 17.51 percent in the last three years, 15.77 percent in the last five
years, and 14.62 percent in the last decade. The expense ratio of the T. Rowe Price
Dividend Growth Fund is 0.63 percent.
b The benefits and reasons for investing in Mutual Fund: 1
0
1. Diversification
Diversification is one of the most apparent benefits of mutual fund investing. It's the
technique of distributing a single investment across a variety of asset classes.
Diversification allows us to build a diverse portfolio that separates the various
sectors' headwinds. Money is invested in a variety of assets based on one's risk
tolerance. An equity-oriented mutual fund, for example, would invest 60-70 percent
in equities and 30-40 percent in debt instruments. As previously stated,
diversification reduces the risk associated with various asset classes. When an
underlying component of a mutual fund encounters market headwinds, this proves to
be advantageous. Diversification means that the risk associated with one asset class
is offset by the risk associated with the others. This manner, if a component of your
portfolio has a period of volatility, you don't lose the entire value of your investment.

2. Professional Management

Many investors lack the time or resources to undertake research and make
individual stock purchases. This is where professional management becomes quite
useful. Several people put their money into mutual funds because of the professional
advice they get. A fund manager keeps a close eye on investments and makes
adjustments to the portfolio as needed to accomplish the goals. One of the most
significant advantages of a mutual fund is its competent management.

3. Tax Benefits

The tax advantages connected with a specific type of mutual fund may be what
attracts the majority of investors to this investment vehicle. The Indian government
provides many tax perks to encourage mutual fund investing.

4. Highly Liquid

To satisfy one's financial needs, mutual funds can be simply sold. After the money is
liquidated, it is placed in your bank account within a few days. There are also mutual
funds that disburse money more quickly. They're referred to as funds with instant
redemption capability because the money is transferred to your bank the same day.

5. Higher Return on Investment

To beat inflation and build their long-term wealth, all investors seek a higher return
on investment by investing in financial instruments such as mutual funds. Because
mutual funds can invest in a wide range of sectors and businesses, they have a
better chance of producing high returns over time.

6. Well-regulated

The Securities and Exchange Board of India, which oversees India's capital markets,
regulates all mutual funds (SEBI). This means that all mutual fund houses are
expected to adhere to SEBI's different mandates. As a result, the investor's interests
are safeguarded. In addition, SEBI requires all mutual funds to publish their holdings
on a monthly basis.

7. Easy Investment

Investing in mutual funds is simple, and you may do so either online or offline. To
begin your investment adventure, all you have to do is go to the website of your
Asset Management Company (AMC) and submit the required paperwork. You can
also go to your AMC and sign the physical documentation in person to get started.
Mutual funds are a preferred investing option because of their ease of use.

Source: https://www.franklintempletonindia.com/investor/investor-education/video/
benefits-of-investing-in-mutual-funds-io04og32

The benefits and reasons for investing in ETFs:

1. Diversification

A single exchange-traded fund (ETF) can provide exposure to a group of stocks,

market segments, or styles. An ETF can follow a bigger variety of stocks or even try
to replicate the results of a country or a group of countries.

2. Trades like a Stock

Despite the fact that the ETF provides diversity, it lacks the trading liquidity of stock.
In particular:
-ETFs can be bought on leverage and sold on the open market.
- ETFs have a dynamic price that changes throughout the day. On the other hand,
the net asset value of an open-ended mutual fund is determined at the end of the
day.
- ETFs also give you the ability to manage risk by trading futures and options in the
same way that stocks do.

Because ETFs are traded like stocks, you may instantly look up the ETF's
approximate daily price change and compare it to its indexed sector or commodity
using its ticker symbol. Many stock websites have superior chart-manipulation
interfaces than commodities websites, and some even have apps for your mobile
devices.

Lower Fees

When compared to actively managed products, such as mutual funds, ETFs offer
substantially lower expense ratios. Management fees, shareholder accounting
expenditures at the fund level, service fees such as marketing, paying a board of
directors, and load fees for sale and distribution are all examples of these costs.

Immediately Reinvested Dividends

The dividends of the firms in an open-ended ETF are promptly reinvested, whereas
index mutual funds' reinvestment schedule can vary.

