Hello, I need help with my assignment. It is about Portfolios and Markets. There are two main questions in the assignment, The requirements are all in the files. Please help me. The report 1 and report 2 are below in case you want to have a look as a guide. Thanks a lot.

Passive Fund Name Benchmar k VCO index fund Maximum of 4 % tracking error on performance of DOW Initial 80% in component Asset stocks of DJIA and Allocation 10% cash Risk Low Level Targeted Targets risk adverse Investors investors such as parastatal and government employee in their prime age. Contractual employees and retirees under pension. Objectives To follow the of Funds movement of DJIA and thus provide investors with the actual return of investing in US traded stock market Constraint At any time, the fund s of Funds must: have no exposure in derivatives; be limited to US stocks only; be limited to a maximum of 25% of size of fund in fixed income instruments; and have minimum 5% cash holding Active Fund VCO Growth Fund At least 20% above the performance of Dow Jones Industrial Average (DJIA) 45% in stocks, 25% in bonds, and 10% in cash High Risk taker investors mostly entrepreneurs, young business individuals, industrialist, and corporate firm mostly from IT and engineering industries. To outperform the return of DJIA by investing in various instruments, employing trading activities, and constant monitoring of the market conditions At any time, the fund must: be limited to a minimum of 35% of size of fund in equities; be limited to a maximum of 55% of size of fund in fixed income instruments; be limited to a maximum exposure in a single stock of 15% of size of fund; and have minimum 5% cash holding Initial Sectorial allocation As per principles DJIA Stock Selection Strategy Initial Stock Filtering Sampling following Low price to book ratio the DJIA principle. Low price to sales ratio At least 3% weightage on DJIA; and Minimum free float of 6% Maximum historical PE Ratio of 40 times; Minimum free float of 12%; and Average trading of at least 1000 shares per trading day Trading technical analysis tools Not applicable Turn up the volume Tune in the Aroon Fibonacci retracement Our project is about Virgin Coconut Oil. Surname:1 Our project is about Virgin Coconut Oil. 1. How many different stocks will you have at the setting up of the fund and why? As for my VCO Index Fund, I wish to invest in eight different stocks and the reason is that I believe that I can setup a passive fund that can follow the movement of DJIA by investing in only eight stocks that have the highest weighting in DJIA. 2. What is the main criterion that you will use in selecting the stocks and why? For example, as for my VCO Index Fund, the main criterion that I will use is highest market capitalization as at December 31, 2014. The reason is because the market capitalization of the stock will have a significant impact on the weighting of the stock and is likely to yield some substantial return albeit being subjected to high risk. 3. Based on the main criterion in (2) above, what are the stocks that you include in your portfolio, how many shares of each stock that you purchase, and at what price? The stocks am likely to include in my portfolio investing 750, 000 in four portfolio Steel excel Inc. @ $ 40 per share=750000/ 24=31250 shares Flower food @ $ 23.55 per share=750000/ 23.44=31,997 shares Plamer system Inc. @ $ 6.13 per share=750000/ 6.13=122, 349shares Advanced auto part in @ $ 187.75per share=750000/ 187.79=3993.82 shares Surname:2 4. What are the selections of fixed income instruments that you will invest in the fund, if any? As for my VCO Index Fund, I will invest in inflation-indexed bond which are securities linked to predetermined price index. This will be done through investment in treasury inflation protected securities (TIPS) inflation indexed bonds. 5. How much is the cash portion of the fund, why, and where will you invest the cash portion? As for my VCO Index Fund, at the initial stage, I will keep 5% or $250,000 in cash and the reason is because the fund needs to have some cash to pay for possible redemptions from investors. I will place this portion in bank of America term deposit for 1 month that presently pays 5.00% per annum. For the active fund, you are required to answer the followings:- 1. How many different stocks will you have at the setting up of the fund and why? For example, as for my VCO Growth Fund, I wish to invest in 10 different stocks in the seven major economic sector because they are negatively correlated to each other hence at any given time am liable to receive some returns. Surname:3 2. What is the main criterion that you will use in selecting the stocks and why? As for my VCO Growth Fund, the main criterion that I will use is average daily volume of at least 100,000 shares. The reason is that because I have ten portfolios in my fund, it will be meaningful and efficient to trade with ten thousand shares for each individual stock among the portfolio. 3. Based on the main criterion in (2) above, what are the stocks that you include in your portfolio, how many shares of each stock that you purchase, and at what price? I am likely to invest in four active stock fund investing one million each in four portfolios. GK services Inc. @ $ 71.13 per share=1000000/ 40=14058 shares Asta funding @ $ 9.11 per share=1000000/ 9.11=109769 shares New corps class B @ $ 14.89 per share=1000000/ 14.89=67, 159 shares Briggs and Stratton @ $ 20per share=1000000/20 =50,000 shares 4. What are the selections of fixed income instruments that you will invest in the fund, if any? As for my VCO Growth Fund, I wish to invest 25% or $2,000,000 in bonds listed on the US Debt Market and is limited to two different bonds only of $1,000,000 each. Surname:4 5. How much is the cash portion of the fund, why, and where will you invest the cash portion? As for my VCO Growth Fund, I may say that at the initial stage, I will keep 5% or $500,000 in cash and the reason is because the fund needs to have some cash to pay for possible redemptions from investors. I will place this portion in Bank of America term deposit for 2 month that presently pays 5.00% per annum. FINA312 / FINA517 - Semester 15B FUND MANAGEMENT SIMULATION PROJECT INSTRUCTION FOR REPORT 03 Following the instructions for Report 02, you will now have a solid portfolio with good securities selections in both the passive fund and active fund. You have made adjustments to your funds' holdings to better reflect objective of the funds. Your funds have begun to show its movement and sensitivity to the market. The passive fund is following the market movement, although imperfect in terms of magnitude, but quite true in terms of direction. The active fund seems more responsive than the market, indicating that it has a higher beta than 1.0. Funds are not static. This is true not only in terms of the funds' return and prices, but also size. Size of a fund changes not only because of the value of the securities invested by the fund (which change every day, or for stocks, every second of the trading hours), but it can also change because of capital injection and/or redemption. For Report 03, we shall assume that there is redemption in both the passive fund and the active fund. Redemption means that certain amount of fund is being pulled out of the fund and this may happen usually because an investor or several investors in the fund decided to take out a part or all of their investments in the fund. These investors may do so because they already met their investment objective in the fund or they just simply need their money back. Whatever their reason is, we cannot stop an investor from redeeming their investments. Sometimes, a unit trust fund has a feature known as Redemption Fee, which will be charged to investors if they redeem their investments earlier than a stipulated date/time. The Redemption Fee may discourage investors to make early redemption, but on the other hand, it may also discourage investors to invest in the fund at all (especially if there are other funds in the market of similar nature but without a Redemption Fee). For the passive fund, you are required to do the followings:1. Assume that an investor who has invested $1,000,000 in the passive fund decided to withdraw all his/her investment and you need to make the necessary adjustments in the fund. If you have to sell some investments made by the fund to pay for the redemption, explain and justify your reasons why you choose the securities to be excluded from the fund's investments. Firstly, you need to calculate what is the Net Asset Value (NAV) per unit of the fund as at today. NAV per unit is the net asset value of all investments made by the fund today divided by the number of units in circulation. We shall assume that the fund is created at $1.00 per unit which means that the number of units in circulation is 5,000,000 units. For example, if the total NAV of the fund is $5,025,000, then the NAV per unit is $1.005. The investor who has invested $1,000,000 would have own 1,000,000 units. If he/she decided to withdraw all his/her investments (all 1,000,000 units), it means that you need to pay him/her $1,005,000 (1,000,000 X $1.005). Which also means that you need to deduct $1,005,000 from your fund and thus means that you need to sell some of your investments made in the fund if you do not have sufficient cash to pay the investor. For example if you have New Zealand Oil and Gas Ltd stocks in the fund and decided to sell this stock, please explain and justify why you choose to sell this stock. 1 For the active fund, you are required to answer the followings:1. Assume that an investor who has invested $2,000,000 in the active fund decided to withdraw all his/her investment and you need to make the necessary adjustments in the fund. If you have to sell some investments made by the fund to pay for the redemption, explain and justify your reasons why you choose the securities to be excluded from the fund's investments. Firstly, you need to calculate what is the Net Asset Value (NAV) per unit of the fund as at today. NAV per unit is the net asset value of all investments made by the fund today divided by the number of units in circulation. We shall assume that the fund is created at $1.00 per unit which means that the number of units in circulation is 10,000,000 units. For example, if the total NAV of the fund is $10,100,000, then the NAV per unit is $1.01. The investor who has invested $2,000,000 would have own 2,000,000 units. If he/she decided to withdraw all his/her investments (all 2,000,000 units), it means that you need to pay him/her $2,020,000 (2,000,000 X $1.01). Which also means that you need to deduct $2,020,000 from your fund and thus means that you need to sell some of your investments made in the fund if you do not have sufficient cash to pay the investor. For example if you have Air New Zealand Ltd stocks in the fund and decided to sell this stock, please explain and justify why you choose to sell this stock. Meanwhile, you are free to buy and/or sell your holdings in each of the funds if you wish to do so. For the passive fund, it is advisable to adopt a buy and hold strategy rather than active trading as the objective of the fund is to mirror the performance of a benchmark index. However, for active fund, you should actively trade the stocks by selling stocks that are in significant profit position and buying stocks that you think are undervalued. In this simulation project, you may be able to make some realized gains from your investment by selling the stocks that are in profit position. We shall ignore brokerage fees and any transactions costs and thus your profit will be higher than if we consider brokerage fees and transactions costs. For this report (FMSP Report 03), please focus on your decision on which securities to be taken out from your fund, bearing in mind that your decision may have a significant impact on the future performance of the fund. If you think that the asset allocation and stock selection of the fund is already good in the present market condition, how can you pay the redemption and at the same time maintain the same portfolio holding? This may be a question that you should ask yourself first before deciding which securities to sell. You should submit your report using the Web Submission. Thank you. ALL THE BEST. 2