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Fin 402 Week 4 Individual Assignment Risk

761 words - 4 pages

Risk and Return Tradeoff Memo

Analyzing the risk and return tradeoffs associated with Casa Bonita’s portfolio
Diversity is an important part of any portfolio; diversity in the industries chosen for investment and in the level of risk undertaken are the two most important factors when considering how to construct a corporate investment portfolio.(3) Casa Bonita is a growing company and it is important that we invest our capital wisely if we are planning to use the gains to fund expansion and corporate growth. As corporate officers we have a duty to our employees, our customers, and the corporate community to be measured and knowledgeable about every investment decision we make. ...view middle of the document...

- the largest worldwide distributor of office products. Levinthal Defense System’s- a defense systems manufacturer whose biggest client is the US government. Transconduit, Inc. - who is the leading designer of silicon technology transport. Goldstein & Delaney Bank- A full service bank with an extensive branch network.
Quality of the choices made
Of the four choices that we decided to include in our corporate portfolio they all turned out to be good solid choices, which was demonstrated during the economic downturn. The noticeable misstep is the fact that we included two technology companies (Transconduit and Desktop Inc.) which is probably not the best choice. Because technology companies are usually the first to recover after an economic downturn has stabilized our portfolio was able to recover well. The effects of the economic downturn were minimized by the inclusion of stocks such as Levinthal Defense System’s and Goldstein & Delaney Bank. Historically during times of economic downturn there has been increased military activity which translates into increased defense spending. (4) Overall we made some great choices, however there was room still left for additional diversification in our portfolio.

The Sharpe Ratio
Utilizing the Sharpe ratio allowed us to identify and choose investments that have historically performed well,...

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