Limited Capital Gains Tax

ETFs can save you money on taxes compared to mutual funds. ETFs have smaller
capital gains than actively managed mutual funds since they are passively managed
portfolios.
In contrast, if a mutual fund manager sells shares for a profit, the manager is
required to distribute capital gains to shareholders. This taxable payout is calculated
based on the percentage of the holders' investment. If other mutual fund investors
sell before the record date, the surviving holders split the capital gain and
consequently pay taxes, even if the fund as a whole has lost value.

Lower Discount or Premium in Price

ETF share prices are less likely to be greater or lower than their true value. ETFs
 trade at a price that is near to the price of the underlying securities throughout the
day, so arbitrage will bring the price back in line if the price is much higher or lower
than the net asset value. ETFs, unlike closed-end index funds, trade on supply and
demand, with market makers profiting from price differences.
Source: https://www.investopedia.com/articles/exchangetradedfunds/11/advantages-
disadvantages-etfs.asp

4 a Each investor's evaluation of stock performance is unique. Every investor has 1 30

distinct standards for evaluating stock performance, just as each person has varied 0
risk appetites, diversification plans, and investment strategies. One investor may be
looking for a stock that is not correlated with the stock market as a whole, while
another may be looking to diversify his portfolio with a stock that is not correlated
with the stock market as a whole. The P/E ratio, which compares earnings per share
to the share price, is the most often used metric for evaluating stock performance.
P/E is computed by dividing the stock price by the earnings per share of the
company.
b 2
Portfolio 1 Allocation:
0
1. Marvell Technology - Stock Price History | MRVL - 40%
2. Marathon Petroleum - Stock Price History | MPC – 30%
3. Booking Holdings - 22 Year Stock Price History | BKNG – 30%
1.

Source: https://www.macrotrends.net/stocks/charts/MRVL/marvell-technology/stock-
price-history
2.

Source: https://www.macrotrends.net/stocks/charts/MPC/marathon-petroleum/stock-
price-history
3.

Source: https://www.macrotrends.net/stocks/charts/BKNG/booking-holdings/stock-
price-history
Sharpe Optimal Portfolio 1:

Portfolio 2 Allocation:

1. Royalty Pharma - 28 Year Stock Price History | RPRX – 50%

2. G Willi-Food, - 24 Year Stock Price History | WILC – 30%
3. Bank Of America - 35 Year Stock Price History | BAC – 20%

1.

Source: https://www.macrotrends.net/stocks/charts/RPRX/royalty-pharma/stock-price-
history
2.

Source: https://www.macrotrends.net/stocks/charts/WILC/g-willi-food,-/stock-price-
 history

3.

Source: https://www.macrotrends.net/stocks/charts/BAC/bank-of-america/stock-price-
history
 Sharpe Optimal Portfolio 2:

As a result of 2 Sharpe optimal portfolio, for the first Expected Portfolio Return I got
 0,217377 and for the second 0,136193.
In addition, Sharpe Ratio for 1st portfolio is 0,779461 and for 2nd is 0,259493.
It is clear from these results that the higher Sharpe Ratio’s measure, the better,
which is 1st Sharpe Optimal Portfolio.

Start here
Answer 1:
1- Explanation each question
Part a) I chose one of the biggest and popular company nowadays, which is Avnet Inc. Avnet, Inc., is a distributor of electronic
components headquartered in Phoenix, Arizona, named after Charles Avnet, who founded the company in 1921.
A company can be valued in a number of ways; Book value, Discounted Cash Flow, Market Capitalization, Enterprise Value, EBITDA
and Present Value of a Growing Perpetuity Formula. After reading Harvard Business Article, https://online.hbs.edu/blog/post/how-to-
value-a-company
I try to find information about Avnet Inc. Company from different sources such as from marketwatch.com etc. and to calculate these 6
methods.

2-Major Conclusion each question

1. Book Value

According to balance sheet, this year, total assets of Avnet Inc. is 8.93B U.S. dollars. And it means book value of Avnet Inc. is 8.93
billion U.S dollars.

