Assignment Paper

INV-711: INVESTMENTS
Final Project
Overview
You are required at the end of the course to submit a final project in the form of a paper in which you
assume the role of an investment manager investing for your clients’ funds in stock and foreign
currencies, futures, options, oil, gold, silver, and other commodities based on profit sharing. For this final
research project, you are required to research the foreign currencies and select two foreign currencies as
soon as possible after initial consultations with your mentor regarding what directions to pursue. You may
use Yahoo Finance at http://finance.yahoo.com to find stocks or foreign currencies. Or you can use
Bloomberg at (http://bloomberg.com/markets/currencies) for finding the major world currencies or news
about the stocks, currencies, and economies.
Guidelines
You are required to research the foreign currencies and select two foreign currencies to invest in for the
account of one of your clients who has given you $20,000.
Use $20,000 of your client’s account in the two foreign currencies which you have selected to invest in
based on a margin of 2% which gives you a high leverage (50 to 1), meaning you can invest up to
$1,000,000 or 50 times of your client’s balance either in currency spot market or currency futures. To
keep things simple, use the currency spot market and you are recommended to choose two hard
currencies such as the Euro, British Pound, Japanese Yen, Canadian Dollar, Australian Dollar, New
Zealand Dollar, or Swiss Franc. The following are some more requirements for research project:
1. You may take a long or short position in each foreign currency or long position in one or short
position on the other.
2. Justify your investment decisions based on a trend (uptrend or downtrend) analysis.
3. Justify your investment positions based on the relative inflation rate between two nations. For
example, if the inflation rate is higher in the United States relative to the Euro Zone, all else equal,
the Dollar would depreciate against the Euro.
4. Justify your investment positions based on the expected relative inflation rate between two
nations. For example, if the inflation rate is expected to be higher in the United States relative to
the Britain, all else equal, the Dollar would depreciate against the British Pound.
5. Justify your investment position based on the relative interest rate between two nations. For
instance, if the Australian banks pay higher interest rate than the U.S. banks, investors or
speculators would move their funds, all else equal or all other variables stay the same, to
Australia to take advantage of the higher interest rate.
6. Similarly, you may justify your investment decisions based on expected interest rate between the
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two nations. For example, when Investors expect higher interest rate in Canada, they would
invest in Canadian denominated assets that, in turn, would cause the Canadian Dollar to
appreciate, all other variables held fixed, .
7. You may justify your investment decisions based on some other macroeconomic or fundamental
analysis such as the unemployment rate, Gross Domestic Products, Trade Balance, and Capital
Flows that you have learned from the textbook or some other outside materials.
8. Select the two currencies in your portfolio which have negative correlations or a weak correlation
for the reduction of risk and risk management purpose.
9. Calculate your return for each investment and overall return.
10. Prepare your findings in an 8-page research report paper based on the APA format.
You will produce your final project in four different stages as part of your course work:
Stage 1
By the end of Module 1 you will inform your mentor which foreign currencies you are thinking of
researching. Your mentor will help you with feedback regarding your choices and how to proceed with
your research.
Stage 2
During Module 2 you will organize the information you have gathered into an interim report that you will
share with your classmates and mentor during a synchronous event. Your mentor will coordinate
arrangements for sharing your report and taking part in the discussion.
Stage 3
After participating in the Module 2 synchronous discussion forum and reflecting on any suggestions,
advice, observations, etc., made by your classmates and mentor, you will decide on which foreign
currencies you would like to invest (choose two hard currencies). You will update your interim report to
include this choice and a brief explanation regarding why you have selected these particular foreign
currencies. You will submit the updated interim report to your mentor for grading at the end of Module 3.
During Module 3 you will also participate in a second synchronous event during which you will have the
opportunity to discuss your final project further.
Stage 4
By the end of Module 4 you will complete and submit your final project paper.
If you have questions about the requirements of the final project, be sure to discuss them with your
mentor well in advance of the final submission. Consult the Course Calendar for the due dale.