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Part 1: Mutual Funds

1. Go to GlobeFund or Morningstar and select six mutual funds, according to the

following requirements:
one index fund
one dividend fund
one global fund
three equity funds in different sectors such as energy, technology, microcaps,
income, etc.
o. Name Type
1 CDSPI S&P 500 Index Index
AGF Canadian Large Cap Dividend
Classic Dividend
3 Axiom Gloal Gro!"# Por"$olio %li"e Gloal
& D'namic %nerg' Income %()i"' %nerg'
5 CI*C Gloal +ec#nolog' %()i"' +ec#nolog'
, *-. Diversi/ed Income Por"$olio %()i"' Income
. !repare a table showing each fund"s load fees #if any$, M%&, and return over one,
three, and five years and from inception. 'dentify which fund is, in your opinion, the
best to invest in considering short( and long(term returns, load fees, and M%&s.
%xplain why you pic)ed this fund.
o. Name Type
Fees MER
Index Index 0 01,23
3 &1513
AGF Canadian
Large Cap Dividend
Classic Dividend
3 114,3
3 21243 41223
Axiom Gloal
Gro!"# Por"$olio
%li"e Gloal 0 11,23
3 21533 0
D'namic %nerg'
%nerg' 0 212,3
3 211,3 51&43 101413
CI*C Gloal
g' 0 310&3
3 &1&53
*-. Diversi/ed
Income Por"$olio
Income 0 .*+
3 21023 31533
F6C%2&5v& Assignmen" 3 Sep" 307 2013
CDSPI S&P 500 Index is the best fund for the investment as we can see the fund has lowest
MER of 0!"# as com$are to the other 5 funds in the table %here is no load fees for this
fund which also reduces the ex$enses related to the fund &lso we can see I the short term
$eriod of ' (R the fund $rovides the return of )*"5# which is hi+hest in com$arison to all
funds in the table also the lon+ term return of ,(r and 5(r is hi+hest for this fund
Part 2: Investment Portfolio Review (45 marks total)
,our response to !art should be between -*. and 1*. words, with complete calculations
shown where required. /ased on the stoc)s of the two companies you chose in 0ssignment
12 !reparation and wor)ed on in 0ssignment , answer the following questions:
' 3alculate the total return percentage achieved for each individual stoc) from the day
you selected the stoc) to the present or most recent business day. 4se the formula
%nd 5hare !rice 6 /eginning 5hare !rice 7 8ividends &eceived #if any$1/eginning
5hare !rice.
(5 marks)
&- Manulife Financial (MFC)
.e+innin+ Share Price / )'5* 0&u+ ',1 )0'2-
End Share Price / )',3 04ct ,'1 )0'2-
Dividend / 0'55
%otal return $ercenta+e / 0)',3 5 )'5* 6 0'55- 7 )'5*
/ 80'!#
.- National Bank of Canada (NA)
.e+innin+ Share Price / 2*53 0&u+ ',1 )0'2-
End Share Price / 5)!* 04ct ,'1 )0'2-
Dividend / 02*
%otal return $ercenta+e / 05)!* 5 2*53 6 02*- 7 2*53
/ 32#
) 0nnuali9e the percentage return for each stoc): that is, calculate what your return
would be if you held the stoc) for one year. ;o do this, ta)e your returns from above,
divide by the number of days the share was held, and multiply by 2<*.
(2 marks)
&- Manulife Financial (MFC)
%otal Da9s / 5!
%otal return $ercenta+e / 0)',3 5 )'5* 6 0'55- 7 )'5*
/ 80'!#
&nnual Percenta+e return / 080'!#75!-:,!5
/ 8'02#
.- National Bank of Canada (NA)
%otal Da9s / 5!
%otal return $ercenta+e / 05)!* 5 2*53 6 02*- 7 2*53
/ 32#
&nnual Percenta+e return / 032#75!-:,!5
/ !',0#
F6C%2&5v& Assignmen" 3 Sep" 307 2013
, 3alculate the annuali9ed return for the portfolio. #4se an equal weighting for each
stoc).$ =as your return higher or lower than the rate of inflation> (3 marks)
Return of Portfolio = 0.50*-1.0! " 0.50*#1.$0!
/ 805) 6 ,0!5
/ ,0',#
Rate of inflation i% = &!
%he rate of inflation in Canada is )# in the month endin+ Se$ '2 %he returns from
the $ortfolio constituent 50# of the each stoc; and the total return of the $ortfolio is
,0',# %his shows that the $ortfolio +ives more return than that of inflation in
2 3ompare your annuali9ed return with that of the index from which you have chosen
your stoc)s. For example, if your stoc)s were chosen from the ;5?, compare your
return with that of the 5@!1;5? 3omposite index over the past year. 'f you chose
stoc)s from more than one index, you may have to compare one return with one
index and the other return with another index. 'f, for example, you have one stoc)
from the ;5?, you would compare your stoc) average annual return with the
5@!1;5? 3omposite index. ;hen, supposing the other stoc) you chose was traded on
the A,5%, you would compare these returns with the 5@! *.. index. 'n one
paragraph, explain why each return is greater or less than the index. (10 marks)
Manulife Financial (MFC) = -1.0!
