A job at East Coast Yachts
It its important that the writer respond to the questions appropriately and use APA 6th edition throughout
the entire paper. APA is critical and the writer must be a master in APA to complete this paper. The are
two questions and calculations are required so the writer must perfume all the calculations as required.
The writer must also proofread the entire paper before sending over
� Mini-Case Study: A Job at East Coast Yachts
This case study, found on page 332 of your course text, presents the scenario of you beginning a new job
and being asked to determine how you want to structure your portfolio for your 401(k). After reading the
case study:
� Briefly answer the first two questions at the end ( 3 or 4 sentences each).
� Include all calculations with your response.
MINI-CASE, A JOB AT EAST COAST YACHTS
Introduction
Investment and planning for investment is a very important since it determines the quality
of future life. There are several investment options and vehicles that a person can choose from
while planning his retirement and to live a comfortable life in future. All these investment
options vary in terms of price, risks, and management among other factors (Bailey & Lopez-de-
Prado, 2013)
Question one
The advantages of mutual funds offer compared to the company stock include the
advanced portfolio management, whereby, one is supposed to pay the fee as part of the expense
ratio (Bruce, 2003). This type of fee that is paid is used to hire a professional portfolio manager
who is known to buy and sell stocks and bonds with the aim of helping the management invest
portfolio. Mutual funds also help in the dividend reinvestment since the dividends can be used in
the purchase of additional shares in a mutual fund and help in the growth of the investment.
Wilmott (2007) argues that, mutual funds help in the reduction of risks which may be incurred in
the company’s stock whereby, this is well achieved through the use of diversification. Mutual
funds also help in making the price fair and convenient to all hence, making it common and easy
to purchase as part of the company’s stock.
MINI-CASE, A JOB AT EAST COAST YACHTS
Investment in 401 (k) enables the investor to have more options with regard to his
investments coupled with risk free CDs. In addition, it enables the investor to have more equity
and bond exposures that yields good returns in the long-term. Since 401(k) is restricted to mutual
funds only, it cannot buy specific stocks or ETFs. Therefore, the investor has to buy a bond fund
that attracts good returns on investment.
The mutual fund also has lower cost in that the investor only incurs the transactions costs
while buying the stocks (Ross., Westerfield., & Jaffe, 2013). Investment I mutual funds also has
less trading restrictions, and this makes the investor to enjoy the benefits that come with market
transactions. Therefore, the investor has the chance of trading as much as they wish to provide
the cash balance and still experience the option of rebalancing his trade. Unlike the company
stock, mutual funds experience less tax headaches since the investor only needs to reconcile the
trade transactions just once in a year.
Question 2
In order to get statistical tabulations on my investment, I’m required to calculate the 5%
of my contribution which is the $3,000
5% of $3,000 = $150
The EAR that I will be able to earn from the match will be $150 therefore, I will be able
to conclude that the returns are very encouraging and have no worry with my investment.
Therefore, the investor has the option of dividend reinvestment since the dividends can be used
in the purchase of additional shares in a mutual fund and help in the growth of the investment
Conclusion
MINI-CASE, A JOB AT EAST COAST YACHTS
Investment is a very important component while planning for the future stability in life as
it determines the amount of riches an individual accumulates. An investor needs to choose an
investment option that does not only provides profits, but provide better than average returns
compared to its peer group over a three, five, and ten year period. In addition, the investor also
needs to choose the option that provides low price with an expense ratio that is least among the
available options. After all these factors have been considered, the fund should have a reasonable
and sound management, such that the manager should have a positive track record of managing
such funds to guarantee their success.
MINI-CASE, A JOB AT EAST COAST YACHTS
References
Bailey, D. &Lopez-de-Prado, M. (2013): “The Strategy Approval Decision: A Sharpe Ratio
Indifference Curve approach”, Algorithmic Finance 2 (1): 99-109
Bruce J. F. (2003). Investment Performance Measurement. New York: Wiley
Ross, S. R., Westerfield, R. W., & Jaffe, J. (2013). Corporate finance (10 th ed.). NY:McGraw-
Hill.
Wilmott, P. (2007). Paul Wilmott introduces Quantitative Finance (Second Ed.). Wiley
