12/1/17 1 CASE 12 MID-ATLANTIC SPECIALTY, INC: Financial Risk 2 Copyright 2018 Foundation of the American College of Healthcare Executives. Not for sale. 3 4 5 Model without Questions, Student Version 6 Case 12 deals with basic financial risk concepts of a medical group practice facing alternative 7 investment opportunities. 8 9 The student version of the model is a format guide only because the objective is for students to attempt 10 basic calculations themselves. The key to student success in this case lies in correct calculations and 11 interpretation of the data. 12 13 14 Estimated one-year return distributions: 15 16 State of the 1-Year Healthcare Inverse Biotech S&P 17 Economy Probability T-Bill Fund ETF Fund 500 18 Poor 0.1 7% -8% 18% -19% -15% 19 Below average 20 Average 21 Above average 88 0.2 7% 2% 23% 0% 0% 0.4 7% 14% 7% 13% 15% 0.2 7% 25% -3% 31% 30% 22 Excellent 0.1 7% 33% 2% 50% 45% 23 24 Historical return distributions: 25 26 1-Year Healthcare Inverse Biotech S&P 27 T-Bill Fund ETF Fund 500 28 Year 1 7% -8% 18% -19% -15% 29 Year 2 7% 2% 23% 0% 0% 30 Year 3 7% 14% 7% 13% 15% 31 Year 4 7% 25% -3% 31% 30% 32 Year 5 7% 33% 2% 50% 45% 33 34 Stand-alone return and risk: 35 36 T-Bill 1-Year Healthcare Inverse Fund ETF Biotech S&P Fund 500 37 Expected return [E(R)] 38 Variance (Var) 39 Standard deviation (SD) 40 Coefficient of variation (CV)