Course Description
COURSE NUMBER and NAME
UNITS
COURSE DESCRIPTION
REQUIRED TEXT
INSTRUCTIONAL METHOD
BUS 550 Financial Management
3
This course is an applied financial and managerial
accounting course. The course focuses on the principles
of financial and managerial accounting used to resolve
difficult strategic and operational decisions. The
objective of this course is to provide the decision
makers with financial and managerial accounting
theory, concepts, and tools necessary to make better
financial management decisions as well as enable the
student to make sound judgments regarding financial
analyses performed by others.
Ross, S. A., Westerfield, R. W., & Jordan, R. D.
(2019). Fundamentals of corporate finance (12th
ed.). McGraw-Hill
Print ISBN: 978-1259918957
eText ISBN: 978-1260153651
Hybrid
Summary of Graded Work and Assessments
Graded work and assessments offer students the opportunity to show the degree of mastery for
each CLO. The following table shows how assessments and CLOs align (link). See grading
criteria description and rubrics in the supplemental materials provided on GAP.
Course Policies and Rubrics
For Westcliff’s course policies and rubrics, please see the Course Policies document.
BUS 550 Syllabus
Course Learning Outcomes (CLOs) Linked to Program Outcomes
Learning outcomes are statements that describe significant and essential scholarship that students
achieve and can reliably demonstrate by the end of the course. Learning outcomes identify what
the learner will know and be able to do by the end of a course – the essential and enduring
knowledge, abilities (skills), and attitudes (values, dispositions) that constitute the integrated
learning needed for successful completion of this course. The learning outcomes for this course
summarize what students can expect to learn, and how this course is tied directly to the
educational outcomes of the degree.
Program Learning
Objectives
Course Learning Objectives (CLOs)
1. Recall accounting and finance vocabulary, terminology, charts,
tables, equations, and calculations.
2. Analyze and evaluate a Balance Sheet, Income Statement, and
Statement of Cash Flows.
3. Calculate and evaluate Present Value, Future Value, Net Present
Value, Internal Rate of Return (IRR), Profitability Index (PI), and
Coefficient of Variance (CV) as applied in capital investment
projects.
4. Evaluate short term versus long term investment decisions,
increasing shareholder values.
5. Compile technical and strategic investment principles.
6. Determine and evaluate the performance of a well-diversified
portfolio.
7. Distinguish and apply the principles of T-accounts, debits, and
credits.
2
1, 2, 3, 9
1, 2, 3, 6, 9
1, 2, 3, 6, 9
2, 6, 8
5, 1, 2, 6
4, 6, 7, 9
1, 2, 4, 6, 9
BUS 550 Syllabus
Modules
Course Learning
Outcomes (CLOs)
Course Modules
Module 1: Discussion Question
4
Module 2: Activity
1, 2, 5
Module 3: Discussion Question
1, 2, 5
Module 4: Professional Assignment #1
1, 2, 5
Module 5: Discussion Question
3, 4
Module 6: Activity
1, 2, 3, 4, 5,7
Module 8: Course Learning Assessment #1
1, 2, 3, 4, 5, 7
Module 10: Activity
1, 3, 4, 5, 6
Module 11: Discussion Question
1, 2, 3, 4, 5
Module 12: Professional Assignment #2
1, 2, 3, 4, 5, 6, 7
Module 13: Discussion Question
1, 2, 3, 4, 5, 6, 7
Module 8: Course Learning Assessment #2
1, 2, 3, 4, 5, 6, 7
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BUS 550 Syllabus
Detailed Course Outline
The following outline provides important assignment details for this course, module by module.
Students are responsible for all of the assignments given. Please refer to the Detailed Description
of Each Grading Criteria in the syllabus for specific information about each assignment.
Module 1
Assignments to complete this module:
● Reading:
o Chapter 1: Introduction to Corporate Finance
● Post DQ Initial Response by Thursday at 11:59 p.m.
