FIN 550 Corporate Investment

Write a six to eight (6-8) page paper in which you:

Explain why investors may be attracted to high-risk investments such as exchange-traded derivatives, global funds, and other complex investment vehicles.

Recommendations: Why would anyone be attracted to a high risk investment? This is your opportunity to discuss risk and return. Keep in mind, additional risk does not necessarily mean higher return. It means that you have the potential for higher returns. This is a section in which you can, and should, discuss many aspects of risk and return, as they relate specifically to derivatives, global funds, and other complex investment types. For example, a young investor may be willing to take on risk, whereas a person nearing retirement might want to maintain wealth created over the years of investing. I will expect you to explore the numerous and specific reasons high risk investments are attractive to an investor at various stages of the life cycle.

Discuss the factors that determine how much risk you are willing to take on. What is your tolerance for risk? What is your time frame for investing? Discuss risk aversion (please note the correct spelling of that term). Discuss your goals. Discuss your investing preferences. There are many directions you can take on this topic, but the key is to cover all aspects of the topic completely and thoroughly.

Analyze the risk associated with exchange-traded derivatives, such as futures and options, and what brokers might do to minimize the risk to investors.

Recommendations: While this question may seem open-ended, it is not. There are very specific risks associated with derivatives. Research the risks associated with derivatives and clearly spell them out. I will expect in-depth technical discussion here.

Discuss the challenges related to regulating a complex global financial firm and make suggestions for regulatory improvements.

Recommendations: For this question, you can go back in history to discuss the legislation of the 1930’s and how this legislation prevailed until recently, and how the recent changes affected the markets. You can also discuss how the internet has changed communication and information flows and how difficult it is to regulate this on a global scale. Finally, make recommendations for regulatory improvements, or do you believe we have enough regulation? Do we have too much regulation? Any statements you make regarding regulations must be supported by your research and/or data, so simply stating your opinion without strong data to back it up will not be considered appropriate discussion.

Analyze the ethical violations of the company you researched.

Recommendations: This is relatively straight-forward; however, I do not want to see any more discussion about Enron, or Madoff, or some of the older ethical violations that have been discussed ad infinitum. Show me something new! I will be specifically looking for companies that are not a household name.

Also, some students in past classes have misunderstood this question, and think the ethical violations have to do with personnel or other human resource issues. That is not what this question is about! You are to investigate companies that have been cited for financial ethical violations. A misunderstanding of this question can result in a significant loss of points.

Discuss the consequences that you believe to be appropriate for the senior management of the firm you researched and the implications for brokers trading in high-risk investments.

Recommendations: This is not a general question, but relates specifically to the previous question. If you adequately research the ethical violations of your chosen company, you should be able to discuss the consequences that the senior management of that company have been subject to, and whether or not these consequences are appropriate, given the violations. Then you should discuss the implications that this specific case has for brokers and management of financial firms who may be tempted to engage in ethical violations.

Create a scenario where you believe the use of high-risk investments would be beneficial for the investor. Provide support for your rationale.

Recommendations: Look at what is happening in the market today and discuss how high risk investments could be beneficial to an investor. Here are some interesting observations for today: interest rates are low, oil prices are low, the stock market has declined year-to-date, this is an election year, and terrorism is on the minds of many. So many things are going on today. So, tell me how a high risk investment (or investments) may be beneficial. But be careful here! Be able to support your comments with good research. Good research is NOT ‘wikipedia’, or ‘investopedia’, etc.! In fact, points will be deducted for inappropriate research references.

Use four (4) external resources to support your work. Note: Wikipedia and other Websites do not qualify as academic resources.

Recommendations: This is self-explanatory; however, it bears repeating. I will not tolerate wiki or investo type references. Further, keep your use of popular commercial financial websites like marketwatch.com or businessinsider.com to a minimum. I expect you to use strong academic and scholarly journal articles and papers as your four main references. As stated, points will be deducted for poor references.

Your assignment must follow these formatting requirements:

•Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; references must follow APA or school-specific format. Check with your professor for any additional instructions. •Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required page length.

Recommendations: This has been a source of confusion for students in past classes and assignments. If you are uncertain about what APA format is, you can refer to the excellent resources and guidelines that are available online. One of the biggest problems students have is when they try to cut and paste text from another source, the font size and style often cannot be matched. This is only one of the many reasons why you should never cut and paste text for your writing assignments. The principal reason is – this is plagiarism, and as you know, each paper will be analyzed for originality.

The specific course learning outcomes associated with this assignment are:

•Analyze the derivatives market and determine the use of derivatives to efficiently manage investment risks in an investment portfolio. •Use technology and information resources to research issues in corporate investment analysis. •Write clearly and concisely about corporate investment analysis using proper writing mechanics.

Recommendations: I have great respect for my many students for whom English is not their first language. This being said, you are writing an academic paper at the graduate level in the English language; therefore, it is expected that you will use correct English writing mechanics. This includes correct word usage, correct spelling, correct grammar, and correct sentence structure. I suggest that you proof read your drafts several times and enlist a friend or colleague to proof read your final draft before you submit it to ensure that you have caught every error possible. Also, it should go without saying that you should pay attention to your word processing spelling and grammar checker.

I also would remind you that I read every word of every paper and make an effort to note directly on your paper specific words, sentences, phrases, and thoughts that could be improved on. I also write comments in the grading comment section which are intended to help you improve. You may want to refer back to the comments I made on your first writing assignment so you can apply them to your work on this assignment. While my comments are sometimes constructive criticisms, they are not intended to be critical of you. Please do not get discouraged or upset. If you have questions, simply contact me and we can discuss your concerns.

I also remind you that every paper will be scanned through a plagiarism detection tool for originality. Any paper that does not pass this test will receive a grade of zero. I will not tolerate any form of plagiarism or academic dishonesty.

Regards to all, and good luck.


Answer

High-risk Investments

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