FIN 340 Milestone One Guidelines and Rubric
Overview: As an investor for yourself or your clients, you have the job of developing investment objectives and a plan to achieve those objectives and then make
subsequent investments in appropriate assets accordingly. This process can be collectively termed “the investment process.” It is helpful to break the process
down into the four core concepts that underpin any sound investment process.
First, you must understand what you are investing in. You have to know the underlying characteristics of the investment. What type of asset is it? What type of
security? How is it priced? What are the expected cash flows? Who are the typical investors and what are their typical motives? If you do not understand the
answers to those questions, then the initial expectations you develop about the value and risk of the asset will be fundamentally flawed. This sets you up for
missteps that can lead to underperforming your investment objectives.
Second, you must be able to estimate the value of the asset. Valuation is about assessing the estimated cash flows of the asset. This is a key component of
discerning absolute return potential and the differences between competing assets. It has a significant influence on the third step in the process as well.
The third step is developing a thesis about an asset's expected return and the associated risk. This is accomplished by assessing your valuation estimates against
the current market price and any developing economic or market dynamics that may impact your expected valuation or its pricing. The market is constantly
changing, and these expectations need to be monitored on a regular basis to ensure they continue to correspond to the objectives you are trying to achieve.
Finally, you must understand how the assets in a portfolio interact with one another. It is likely that you will not have just one investment, so any additional
assets will impact the overall performance of the portfolio. You want to formulate a plan to add assets that, when combined together, will have the potential to
meet your objectives. Putting all of these steps together into a consistent, thorough process will position you to better meet the investment objectives laid out
at the beginning.
Prompt: This milestone involves creating a draft of the client analysis section of the final project. Use the Final Project Scenarios document, which has the client
scenarios and tables needed to complete the final project.
Specifically, the following critical elements must be addressed in this milestone:
I. Client Analysis: In this section, you will analyze your clients’ financial documentation and determine their risk tolerance and objectives. To effectively
address the critical elements in this section, you must analyze the information for both client one and client two.
A. Analyze each client’s financial documentation in order to perform the following evaluativ.
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FIN 340 Milestone One Guidelines and Rubric Overview.docx
1. FIN 340 Milestone One Guidelines and Rubric
Overview: As an investor for yourself or your clients, you have
the job of developing investment objectives and a plan to
achieve those objectives and then make
subsequent investments in appropriate assets accordingly. This
process can be collectively termed “the investment process.” It
is helpful to break the process
down into the four core concepts that underpin any sound
investment process.
First, you must understand what you are investing in. You have
to know the underlying characteristics of the investment. What
type of asset is it? What type of
security? How is it priced? What are the expected cash flows?
Who are the typical investors and what are their typical
motives? If you do not understand the
answers to those questions, then the initial expectations you
develop about the value and risk of the asset will be
fundamentally flawed. This sets you up for
missteps that can lead to underperforming your investment
objectives.
Second, you must be able to estimate the value of the asset.
Valuation is about assessing the estimated cash flows of the
asset. This is a key component of
discerning absolute return potential and the differences between
competing assets. It has a significant influence on the third step
in the process as well.
2. The third step is developing a thesis about an asset's expected
return and the associated risk. This is accomplished by
assessing your valuation estimates against
the current market price and any developing economic or market
dynamics that may impact your expected valuation or its
pricing. The market is constantly
changing, and these expectations need to be monitored on a
regular basis to ensure they continue to correspond to the
objectives you are trying to achieve.
Finally, you must understand how the assets in a portfolio
interact with one another. It is likely that you will not have just
one investment, so any additional
assets will impact the overall performance of the portfolio. You
want to formulate a plan to add assets that, when combined
together, will have the potential to
meet your objectives. Putting all of these steps together into a
consistent, thorough process will position you to better meet the
investment objectives laid out
at the beginning.