● Post DQ Peer Response(s) by Sunday at 11:59 p.m.
Discussion Question
CLO #4 - Evaluate short term versus long term investment decisions, increasing shareholder
values.
Suppose you were the financial manager of a not-for-profit business (a not-for-profit hospital,
perhaps). What kinds of goals do you think would be appropriate?
4
BUS 550 Syllabus
Module 2
Assignments to complete this module:
● Reading:
● Chapter 2: Financial Statements, Taxes, and Cash Flows
● Activity: Highly recommended, not graded
Activity #1
CLO #1 - Recall accounting and finance vocabulary, terminology, charts, tables,
equations, and calculations.
CLO #2 - Analyze and evaluate a Balance Sheet, Income Statement, and Statement of
Cash Flows.
CLO #5 - Compile technical and strategic investment principles.
ABC Company had additional retained earnings for the current fiscal year just ended of
$395,000. The firm paid out $195,000 in cash dividend, and it has ending total equity of $5.3
million. The company currently has 170,000 shares of common stock outstanding. Please answer
the following questions:
a. What are earnings per share (E/PS)?
b. Dividends per share?
c. Book value of share?
d. If the stock currently sells for $64 per share, what is the market-to-book ratio?
e. The price to earnings ratio (P/E)?
f. The company had sales of $5.15 million, what is the price to sales ratio (P/S)?
g. Finally, explain the implication of P/E ratio for different types of investors.
Provide your explanations and definitions in detail and be precise. Comment on your findings.
Provide references for content when necessary. Provide your work in detail and explain in your
own words.
5
BUS 550 Syllabus
Module 3
Assignments to complete this module:
● Reading:
● Chapter 2: Financial Statements, Taxes, and Cash Flows
● Post DQ Initial Response by Thursday at 11:59 p.m.
● Post DQ Peer Response(s) by Sunday at 11:59 p.m.
Discussion Question
CLO #1 - Recall accounting and finance vocabulary, terminology, charts, tables, equations, and
calculations.
CLO #2 - Analyze and evaluate a Balance Sheet, Income Statement, and Statement of Cash
Flows.
CLO #5 - Compile technical and strategic investment principles.
In a 200-250-word response, please respond to the following scenario/questions:
Review the fictitious company Balance Sheet in Chapter 2: Table 2.1 in the textbook and
Income Statement in Chapter 2: Table 2.2 based on a fictitious company.
● What do you believe the significance of each of these is for financial management?
● Why did you answer the way you did?
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BUS 550 Syllabus
Module 4
Assignments to complete this module:
● Reading:
● Chapter 3: Working with Financial Statements
● Submit Professional Assignment #1 by Sunday at 11:59 p.m
Professional Assignment #1 - Please see the rubrics for grading criteria.
CLO #1 - Recall accounting and finance vocabulary, terminology, charts, tables, equations, and
calculations.
CLO #2 - Analyze and evaluate a Balance Sheet, Income Statement, and Statement of Cash
Flows.
CLO #5 - Compile technical and strategic investment principles.
Search Yahoo Finance and/or any other credible source(s) to find the most recent income
statement and balance sheet of a major corporation, then provide the following information:
1. Provide these statements in the appropriate format (financial statement)
2. Perform a vertical financial analysis incorporating
a. Debt ratio
b. Debt to equity ratio
c. Return on assets
d. Return on equity
e. Current ratio
f. Quick ratio
g. Inventory turnover
h. Days in inventory
i. Accounts receivable turnover
j. Accounts receivable cycle in days
k. Accounts payable turnover
l. Accounts payable cycle in days
m. Earnings per share (EPS)
n. Price to earnings ratio (P/E)
o. Cash conversion cycle (CCC), and
p. Working capital
q. Explain Dupont identity. Apply it to your selected company. Interpret the
components in Dupont identity.
Provide your explanations and definitions in detail and be precise. Comment on your findings.