2. Discounted Cash Flows

Cost of Capital= 1%=0,01

Free Cash Flow= 40.59M

Formula: Discounted Cash Flow =Terminal Cash Flow / (1 + Cost of Capital) # of Years in the Future

Calculation: = 40,59M/ (1+0,01)^1= 40,18811881

3. Market Capitalization

Share price of Avnet Inc. on 09.11.2021 date is $39.31 (previous close)

Avnet Inc. total number of shares is 99.22M

Formula: Market Capitalization = Share Price x Total Number of Shares

Calculation: 39.31x99.22=3,900,3382M U.S dollars

4. Enterprise Value

Avnet Inc. Balance Sheet (09.11.2021)

Source: https://www.wsj.com/market-data/quotes/AVT/financials

Cash=199.69M
Total debt= 1.51B
Total equity=4.08B

Formula: Enterprise Value = Debt + Equity – Cash

Calculation: 1.51B + 4.08B – 199.69M= -194.1

5. EBITDA

https://www.marketwatch.com/investing/stock/avt/financials

In 2020, according to income statement, annual EBITDA of Avnet Inc. was 464.23M
For this year, annual EBITDA is 554.5M.

6. Present Value of a Growing Perpetuity Formula

Cash Flow:

Source: https://www.marketwatch.com/investing/stock/avt/financials/cash-flow

The cost of capital is the cost of a company's funds (both debt and equity)
Total debt= 1.51B
Total equity=4.08B
Cost of capital= 1.51+4.08=5.59B

Growth Rate:
Source: https://www.zacks.com/stock/quote/AVT/detailed-estimates

Formula: Value of a Growing Perpetuity = Cash Flow / (Cost of Capital - Growth Rate)

Calculation: 61.2 / (5.59B – 160.42%) = 61.2 / (5.59B – 1, 6042) = 57,2142

Explanation each question

Part b) I looked for graph shows P/E ratio Stock performance of Avnet Inc. evolution during the 2011-2021 years from macrotrends.com
website. Then I had to calculate and find from formula P/E ratio of Avnet Inc. I used the formula from the given theory.

Major Conclusion each question

This graph shows P/E ratio Stock performance of Avnet Inc. evolution during the 2011-2021 years.

Source: https://www.macrotrends.net/stocks/charts/AVT/avnet/pe-ratio
Source: https://www.nasdaq.com/market-activity/stocks/avt/revenue-eps

Source: https://ir.avnet.com/stock-information/historic-stock-lookup
Formula:

P/E Ratio = Stock Price/EPS

Calculation: 38.99 / 1.93 = 20.20, it means that, P/E Ratio of Avnet Inc. is 20.20

Explanation each question

Part c) I calculate the value of these stock using dividend Valuation Model and considering dividend growth 1% and Required rate of
Return= 2,5%

Major Conclusion each question

Source: https://finance.yahoo.com/quote/AVT/
Formula:

Dividend growth 1% = 0.01

Required rate of Return 2,5% = 0.025

Calculation: 0.96 / (0.025 – 0.01) = 0.96/0.015 = 64

Answer 2:

Explanation each question

Part a) I include some official pictures and ticker portfolio of Government bonds.

Major Conclusion each question

Source: https://www.marketwatch.com/investing/Bond/TMBMKES-10Y?countryCode=BX

Source: https://www.marketwatch.com/investing/Bond/TMBMKIT-10Y?countryCode=BX
Source: http://www.worldgovernmentbonds.com/bond-historical-data/united-kingdom/10-years/

Explanation each question

Part b) this question is theoretical and I try to explain clearly

Major Conclusion each question

What is a Bond? - A bond is a fixed-income security that represents a loan made to a borrower by an investor. A bond can be
regarded of as an I.O.U. between the lender and the borrower that outlines the loan's terms and instalments. Bonds are used to finance
projects and operations by corporations, municipalities, states, and sovereign governments. Owners of bonds are debt-holders, or
creditors, of the issuer.

Investors buy bonds because:

 They give a steady stream of money. Bonds usually pay interest twice a year.
 Bondholders receive their entire investment back if the bonds are held to maturity, therefore bonds are a good way to
save money while investing.
 Bonds can help to mitigate the risk of stock investments that are more volatile.
Bonds can help you save money while still generating a regular return. Bond investments provide consistent revenue streams from
interest payments made before the maturity date. Municipal bond interest is normally tax-free on a federal level, and it may also be tax-
free on a state and local level for citizens of the states where the bond is issued. These are all benefits for investing in bonds.