Prompt: This milestone involves creating a draft of the client
analysis section of the final project. Use the Final Project
Scenarios document, which has the client
scenarios and tables needed to complete the final project.
Specifically, the following critical elements must be addressed
in this milestone:
I. Client Analysis: In this section, you will analyze your clients’
financial documentation and determine their risk tolerance and
objectives. To effectively
address the critical elements in this section, you must analyze
the information for both client one and client two.
3. A. Analyze each client’s financial documentation in order to
perform the following evaluative activities. Be sure to support
your analysis with
relevant client information.
1. Explain the clients’ risk tolerances.
http://snhu-
media.snhu.edu/files/course_repository/undergraduate/fin/fin34
0/fin340_final_project_scenarios.docx
2. Explain the clients’ return objectives.
3. Explain the clients’ liquidity objectives.
B. Using the three objectives above, write a brief investment
statement classifying the clients into one of the following
categories: growth, income,
or capital preservation. Justify your response with specific
client information.
Rubric
Guidelines for Submission: Your client analysis should a 2- to
4-page Microsoft Word document, double spaced, with 12-pt.
Times New Roman font, one-inch
margins, and citations cited in APA format.
Critical Elements Proficient (100%) Needs Improvement (75%)
Not Evident (0%) Value
Client Analysis: Client
4. Information: Risk
Tolerances
Explains the clients’ risk tolerances,
supporting the explanation with
relevant client information
Explains the clients’ risk tolerances,
supporting with client information, but
explanation is missing components, or
supporting information is missing or
contains inaccuracies
Does not explain the clients’ risk tolerances 35
Client Analysis: Client
Information: Return
Objectives
Explains the clients’ return objectives,
supporting the explanation with
relevant client information
Explains the clients’ return objectives,
supporting with client information, but
explanation is missing components, or
supporting information is missing or
contains inaccuracies
Does not explain the clients’ return
objectives
20
5. Client Analysis: Client
Information: Liquidity
Objectives
Explains the clients’ liquidity
objectives, supporting the
explanation with relevant client
information
Explains the clients’ liquidity objectives,
supporting with client information, but
explanation is missing components, or
supporting information is missing or
contains inaccuracies
Does not explain the clients’ liquidity
objectives
20
Client Analysis: Brief
Investment Statement
Writes a brief investment statement
based on client analysis and classifies
clients into a category, justifying
response with specific client
information
Writes a brief investment statement based
on client analysis and classifies clients into a
category, justifying response with specific
client information, but response is missing
components, or supporting information is
missing or contains inaccuracies
6. Does not write a brief investment
statement
20
Articulation of
Response
Submission has no major errors
related to citations, grammar,
spelling, syntax, or organization
Submission has major errors related to
citations, grammar, spelling, syntax, or
organization that negatively impact
readability and articulation of main ideas
Submission has critical errors related to
citations, grammar, spelling, syntax, or
organization that prevent understanding
of ideas
5
Total 100%
FIN 340 Final Project Scenarios and Tables
7. You will use these scenarios and tables to complete the final
project.
Client 1:
Ezra, age 26, is single. However, he is dating and preparing to
get engaged. He will need roughly $5,000 for an engagement
ring almost immediately, and expects he will need $10,000–
$15,000 for the wedding in the next 12–24 months. He is
currently employed and earns about $70,000 a year in salary.
This salary is enough to cover all his taxes and normal living
expenses of approximately $4,800. This leaves him with about
$1,000 in savings each month ($350 to 401K, $650 to savings).
He has been able to save roughly $15,000 to date in a 401K plan
from work and about $20,000 in cash savings. His 401K plan
has been invested 100% in the stock market, including some
sector-specific funds. His other savings have been in interest-
bearing savings and cash substitutes such as money market
funds. He recently received a windfall of $60,000, and this
prompted him to come to you for some advice. The following
are few of Ezra’s comments to help guide your thoughts:
1. “I understand I am young, so I need to take on as much risk
as I can.”