Provide references for content when necessary. Provide your work in detail and explain in your
own words.
7
BUS 550 Syllabus
Module 5
Assignments to complete this module:
● Reading:
● Chapter 4: Long-Term Financial Planning and Growth (# of pages in chapter or
range of pages)
● Chapter 5: Introduction to Valuation, the Time Value of the Money (# of pages in
chapter or range of pages)
● Post DQ Initial Response by Thursday at 11:59 p.m.
● Post DQ Peer Response(s) by Sunday at 11:59 p.m.
Discussion Question
CLO #3 - Evaluate short term versus long term investment decisions, increasing shareholder
values.
CLO #4 - Evaluate short term versus long term investment decisions, increasing shareholder
values.
Review the Mini Case: The MBA Decision in your textbook on page 132. Then, answer the
following questions:
● How does Ben’s age affect his decision to get an MBA?
● What other, perhaps non-quantifiable, factors affect Ben’s decision to get an MBA?
● Assuming all salaries are paid at the end of each year, what is the best option for Ben—
from a strictly financial standpoint?
● Ben believes that the appropriate analysis is to calculate the future value of each option.
How would you evaluate this statement?
● What initial salary would Ben need to receive to make him indifferent between attending
Wilton University and staying in his current position?
● Suppose, instead of being able to pay cash for his MBA, Ben must borrow the money.
The current borrowing rate is 4.3 percent. How would this affect his decision?
8
BUS 550 Syllabus
Module 6
Assignments to complete this module:
● Reading:
● Chapter 6: Discounted Cash Flow Valuation
● Activity: Highly recommended, not graded
Activity #2
CLO #1 - Recall accounting and finance vocabulary, terminology, charts, tables,
equations, and calculations.
CLO #2 - Analyze and evaluate a Balance Sheet, Income Statement, and Statement of
Cash Flows.
CLO #3 -Calculate and evaluate Present Value, Future Value, Net Present Value, Internal
Rate of Return (IRR), Profitability Index (PI), and Coefficient of Variance (CV) as
applied in capital investment projects.
CLO #4 - Evaluate short term versus long term investment decisions, increasing
shareholder values.
CLO #5 - Compile technical and strategic investment principles.
CLO #7 - Distinguish and apply the principles of T-accounts, debits, and credits.
Part A:
By the end of this year, you will be 35-years old, and you want to plan for your retirement. You
wish to retire at the age of 65, and you expect to live 20 years after retirement. Upon retirement
you wish to have an annual sum of $50,000 to supplement your social security benefits.
Therefore, you opened your retirement account with a 7% annual interest rate. At retirement you
liquidate your account and use the funds to buy an investment grade bond which makes $50,000
annual coupon payments based on a 6 % coupon rate throughout your retirement years.
1. What is the face value, not the actual value, of the bond that you will be investing in?
2. Please calculate the monthly payment in your retirement account in order to be able to
achieve the plan mentioned above.
3. How much will your inheritors receive?
Now let us extend the problem so that you protect yourself against inflation.
Part B:
Suppose you think if you were to retire right now, you would have needed $50,000 each year to
supplement your social security and maintain your desired lifestyle. But because there is on
average 3% annual inflation, when you retire 30 years from now, you need more than $50,000
per year to maintain the lifestyle you like.
4. How much will be equivalent to $50,000 at retirement time when adjusted for inflation?
5. What will be the face value of the bond that yields the equivalent of $50,000, found in #4
of Part B in coupon payment?
9
BUS 550 Syllabus
6. How much annual payment in the retirement account is needed to accumulate the amount
needed to purchase the bond when retiring?
7. What is the purchase power of the amount that will be received by your inheritors,
measured in the current value of $ at the time of opening the retirement account?
(Hint: First calculate what the future value will be in 30 years, which is equivalent to $50,000
now and then solve the rest of the problem).
