Investment Learning Curve Project from Minghua's "Money and Banking" class

This project is designed for you to learn the basics about securities and financial markets through doing it online (without the risk of suffering any real loss). The project is divided into three parts. For the first part you make your decision without any solid economic theories but only based on your intuition or perhaps some knowledge you learned from your ET101. For the second part, you have already been equipped with various financial concepts and theories, you should put your knowledge into action and make better decisions. Regarding to the third part (after one month you made you informed decision) you have mulled over what you learned and you have observed the financial market for a while, you are an investment expert, so will your decision be different?



Part One: Being an Intuitive Investor
Due on Sep 7, 2007
1. If you have some extra money and plan to invest in securities (i.e. bonds and stocks) for a period of Sep 5-Sep 28, which one would you like to buy, bonds or stocks? Why? Please list at least two reasons to justify your decision.








2. Now assuming you have decided to choose bonds as your investment, which bonds are you going to buy? Pick up 2 bonds as your investment vehicle and for each bond list all the factors that you took into account when you made your decision.











3. Now suppose you considering investing in stocks instead, which stocks are you going to buy? Pick up 3 stocks as your investment option and for each stock explain why you pick it up.
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Part Two: Performance Report One
Due: Nov1, 2007

Now it is Sep 28 and you have learned some concrete economic theories about securities and the financial market in general. Can you make better choices? Please repeat Part One and apply what you have learned from class to explain your investment decisions. You are required to turn in a report tracking the prices of bonds and stocks that you selected between Sep 28 and Oct 26.The report is due on Nov 1st, 2007. Your report should at least cover the following:
1) Track and input the daily yields/prices of the bonds and stocks into a spreadsheet and draw graphs to show the yield/price fluctuation of the bonds and stocks respectively over the period of Sep 29-Oct 29 (one graph for the bonds and one for the stocks).
2) Explain why the bonds and stocks yields/prices changed the way they did during this period.
3) Calculate the rate of return during this period (Sep 28-Oct 26) given the yields/prices as of Oct 26 (ignoring issues like broker commissions, taxes, etc.).
4) Suppose on Oct 26 you can change your investment portfolio, would you like to keep the bonds and stocks you purchased? Why? Why not?




Part Three: Performance Report Two.
Due: Dec 1, 2007

Repeat Part Two for the period of Oct 30 –Nov 30.

If by the end of last period (Sep28- Oct26), you decide to change your portfolio, you should repeat Part Two for your new stocks and bonds instead of the old combination.

Submitting: You should submit your report in the folder of “Investment Guru Forum” via WebCt in the.

Grading:
You will get 10% extra credit for your final grade if you turn in your assignment on time.
If you lose money by Dec 1, there is no punishment in terms of your grade. But if your yield is greater than 5% you will earn at least 5% additional extra credit for your final grade depending on your actual rate of return. Higher return rate will result in higher extra credit.