Investment Portfolio Implementation and Management Assignment

Investment Portfolio Implementation and Management Assignment

Deliverable Length: 400-600 words
Part 1
Clark Dale is one of the investment portfolio managers at ACG in charge of managing a $15 million Treasury bond portfolio account for a trust fund. He is considering the use of Treasury bond futures in an attempt to hedge the account portfolio. He consults with you with regard to the best plan of action for investment and portfolio management of this account. How would you counsel Clark?
1. Is a hedging strategy the best plan of action?
o Explain why you think Clark is considering this strategy.
o What is the relationship between bond prices and interest rate fluctuations?
2. Should he consider a long or short hedge strategy?
3. Explain your reasoning behind your suggestion. What will the return be?

Part 2
Deliverable Length: 1000-1200 words
Beth Anaheim is a 70-year-old retiree who has been referred to ACG by a current ACG client. Beth’s main investment objectives are safety of principal and current income. Her retirement income sources include social security, rental income from a commercial investment property managed by a professional property management firm, and a $500,000 investment portfolio consisting of several utility company stocks and corporate bonds. Beth is currently in the 30% combined federal and state marginal tax rate. Beth is considering an investment in one of the following bonds:
* DES Corporate Bond: A-Rated, 9% coupon rate, maturing in 7 years (recommended by a friend).
* FGR Municipal Bond: AAA-rated, 7% coupon, maturing in 7 years (recommended by her ACG investment advisor).
Using the taxable equivalent yield concept, you are to help the ACG advisor explain to Beth why the FGR bond investment could offer a higher yield and lower risk. Make sure that you present the information in as simple a manner as possible without leaving out any pertinent information.