10
BUS 550 Syllabus
Module 7
Assignments to complete this module:
● Reading:
● Chapter 6: Discounted Cash Flow Valuation
● Chapter 9: Net Present Value and Other Investment Criteria
● Chapter 10: Making Capital Investment Decisions
Preparing for a Successful Course Learning Assessment 1
Review the Course Learning Assessment 1 prompt in Module 8 and begin drafting your
response. Be sure to submit your response by the given deadline.
11
BUS 550 Syllabus
Module 8
Assignments to complete this module:
● Reading:
● Chapter 11: Project Analysis and Evaluation
● Submit Course Learning Assessment #1 by Sunday at 11:59 p.m
Course Learning Assessment #1
CLO #1 - Recall accounting and finance vocabulary, terminology, charts, tables, equations, and
calculations.
CLO #2 - Analyze and evaluate a Balance Sheet, Income Statement, and Statement of Cash
Flows.
CLO #3 -Calculate and evaluate Present Value, Future Value, Net Present Value, Internal Rate
of Return (IRR), Profitability Index (PI), and Coefficient of Variance (CV) as applied in
capital investment projects.
CLO #4 - Evaluate short term versus long term investment decisions, increasing shareholder
values.
CLO #5 - Compile technical and strategic investment principles.
CLO #7 - Distinguish and apply the principles of T-accounts, debits, and credits.
Please note this CLA 1 assignment consists of two separate parts. The first part gives the cash
flows for two mutually exclusive projects and is not related to the second part. The second part is
a capital budgeting scenario.
Part 1
Please calculate the payback period, IRR, MIRR, NPV, and PI for the following two mutually
exclusive projects. The required rate of return is 15% and the target payback is 4 years. Explain
which project is preferable under each of the four capital budgeting methods mentioned above:
Table 1
Cash flows for two mutually exclusive projects
Year
Investment A
Investment B
0
-$5,000,000
-5,000,000
1
$1,500,000
$1,250,000
2
$1,500,000
$1,250,000
3
$1,500,000
$1,250,000
4
$1,500,000
$1,250,000
12
BUS 550 Syllabus
5
$1,500,000
$1,250,000
6
$1,500,000
$1,250,000
7
$2,000,000
$1,250,000
8
0
$1,600,000
Part 2
Please study the following capital budgeting project and then provide explanations for the
questions outlined below:
You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers
of fine zithers. The market for zithers is growing quickly. The company bought some land three
years ago for $2.1 million in anticipation of using it as a toxic waste dump site but has recently
hired another company to handle all toxic materials. Based on a recent appraisal, the company
believes it could sell the land for $2.3 million on an after-tax basis. In four years, the land could
be sold for $2.4 million after taxes. The company also hired a marketing firm to analyze the
zither market, at a cost of $125,000. An excerpt of the marketing report is as follows:
The zither industry will have a rapid expansion in the next four years. With the brand name
recognition that PUTZ brings to bear, we feel that the company will be able to sell 3,600, 4,300,
5,200, and 3,900 units each year for the next four years, respectively. Again, capitalizing on the
name recognition of PUTZ, we feel that a premium price of $750 can be charged for each zither.
Because zithers appear to be a fad, we feel at the end of the four-year period, sales should be
discontinued. PUTZ believes that fixed costs for the project will be $415,000 per year, and
variable costs are 15 percent of sales. The equipment necessary for production will cost $3.5
million and will be depreciated according to a three-year MACRS schedule. At the end of the
project, the equipment can be scrapped for $350,000. Net working capital of $125,000 will be
required immediately. PUTZ has a 38% tax rate, and the required rate of return on the project is
13%.