National Bank of Canada (NA) = #1.$0!
'(P)*'+ Co,-o%ite inde. = 0.5/!
<e can see that the S&P7%S= Com$osite index annual return is 05"# which is
+reater than that of Manulife >inancial which +ives the return of 8'02# and less than that
of ?ational .an; of Canada which $rovides annual return of !',0# which is far more that
the index return
If we com$are the index to that of the stoc; return we see there is the difference in the
returns the differences in the returns are due to the Index returns is the combinations of
man9 stoc;s and it var9 accordin+l9 to the returns of the different stoc; <hile the stoc;
returns is onl9 the return of the self
5 For each of your stoc)s, identify #in one sentence$ the most significant variable that
explains the performance of the stoc). For example, if you held 4.5. ban) stoc) and
your stoc) has generated a 1.+ loss, you might identify the 4.5. housing mar)et as
the most significant variable affecting the stoc)"s average return. (5 marks)
Manulife Financial (MFC) +ives ne+ative return 80'!# due to the less estimated
$rofits as $er the ex$ectations of the investors
National Bank of Canada (NA) +ives a $ositive return of 320# as the Canada
housin+ mar;et is boomin+ and increasin+ the $rofits of the ban;s
F6C%2&5v& Assignmen" 3 Sep" 307 2013
! 'n two paragraphs, describe the concept of Breturn versus ris),C and explain how you
would use it in selecting a new investment portfolio. %xplain how and why you used
#or did not use$ this concept when you chose your original two stoc)s. 'n your
explanation, ensure that you answer the following questions:
Ever9 investment $rovides certain level of return and ris; &t the time of investin+
we can@t able to sa9 that our investment is ris;8free it contains certain amount of
ris; in it %he amount of ris; related to the investment is due to some factors such
as inflation1 tax1 economic etc
In selectin+ the two stoc;s the return would be hi+h and the ris; will be lower %he
stoc;s should be less affected b9 the ris; related factors and the stoc;s should
shows the constant return in $ast
a. =hat would you do differently if you were to choose another two stoc)s for
your portfolio> %xplain your answer. (10 marks)
I will choose the stoc; which $rovides the constant return in the $ast and
have the abilit9 to $rovide the +ood returns in the near future also %he
stoc;s should have minimum ris; averse ie the stoc;s are less ris;9 and
their returns are not affected b9 the +iven ris; factors such as inflation1
economic1 tax etc
b. =hat specific actions could you ta)e in the future when choosing stoc)
investments to reduce ris) and increase the reward in your portfolio>
(10 marks)
%o carefull9 chec; the $ast returns of the stoc; and chec; the stoc; $rice
movements as it shows the volatilit9 of the stoc;s More the stoc; is volatile
more the ris; associated with that stoc;
So alwa9s select the stoc; which is less volatile and less ris;9 and $rovides
the constant returns in the $ast
Part 3: earnin! from t"e Masters (35 marks total)
,our response to !art 2 should be no more than 1... words, with complete calculations
shown where required. 4se the lesson notes from Desson < to answer the following
questions. 'f appropriate, you may use tables to present information.
1. 3ompare the investment philosophy you used to select your two stoc)s with that of
/enEamin Graham. =hat would /enEamin Graham say about your stoc) pic)s>
!rovide a reason your choice may be different than Mr. Graham"s. (10 marks)
%he investment $hiloso$h9 is used as Arowth Investin+ in which bu9in+ into
com$anies that have $romisin+ emer+in+ $roducts or services that hold $romisin+
+rowth $otential <hereas the investment $hiloso$h9 of .enBamin Araham is the
fund will aim to o$timiCe the relationshi$ between ca$ital $reservation and $rofit1 or
ris; and reward1 where ris; is defined as the $robabilit9 of $ermanent loss of ca$ital
F6C%2&5v& Assignmen" 3 Sep" 307 2013
. =arren /uffett does not invest in 'nternet companies due to the difficulty in
predicting their future earnings. %xplain to Mr. /uffett how he could value an 'nternet
company that at present has no cash flow. 4se financial calculations as appropriate
to answer this question. (10 marks)
>or exam$le1 sa9 a business ex$ects to +enerate D)5 million of net cash flows over
the first five 9ears of o$eration1 +rowin+ from Cero for the first 9ear1 then D) million1
D5 million1 D* million and D'0 million in the next four 9ears1 res$ectivel9 Discounted
at the )5# rate1 that $attern of cash flow@s net $resent value is a bit below D',
2. 3hoose five of the masters listed in Desson <. 3ompare and contrast their investment
styles, using a table if appropriate. =hich of the masters" investment styles do you
believe will be most effective over the next ten years> 0s an investment advisor,
which of these investment styles would you use during a bull mar)et> 8uring a bear
mar)et> /e sure to fully explain each of your responses. (15 marks)
F6C%2&5v& Assignmen" 3 Sep" 307 2013