Source: https://www.investor.gov/introduction-investing/investing-basics/investment-products/bonds-or-fixed-income-products/bonds

Advantages and Disadvantages

Advantages:

-When the bond matures, you will get a predetermined rate of interest and your principle will be refunded. You know exactly how much
money you'll make.
-Bondholders are paid first over shareholders in the case of liquidation, in addition to obtaining predetermined investment returns.
- The value of a bond can fluctuate depending on current interest and inflation rates, but they are generally more stable than stocks.
- Bonds, unlike equities, are rated by credit rating agencies such as Standard & Poor's and Moody's. Although this offers investors more
confidence when choosing a bond, you should still do your own research and due diligence before investing.

Disadvantages:

- While this provides greater security for investors, it also has a downside in that you forego the larger potential gains that would be
available if you invested in stock.
- While some bonds can be bought for as little as $1,000, others may demand greater quantities, putting them out of reach for certain
investors.
- Some bonds, such as those issued by the US Treasury and significant firms, are extremely liquid, but bonds issued by a smaller, less
financially solid company may be less liquid since fewer individuals are prepared to buy them. Bonds with extremely high face values
are also less liquid since the pool of possible buyers is fewer.
- Bonds are more directly affected by interest rates than stocks. This may not be a problem if you only plan on receiving interest
payments and holding the bond until it matures. Bondholders, on the other hand, are more vulnerable to interest rate risk.

Source: https://fifthperson.com/pros-cons-investing-bonds/

Explanation each question

Part c) I have chosen to compare 3 Treasury Bonds by 2 Agencies Classification, which are United Kingdom, Spain and Italy.

Major Conclusion each question

Source: https://countryeconomy.com/ratings

Source: https://countryeconomy.com/bonds

I would like to compare 3 Treasury Bonds by 2 Agencies Classification, which are United Kingdom, Spain and Italy. The United
Kingdom 10Y Government Bond has a 0.922% yield. Central Bank Rate is 0.10% (last modification in March 2020). The United
Kingdom credit rating is AA, according to Standard & Poor's agency. Spain's yields are lower than United Kingdom's. The Spain 10Y
Government Bond has a 0.449% yield. The Spain credit rating is AA, according to Standard & Poor's agency. According to Moody’s
agency, Spain and UK bond ratings are Baa1 and Aa3 respectively.Baa1 credit rating means that, an obligor has adequate capacity to
meet its financial commitments. Negative economic conditions or shifting circumstances, on the other hand, are more likely to result in
the obligor's ability to satisfy its financial obligations being diminished. The Italy 10Y Government Bond has a 0.953% yield. Central
Bank Rate is 0.00% (last modification in March 2016). The Italy credit rating is BBB, according to Standard & Poor's agency. BBB'
ratings indicate that expectations of default risk are currently low. Although the capacity to pay financial obligations is considered
adequate, poor business or economic situations are more likely to erode it. According to Moody’s agency, Italy bond rating is Baa3 and
obligations with a Baa3 rating have a moderate credit risk. They are classified medium-grade, thus they can have some speculative
qualities.
Interest rate risk is the most well known risk in the bond market. Bond prices and interest rates have an inverse connection. When you
purchase a bond, you agree to receive a fixed rate of return (ROR) for a specific length of time.

Source: https://www.marketwatch.com/investing/Bond/TMBMKES-10Y?countryCode=BX
Source: https://www.marketwatch.com/investing/Bond/TMBMKIT-10Y?countryCode=BX
Source: http://www.worldgovernmentbonds.com/bond-historical-data/united-kingdom/10-years/

Answer 3:

Explanation each question

Part a) I try to compare carefully Mutual Funds and ETFs performance and I added some official pictures and ticker portfolio/holdings.