Now please provide detailed explanation for the following:
● Explain how you determine the initial cash flows
● Discuss the notion of sunk costs and identify the sunk cost in this project
● Verify how you determine the annual operating cash flows
● Explain how you determine the terminal cash flows at the end of the project’s life
● Calculate the NPV and IRR of the project and decide if the project is acceptable
● If the company that is implementing this project is a publicly traded company, explain
and justify how this project will impact the market price of the company’s stock
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BUS 550 Syllabus
Module 9
Assignments to complete this module:
● Reading:
● Chapter 6: Discounted Cash Flow Valuation
● Chapter 7: Interest Rates and Bond Valuation
● Chapter 8: Stock Valuation
● Chapter 9: Net Present Value and Other Investment Criteria
● Chapter 10: Making Capital Investment Decisions
Preparing for a Successful Professional Assignment 2
Review the Professional Assignment 2 prompt in Module 12 and begin drafting your response.
Be sure to submit your response by the given deadline.
14
BUS 550 Syllabus
Module 10
Assignments to complete this module:
● Reading:
● Chapter 11: Project Analysis and Evaluation
● Activity: Highly recommended, not graded
Activity #3
CLO #1 - Recall accounting and finance vocabulary, terminology, charts, tables,
equations, and calculations.
CLO #3 - Calculate and evaluate Present Value, Future Value, Net Present Value,
Internal Rate of Return (IRR), Profitability Index (PI), and Coefficient of Variance (CV)
as applied in capital investment projects.
CLO #4 - Evaluate short term versus long term investment decisions, increasing
shareholder values.
CLO #5 - Compile technical and strategic investment principles.
CLO #6 - Determine and evaluate the performance of a well-diversified portfolio.
This activity has two parts, please answer both.
1. Two bonds, A and B, have the same credit rating, the same par value, and the same
coupon rate. Bond A has 30 years to maturity and bond B has 5 years to maturity. Please
demonstrate your understanding of interest rate risk by answering the following questions
:
a. Discuss which bond will trade at a higher price in the market.
b. Discuss what happens to the market price of each bond if the interest rates in the
economy go up.
c. Which bond would have a higher percentage price change if interest rates go up?
d. Please substantiate your argument with numerical examples.
e. As a bond investor, if you expect a slowdown in the economy over the next 12
months, what would be your investment strategy?
2. Familiarity with random variables is essential to understand the basics of portfolio theory.
Given that the CLA 2 assignment is about portfolio formation, you need to strengthen
your skills in dealing with random variables. Please review and explain the significance
of basic concepts about random variables, namely, the mean, the variance, the standard
deviation, and the correlation.
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BUS 550 Syllabus
Module 11
Assignments to complete this module:
● Reading:
● Chapter 8: Stock Valuation
● Chapter 12: Some Lessons from Capital Market History
● Post DQ Initial Response by Thursday at 11:59 p.m.
● Post DQ Peer Response(s) by Sunday at 11:59 p.m.
Discussion Question
CLO #1 - Recall accounting and finance vocabulary, terminology, charts, tables, equations, and
calculations.
CLO #2 - Analyze and evaluate a Balance Sheet, Income Statement, and Statement of Cash
Flows.
CLO #3 - Calculate and evaluate Present Value, Future Value, Net Present Value, Internal Rate
of Return (IRR), Profitability Index (PI), and Coefficient of Variance (CV) as applied in
capital investment projects.
CLO #4 - Evaluate short term versus long term investment decisions, increasing shareholder
values.
CLO #5 - Compile technical and strategic investment principles.
● Compare and contrast the risk versus expected rate of return tradeoff, the security market
line, and determination of beta on this basis.
○ Include explanation of all the constituents, namely security market line, risk
measure, expected rate of return, risk-free rate of return, and market rate of return.
○ Include hypothetical examples for better clarity.
● What is the weighted average cost of capital (WACC) and its significance?
○ Can you think of two hypothetical examples for better clarity?
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BUS 550 Syllabus
Module 12
Assignments to complete this module:
● Reading:
● Chapter 13: Return, Risk, and the Security Market Line
● Chapter 14: Cost of Capital
● Submit Professional Assignment #2 by Sunday at 11:59 p.m
Professional Assignment #2 - Please see the rubrics for grading criteria.
