Advise to a client who wishes to invest

Advise to a client who wishes to invest


You are required to advise a client who wishes to invest $5,000,000 in a portfolio with a low-risk, long-only, conservative investment stance. The portfolio will consist of (1.) US Treasury bonds and (2.) US equities. Your advice should recommend an asset allocation mix which you believe would be appropriate for the client’s portfolio under current investment conditions and for the next 12-months. Your advice should detail which bonds and equities should be bought and the proportion in which they should be held, and you should provide a justification for each element of your recommendation.


Part 1:    Fixed Income Element


1              Recommend a sum to be invested in US Treasuries, out of the total $5,000,000, and       recommend a selection of securities for the fixed income element of the portfolio using the                 list of notional bonds in the table below. Your recommendation should refer to possible               risks in investment environment and discuss possible strategy responses for the              portfolio.

                You should ….

  • Fit the full Treasury yield curve using Nelson-Siegel-Svensson model to solve for the missing yields in each maturity area of the curve.
  • Analyse and discuss each bond’s investment characteristics under the different possible bond market scenarios that you think possible over the next 12-months.
  • Advise on how these scenarios would impact your recommendation for the choice of bonds for the portfolio.
  • Discuss possible risk management strategies (eg immunisation) and analyse their merits.
Maturity (Yrs. To maturity) Bond notional US Treasury Bond Yield (%)
3 1% US Treasury 2018 0.66%
4 1.5% US Treasury 2019
5 2.0% US Treasury 2020 0.85%
6 2.5% US Treasury 2021
7 2.2% US Treasury 2022
10 3% US Treasury 2025 1.85%
18 3% US Treasury 2035
20 4.5% US Treasury 2037
23 5% US Treasury 2040 3.340
25 5.%US Treasury 2042
30 6% US Treasury 2047

[Assume:  It is 01.01.2016& each bond pays coupon at 30.06. and at 31.12




Part 2:   Equity Element

2              Recommend a sum to be invested in USEquitiesfrom the $5,000,000 and recommend a                 selection of securities using the list of stocks in the table below.

                You should present…

  • An analysis of financial structure of the companies selected, to justify their selection
  • Discussion and interpretation of key financial information
  • Comparative measures of absolute and relative valuation
  • Other relevant information for investment purposes.
US S&P500 Stocks  for consideration in client portfolio
Apple Inc. Wells Fargo & Company
Microsoft Corporation Walmart Stores Inc. Inc. Kraft Heinz Inc.
Johnson & Johnson General Electric Company
Facebook Inc. Class A Con Agra Foods
Colgate- Palmolive Company Verizon Communications
J.P Morgan Chase & Co. Coca-Cola Company
Alphabet Inc. Class A Boeing Company
AT&T Inc. Union Pacific Corporation
Proctor & Gamble Company Raytheon Company




Required word- count approx. 5 ,000 words.This word-count excludessnapshots of         spread-                sheet attachments which may be included in appendices, and the bibliography. You            should include                 workings in your submission incl. those inexcel (appendix) to receive partial       credit.   Your report must be accompanied Declaration re Plagiarism see attached –         or  IT WILL NOT BE READ & WILL NOT RECEIVE A MARK

This Assignment 25% of module mark – Hand up date no later than 4pm 29 November 2016

NO EXCEPTIONS/EXTENSIONS TO THE SUBMISSION DEADLINE WILL BE MADE WITHOUT                WRITTEN EVIDENCE OF MITIGATING CIRCUMSTANCES. Students must submit a Hard Copy         to the Project Box on the second floor AND  upload to loop . Any queries, please feel free     to contact me.