Major Conclusion each question

Ticker: VENAX- Vanguard Energy Index Fund
Portfolio

Source: https://www.marketwatch.com/investing/fund/venax?mod=mw_quote_tab

Holdings:
 Source:https://www.marketwatch.com/investing/
fund/venax/holdings?mod=mw_quote_tab

This low-cost index fund (Vanguard Energy Index) invests in the energy sector of the US stock market, which includes equities of firms involved in
the discovery and production of energy goods like oil and natural gas. The fund's major risk is its limited investment horizon—it only invests in
energy stocks. The fund's high volatility should be expected by investors, and it should only be used as a tiny part of a well-diversified portfolio. In
2020, the minimum initial investment was $100.000. The fund’s expense ratio was 0.10 percent.
Ticker TDVG: T. Rowe Price Dividend Growth ETF
Portfolio
Source: https://www.marketwatch.com/investing/fund/tdvg
Holdings:

Price T. Rowe Dividend Growth aims to provide investors with one of the most important things in today's economy: current income.
The fund has almost $20.87 billion in assets invested in 105 distinct holdings as of August 18, 2021. Its portfolio is mostly comprised of
dividend-paying stocks. In the last year, the fund has returned 32.72 percent, 17.51 percent in the last three years, 15.77 percent in the
last five years, and 14.62 percent in the last decade. The expense ratio of the T. Rowe Price Dividend Growth Fund is 0.63 percent.
Explanation each question
Part b) this also question is theoretical and I try to explain clearly

Major Conclusion each question

The benefits and reasons for investing in Mutual Fund:

1. Diversification

Diversification is one of the most apparent benefits of mutual fund investing. It's the technique of distributing a single investment across
a variety of asset classes. Diversification allows us to build a diverse portfolio that separates the various sectors' headwinds. Money is
invested in a variety of assets based on one's risk tolerance. An equity-oriented mutual fund, for example, would invest 60-70 percent in
equities and 30-40 percent in debt instruments. As previously stated, diversification reduces the risk associated with various asset
classes. When an underlying component of a mutual fund encounters market headwinds, this proves to be advantageous.
Diversification means that the risk associated with one asset class is offset by the risk associated with the others. This manner, if a
component of your portfolio has a period of volatility, you don't lose the entire value of your investment.

2. Professional Management

Many investors lack the time or resources to undertake research and make individual stock purchases. This is where professional
management becomes quite useful. Several people put their money into mutual funds because of the professional advice they get. A
fund manager keeps a close eye on investments and makes adjustments to the portfolio as needed to accomplish the goals. One of the
most significant advantages of a mutual fund is its competent management.

3. Tax Benefits

The tax advantages connected with a specific type of mutual fund may be what attracts the majority of investors to this investment
vehicle. The Indian government provides many tax perks to encourage mutual fund investing.

4. Highly Liquid

To satisfy one's financial needs, mutual funds can be simply sold. After the money is liquidated, it is placed in your bank account within
a few days. There are also mutual funds that disburse money more quickly. They're referred to as funds with instant redemption
capability because the money is transferred to your bank the same day.

5. Higher Return on Investment

To beat inflation and build their long-term wealth, all investors seek a higher return on investment by investing in financial instruments
such as mutual funds. Because mutual funds can invest in a wide range of sectors and businesses, they have a better chance of
producing high returns over time.

6. Well-regulated

The Securities and Exchange Board of India, which oversees India's capital markets, regulates all mutual funds (SEBI). This means that
all mutual fund houses are expected to adhere to SEBI's different mandates. As a result, the investor's interests are safeguarded. In
addition, SEBI requires all mutual funds to publish their holdings on a monthly basis.

7. Easy Investment

Investing in mutual funds is simple, and you may do so either online or offline. To begin your investment adventure, all you have to do is
go to the website of your Asset Management Company (AMC) and submit the required paperwork. You can also go to your AMC and
sign the physical documentation in person to get started. Mutual funds are a preferred investing option because of their ease of use.

Source: https://www.franklintempletonindia.com/investor/investor-education/video/benefits-of-investing-in-mutual-funds-io04og32

The benefits and reasons for investing in ETFs:

1. Diversification

A single exchange-traded fund (ETF) can provide exposure to a group of stocks, market segments, or styles. An ETF can follow a bigger variety of
stocks or even try to replicate the results of a country or a group of countries.

2. Trades like a Stock

Despite the fact that the ETF provides diversity, it lacks the trading liquidity of stock. In particular:

-ETFs can be bought on leverage and sold on the open market.