CLO #1 - Recall accounting and finance vocabulary, terminology, charts, tables,
equations, and calculations.
CLO #2 - Analyze and evaluate a Balance Sheet, Income Statement, and Statement of
Cash Flows.
CLO #3 - Calculate and evaluate Present Value, Future Value, Net Present Value,
Internal Rate of Return (IRR), Profitability Index (PI), and Coefficient of Variance (CV)
as applied in capital investment projects.
CLO #4 - Evaluate short term versus long term investment decisions, increasing
shareholder values.
CLO #5 - Compile technical and strategic investment principles.
CLO #6 - Determine and evaluate the performance of a well-diversified portfolio.
CLO #7 - Distinguish and apply the principles of T-accounts, debits, and credits.
The PA 2 includes two parts: Part 1 about evaluating beta and WACC, and Part 2 is about data
acquisition in preparation of the CLA 2. You need to complete both parts in your 2 to 4 page,
APA-formatted report to demonstrate your comprehensive evaluation of the company's
opportunity cost as well as your skills in retrieving and organizing historical data on securities
for the purpose of portfolio formation.
1. Search Yahoo Finance, or any other credible source to retrieve the most recent income
statement and balance sheet for a major leveraged corporation.
a. Provide these statements in proper format and include a screenshot of the data.
b. Retrieve the data on the company’s historical data and calculate annual rate of
return by using adjusted closing prices for the past 20 years.
c. Using the data on the company's stock rate of return and the index’s rate of return,
estimate the beta of the corporation. Compare this value with the value stated by
the source.
d. Retrieve the risk-free rate of return as the annual interest rate of US treasuries.
Based on these values, estimate the expected annual rate of return of the
corporation’s security. Compare your estimate with the expected rate of return as
evaluated based on your data in part b.
e. Using the financial statements mentioned above, estimate the annual rate of
interest paid by the corporation (cost of debt).
i. Also, find the tax rate and capitalization ratio (proportions among equity
and debt). Using these values that you have found, estimate the annual
weighted cost of capital (WACC) of the corporation.
17
BUS 550 Syllabus
2. This part of the assignment is in preparation for CLA 2. Choose five (5) major securities
from different industries, one of which can be the one you chose in part 1 of the question.
a. Retrieve the data on the companies’ historical data and calculate annual rate of
return for the past 20 years for each security.
18
BUS 550 Syllabus
Module 13
Assignments to complete this module:
● Reading:
● Chapter 11: Project Analysis and Evaluation Chapter 13: Return, Risk, and the
Security Market Line
● Chapter 14: Cost of Capital
● Post DQ Initial Response by Thursday at 11:59 p.m.
● Post DQ Peer Response(s) by Sunday at 11:59 p.m.
Discussion Question
CLO #1 - Recall accounting and finance vocabulary, terminology, charts, tables, equations, and
calculations.
CLO #2 - Analyze and evaluate a Balance Sheet, Income Statement, and Statement of Cash
Flows.
CLO #3 - Calculate and evaluate Present Value, Future Value, Net Present Value, Internal Rate
of Return (IRR), Profitability Index (PI), and Coefficient of Variance (CV) as applied in
capital investment projects.
CLO #4 - Evaluate short term versus long term investment decisions, increasing shareholder
values.
CLO #5 - Compile technical and strategic investment principles.
CLO #6 - Determine and evaluate the performance of a well-diversified portfolio.
CLO #7 - Distinguish and apply the principles of T-accounts, debits, and credits.
ABC Company has hired you to explain the criteria for assessing the performance of a security,
namely expected rate of return, standard deviation of rate of return, and coefficient of variation
(CV). Also, they want you to show how by forming a portfolio, an instrument can be generated
that has properties better than each of its constituents in terms of the standard deviation of rate of
return and CV. How would you explain and show this information to ABC Company?
