Assume that you have $500,000 to invest in equities and wantto establish a new portfolio that includes ten (10) stocks to be selected fromthe Dow Jones Industrial Average of 30 companies. It is also desired to start with nearly equaldollar values of each issue. Use currentmarket prices to compute the number of shares required.

You are bullish on the markets in the long-term; however,you have read analyst predictions that over the next 18 months the market willlikely stay flat with some downside potential.Despite these predictions, you want to make some money in theshort-term, and at the same time avoid any downside spikes in the markets. A hedging strategy using options and/orfutures seems appropriate. Pleasedevelop a plan to accomplish your goal and give a detailed explanation, withnumerical computations, of the upside opportunities and the downside risks foreach chosen position.

In addition to your investment in equities, you also have $1million dollars to invest conservatively in U.S. Treasury issues and moneymarket securities. Select four T-bondsand/or T-notes ranging in maturity from two years to five years and purchaseequal dollar amounts with a total of approximately $500,000. Invest the remaining $500,000 in the moneymarket. You need not select individualmoney market issues; just assume that the money market investments are secureand return the risk free rate. Pleasediscuss the how the inclusion of the fixed income securities affects the riskin your total portfolio.

To begin the project you need to select 10 stocks andfixed income issues. When buying largequantities of stocks, it is most usual and convenient to issue orders in roundlots (rounded to 100 shares). When you sum the value of the rounded lots, theresult will almost certainly not be exactly $500,000. Ignore that difference and use the sum of therounded lots as your equity investment.The same holds true for the fixed income selections.

Please give Explanation of Hedging Strategy using Spreadsheet. Explanation of the strategy's risks and rewards

Example of How to Record Your FI567 Poject Investment Portfolio Approx Value Company Symbol 3M MMM Alcoa AA American Express AXP AT&T T Bank of America BAC Boeing BA Caterpillar CAT Chevron Corporation CVX Cisco Systems CSCO Coca-Cola KO DuPont DD ExxonMobil XOM General Electric GE Hewlett-Packard HPQ The Home Depot HD Intel INTC IBM IBM Johnson & Johnson JNJ JPMorgan Chase JPM Kraft Foods KFT McDonald's MCD Merck MRK Microsoft MSFT Pfizer PFE Procter & Gamble PG Travelers TRV United Technologies CorporaUTX Verizon Communications VZ Wal-Mart WMT Walt Disney DIS Industry Date Added of Position Conglomerate 8/9/1976 $50,000.00 Aluminum 6/1/1959 $50,000.00 Consumer finance 8/30/1982 $50,000.00 Telecommunication 11/1/1999 $50,000.00 Banking 2/19/2008 $50,000.00 Aerospace and defense 3/12/1987 $50,000.00 5/6/1991 $50,000.00 2/19/2008 $50,000.00 Construction and mining equipment Oil & gas Computer networking 6/8/2009 $50,000.00 3/12/1987 $50,000.00 11/20/1935 $50,000.00 Oil & gas 10/1/1928 $50,000.00 Conglomerate 11/7/1907 $50,000.00 Technology 3/17/1997 $50,000.00 Home improvement retailer 11/1/1999 $50,000.00 Semiconductors 11/1/1999 $50,000.00 Computers and technology 6/29/1979 $50,000.00 Pharmaceuticals 3/17/1997 $50,000.00 5/6/1991 $50,000.00 9/22/2008 $50,000.00 Beverages Chemical industry Banking Food processing Fast food 10/30/1985 $50,000.00 Pharmaceuticals 6/29/1979 $50,000.00 Software 11/1/1999 $50,000.00 Pharmaceuticals 4/8/2004 $50,000.00 Consumer goods 5/26/1932 $50,000.00 6/8/2009 $50,000.00 3/14/1939 $50,000.00 Insurance Conglomerate Telecommunication Retail Broadcasting and entertainment 4/8/2004 $50,000.00 3/17/1997 $50,000.00 5/6/1991 $50,000.00 xample of How to Record Your 567 Poject Investment Portfolio Value of Equities========== 512,891 Current Number of Round to Current Share Price Shares Nearest 100 Value $39.66 1,260.72 1300 51,558 $139.24 359.09 400 55,696 $30.07 1,662.79 1700 51,119 $65.79 759.99 800 52,632 $55.89 894.61 900 50,301 $23.99 2,084.20 2100 50,379 $19.27 2,594.71 2600 50,102 $65.85 759.30 800 52,680 $100.31 498.45 500 50,155 $37.13 1,346.62 1300 48,269 FIN567 Poject Investment Portfolio EQUITIES Company 3M Alcoa American Express AT&T Bank of America Boeing Caterpillar Chevron Corporation Cisco Systems Coca-Cola DuPont ExxonMobil General Electric Hewlett-Packard The Home Depot Intel IBM Johnson & Johnson JPMorgan Chase Kraft Foods McDonald's Merck Microsoft Pfizer Procter & Gamble Travelers United Technologies Corp Verizon Communications Wal-Mart Walt Disney Symbol Industry MMM AA AXP Date Added Approx Value Current of Position Share Price Conglomerate 8/9/1976 $50,000.00 Aluminum 6/1/1959 $50,000.00 8/30/1982 $50,000.00 11/1/1999 $50,000.00 Banking 2/19/2008 $50,000.00 BA Aerospace and defense 3/12/1987 $50,000.00 CAT Construction + mining equip 5/6/1991 $50,000.00 CVX Oil & gas 2/19/2008 $50,000.00 6/8/2009 $50,000.00 T BAC Consumer finance Telecommunications CSCO Computer networking KO Beverages 3/12/1987 $50,000.00 DD Chemical industry 11/20/1935 $50,000.00 Oil & gas 10/1/1928 $50,000.00 Conglomerate 11/7/1907 $50,000.00 Technology 3/17/1997 $50,000.00 XOM GE HPQ Home improvement retailer 11/1/1999 $50,000.00 INTC HD Semiconductors 11/1/1999 $50,000.00 IBM Computers and technology 6/29/1979 $50,000.00 JNJ Pharmaceuticals 3/17/1997 $50,000.00 JPM Banking 5/6/1991 $50,000.00 KFT Food processing 9/22/2008 $50,000.00 MCD Fast food 10/30/1985 $50,000.00 MRK Pharmaceuticals 6/29/1979 $50,000.00 MSFT Software 11/1/1999 $50,000.00 PFE Pharmaceuticals 4/8/2004 $50,000.00 PG Consumer goods 5/26/1932 $50,000.00 TRV Insurance 6/8/2009 $50,000.00 UTX Conglomerate 3/14/1939 $50,000.00 Telecommunication 4/8/2004 $50,000.00 Retail 3/17/1997 $50,000.00 Broadcasting + entertainment 5/6/1991 $50,000.00 VZ WMT DIS Notes: 1. Select any 10 issues. 2. Enter their current prices in the column marked Current Share Price. 3. The rest of the data will appear automatically as will the total. FIXED INCOME Bonds/Notes Qty 1000 US Treasury Note 1000 US Treasury Note 1000 US Treasury Note 1000 US Treasury Note Total Market Value of Bonds/Notes Money Market Portfolio Value Maturity Price Current Value 0 500,000 500,000 Coupon Notes: 1. Select 4 issues ranging from two to five years (approximately) in maturity. 2. Fill in the required data in the spreadsheet and compute the current value of each issue. 3. The spreadsheet will sum up your portfolio value. Value of Equities===> 0 Number of Round to Current Shares Nearest 100 Value ` Yield to Maturity