2. “I am willing to lose 30–40% on my invested capital if the
return is commensurate.”
3. “I do like to have a decent sized cushion in the bank in case
something happens at my job.”
4. “I don’t foresee my risk tolerance changing after I get
married.”
5. “Do you have any good stock tips?”
Client 2:
Jacob and Rachel, 53 and 52 respectively, are married with four
children. Two of the children are currently in college, and two
8. are in high school. They expect the other two children to attend
college. The couple has done relatively well for themselves and
earn roughly $275,000 before tax between the two of them,
which equates to $190,000 after taxes. They live well below
their means, and this should allow them to cover all of their
children’s college expenses out of pocket, but it will not leave
much for them to save over the next six to eight years. Through
savings and portfolio growth, they have managed to accumulate
$900,000. To this point, they have been moderately aggressive
(70–75% equities) with their portfolio, but they feel that they
need to begin preparing the portfolio for partial retirement in
eight years, and full retirement in 13 years.
1. “I know we still need to be somewhat aggressive—we could
live until we’re 90—so we need to plan for some growth even in
retirement.”
2. “We definitely can’t afford to take a big hit in our portfolio.
We don’t have enough time to recover.”
3. “Our jobs allow us to work part-time in retirement, and we
will probably do so as long as we are able.”
4. “What do bond yields look like today?”
5. “I think we’ll need to draw on 3–5% of our portfolio in
retirement. We’d like to earn enough income from the portfolio
to cover that.”
CAPM Inputs:
Market Return 9%
Risk-free Rate 0.75%
Stock Analysis Table:
Symbol
Estimated Beta
Dividends
Earnings
9. Sales
Free Cash Flow
5-Year Dividend Growth
Average Industry P/E Ratio
Average Industry P/S Ratio
Free Cash Flow Growth
IBM
0.86
Use Last Year
Use Last Year
Use Last Year
Use Last Year
13.7
23.7
1.12
2.60%
KO
0.66
Use Last Year
Use Last Year
Use Last Year
Use Last Year
8.3
22.6
2.2
6.50%
BMY
0.78
Use Last Year
Use Last Year
Use Last Year
Use Last Year
2.9
24.4
3.37
N/A
10. ORCL
1.1
Use Last Year
Use Last Year
Use Last Year
Use Last Year
21.1
20.5
4.45
10%
MMM
0.98
Use Last Year
Use Last Year
Use Last Year
Use Last Year
15.1
23.8
2.59
7%
BAX
0.75
Use Last Year
Use Last Year
Use Last Year
Use Last Year
-16.9
36.09
3.68
N/A
BIG
1.04
None
Use Last Year
Use Last Year
Use Last Year
11. N/A
23
1.12
N/A
NFLX
1.57
None
Use Last Year
Use Last Year
Use Last Year
N/A
52.5
6
N/A
AKAM
1.34
None
Use Last Year
Use Last Year
Use Last Year
N/A
41.8
3.58
17%
GE
1.12
Use Last Year
Use Last Year
Use Last Year
Use Last Year
9.7
23.8
2.59
N/A
12. Available Assets Table: Stocks listed in Analysis Table and
these additional assets
Symbol
Estimated Beta
Standard Deviation
SPY
1
13%
IWM
1.15
16.50%
EFA
1.03
15%
EEM
1.09
20%
SHY
0
1%
IEF
-0.2
6%
TLT
-0.48
13%
LQD
-0.02
5.25%
HYG
0.38
7.50%
Ex-post Return Statistics:
13. Symbol
Holding Period Return
Standard Deviation
Benchmarks
Holding PeriodReturn
Standard Deviation
IBM
8%
20.00%
Growth
9.6%
13.1%
KO
6%
13.00%
Capital Appreciation
8.1%
8.6%
BMY
13%
28.00%
Income
7.7%
7.2%
ORCL
2%
16.00%
Capital Preservation
5.8%
5.2%
MMM