19
BUS 550 Syllabus
Module 14
Assignments to complete this module:
● Submit Quiz by Sunday at 11:59 p.m
Quiz - Please see the rubrics for grading criteria.
The quiz can be accessed in GAP. The quiz will open on Monday and will close on Sunday at
11:59 p.m. You will have one (1) attempt to complete the quiz. Please see Grading Criteria for
Examinations and Quizzes in the University Policies.
20
BUS 550 Syllabus
Module 15
Assignments to complete this module:
● Post DQ Initial Response by Thursday at 11:59 p.m.
● Post DQ Peer Response(s) by Sunday at 11:59 p.m.
Discussion Question – Summary & Critical Thinking – Week/Course Learning Outcomes
In this discussion question you have the opportunity to be creative and to relate what you have
learned to your professional lives. Please explore and critically think about some of the learning
outcomes and concepts presented in this course. Please effectively communicate how you would
lead an organization (or a group of people within the organization) by applying the knowledge
you have learned ethically and responsibly. Your discussion should also include innovative
thinking, and information-technology aspects (such as the Internet, social-media, computers, and
so forth) that may assist you in decision-making. You may frame your discussion around any
functional component of business, and in any context; problem-solving, management, leadership,
organizational behavior, and so forth.
21
BUS 550 Syllabus
Module 16
Assignments to complete this module:
● Reading:
● Review all chapters covered that will assist in the completion of the CLA 2
assignment
● Submit Course Learning Assessment #2 by Sunday at 11:59 p.m.
Course Learning Assessment #2 - Please see the rubrics for grading criteria.
CLO #1 - Recall accounting and finance vocabulary, terminology, charts, tables, equations, and
calculations.
CLO #3 - Calculate and evaluate Present Value, Future Value, Net Present Value, Internal Rate
of Return (IRR), Profitability Index (PI), and Coefficient of Variance (CV) as applied in
capital investment projects.
CLO #4 - Evaluate short term versus long term investment decisions, increasing shareholder
values.
CLO #5 - Compile technical and strategic investment principles.
CLO #6 - Determine and evaluate the performance of a well-diversified portfolio.
CLO #7 - Distinguish and apply the principles of T-accounts, debits, and credits.
This is a complete written report of your portfolio formation in a Word file. Your historical data
and relevant derived values in tables can be pasted from your previous calculations in the Excel
file. Please provide explanations of all calculations and the justifications in Word format. Also,
make sure to paste all underlying Excel formulae that you used for calculations in the Word file.
1. Provide once again the data that you presented in answering part 2 of Professional
Assignment 2.
2. Calculate the mean, variance, and the standard deviation of each security’s annual rate of
return.
3. Calculate the correlation coefficient between every possible pair of securities’ annual
rates of return.
4. Choose percentages of your initial investment that you want to allocate amongst the five
(5) securities (weights in the portfolio).
a. Create embedded formulae which generate statistical properties of the portfolio
upon insertion of the weights.
b. Observe the mean, the standard deviation, and the CV of the annual rate of return
of the portfolio.
5. Find the combination of the weights that minimizes CV of the portfolio.
a. How does the CV of the optimal portfolio compare with the CVs of its
constituents?
b. What is the expected rate of return and standard deviation of the rate of return of
the portfolio?
6. Choose different values within the range of the standard deviation of the portfolio, and
for each chosen value, locate the corresponding point on the efficient frontier by finding
the weights that maximize the expected rate of return of the portfolio.
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BUS 550 Syllabus
a. Subsequently, construct the efficient frontier of your portfolio.
7. Assume that you initially invested $1,000,000 in the portfolio and that the distribution of
the annual rate of return of the portfolio is normal.
a. What is the distribution of the return of the portfolio 20 years after its formation?
b. Provide the graph of the distribution of the return of the portfolio.
Provide your explanations and definitions in detail and be precise. Comment on your findings.
Provide references for content when necessary.
23