FINANCIAL ASSIGNMEMENT

Financial Assignment

Financial Assignment

Part I

The purpose of this part is to invest AUD $5000?000 by forming a portfolio. Firstly? I have discussed the general investment trends and environments and than shown how I made portfolio and invested AUD $5000?000 in order to generate maximum profits. Asset allocation is based on the incontrovertible truth that a portfolio needs to be structured on the basis that no one can predict the future. The portfolio has been diversified among 3 assets sectors:

Banking sector (shares of one bank only from the two banks Commonwealth bank & Westpac banking Corporation.);

Non-banking industry sector (shares of one company only from the two companies' BHP & Rio Tinto); and

Portion of funds in cash.

Question 1: Trend Behaviour of Non Cash Assets From Jan 2000-Dec 2009

Question 2: BHP

BHP Billiton Limited (BHP) is the world's largest diversified resource company, with operations spanning several continents. It has interests in mineral exploration, production and processing, oil and gas exploration and development, steel production and merchandising.

On November 12, 2007, BHP released details of a merger proposal with Rio Tinto, which comprised a 3-for-1 share indicative offer, or 28% premium to Rio Tinto shareholders based on the combined volume weighted average market capitalizations of Rio Tinto Limited and Rio Tinto plc over the month ended 31 October 2007 and the volume weighted average BHP Billiton share prices over the same period. According to management, the combined entity could eventually deliver annual savings of $3.7B largely through the removal of duplication as well as procurement and operating efficiency savings, with benefits of $1.7B by the third year, and additional cost savings of $2B after seven years. The merged company would have more than $70B in annual sales and become the world's largest producer of copper and aluminum, and the second-largest provider of iron ore. In addition, BHP management also announced it intended to commence a $30B share buy-back post completion of the merger.

Question 3: Capital Gain/Loss of Banking Asset

Just as the Around the Horn trading plan developed for our personal use? these rules also evolved to maximize our own trading profits? minimize risk and still allow the trades room to breathe. When we compute the monthly results? we use these rules to calculate the plan's efficacy. Individual trade results may exceed or fall short of the monthly results (for example? more or less favorable fills or missing a trade)? but these rules allow comparison of results over time and a measure for one's own trading performance using pre-established criteria. While these guidelines will always have an exception to the rule (e.g. stopping out of a trade that later becomes profitable) over time? they serve us well more often than not.

If the trade is not this strong (as occurs much more often)? exit the trade at the Initial Profit Target. Some traders choose to exit only half or some other percentage at this level and then trail a profit stop initially at the 50% to Target level? then later ...