- ETFs have a dynamic price that changes throughout the day. On the other hand, the net asset value of an open-ended mutual fund is determined
at the end of the day.
- ETFs also give you the ability to manage risk by trading futures and options in the same way that stocks do.
Because ETFs are traded like stocks, you may instantly look up the ETF's approximate daily price change and compare it to its indexed sector or
commodity using its ticker symbol. Many stock websites have superior chart-manipulation interfaces than commodities websites, and some even
have apps for your mobile devices.

Lower Fees

When compared to actively managed products, such as mutual funds, ETFs offer substantially lower expense ratios. Management fees, shareholder
accounting expenditures at the fund level, service fees such as marketing, paying a board of directors, and load fees for sale and distribution are all
examples of these costs.

Immediately Reinvested Dividends

The dividends of the firms in an open-ended ETF are promptly reinvested, whereas index mutual funds' reinvestment schedule can vary.

Limited Capital Gains Tax

ETFs can save you money on taxes compared to mutual funds. ETFs have smaller capital gains than actively managed mutual funds since they are
passively managed portfolios.
In contrast, if a mutual fund manager sells shares for a profit, the manager is required to distribute capital gains to shareholders. This taxable
payout is calculated based on the percentage of the holders' investment. If other mutual fund investors sell before the record date, the surviving
holders split the capital gain and consequently pay taxes, even if the fund as a whole has lost value.

Lower Discount or Premium in Price

ETF share prices are less likely to be greater or lower than their true value. ETFs trade at a price that is near to the price of the underlying securities
throughout the day, so arbitrage will bring the price back in line if the price is much higher or lower than the net asset value. ETFs, unlike closed-
end index funds, trade on supply and demand, with market makers profiting from price differences.
Source: https://www.investopedia.com/articles/exchangetradedfunds/11/advantages-disadvantages-etfs.asp

Answer 4

Explanation each question

Part a)
Each investor's evaluation of stock performance is unique. Every investor has distinct standards for evaluating stock performance, just
as each person has varied risk appetites, diversification plans, and investment strategies. One investor may be looking for a stock that
is not correlated with the stock market as a whole, while another may be looking to diversify his portfolio with a stock that is not
correlated with the stock market as a whole. The P/E ratio, which compares earnings per share to the share price, is the most often
used metric for evaluating stock performance. P/E is computed by dividing the stock price by the earnings per share of the company.
Major Conclusion each question

Explanation each question

Part b)

Major Conclusion each question

Portfolio 1 Allocation:

1. Marvell Technology - Stock Price History | MRVL - 40%

2. Marathon Petroleum - Stock Price History | MPC – 30%
3. Booking Holdings - 22 Year Stock Price History | BKNG – 30%

1.

Source: https://www.macrotrends.net/stocks/charts/MRVL/marvell-technology/stock-price-history
2.

Source: https://www.macrotrends.net/stocks/charts/MPC/marathon-petroleum/stock-price-history
3.

Source: https://www.macrotrends.net/stocks/charts/BKNG/booking-holdings/stock-price-history
Sharpe Optimal Portfolio 1:

Portfolio 2 Allocation:

1. Royalty Pharma - 28 Year Stock Price History | RPRX – 50%

2. G Willi-Food, - 24 Year Stock Price History | WILC – 30%
3. Bank Of America - 35 Year Stock Price History | BAC – 20%
1.

Source: https://www.macrotrends.net/stocks/charts/RPRX/royalty-pharma/stock-price-history
2.

Source: https://www.macrotrends.net/stocks/charts/WILC/g-willi-food,-/stock-price-history
3.

Source: https://www.macrotrends.net/stocks/charts/BAC/bank-of-america/stock-price-history
 Sharpe Optimal Portfolio 2:

As a result of 2 Sharpe optimal portfolio, for the first Expected Portfolio Return I got 0,217377 and for the second 0,136193.
In addition, Sharpe Ratio for 1st portfolio is 0,779461 and for 2nd is 0,259493.
It is clear from these results that the higher Sharpe Ratio’s measure, the better, which is 1 st Sharpe Optimal Portfolio.
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‌

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