REFAL_FIN403

Kingdom of Saudi Arabia

Ministry of Education

Saudi Electronic University

College of Administrative and Financial Sciences

Assignment 3

Course Name: Investments Course Code: FIN403

CRN: Assignment Title: Advanced Topics in Investment and Risk Management

Semester: First Academic Year: 2025-26

Suggested Role Division

Student Name Student ID Assigned Part Section Title

Part A

Part B

Part C

Part D

For Instructors Use only

Instructors Name:

Assigned Part Individual Section Grade 8 Group effort Grade 2 Presentation Grade 10 Total Grade 20 Level of Marks

Part AHigh/Middle/Low

Part BHigh/Middle/Low

Part CHigh/Middle/Low

Part DHigh/Middle/Low

Average Grade (Group Overall)High/Middle/Low

Important Guidelines -Please read carefully

General Instructions

Submit the assignment through Blackboard (Word format only) via the designated folder.

Submissions via email or late submissions will not be accepted.

Make sure your work is clear, wellstructured, and includes your complete details on the cover page.

Plagiarism or use of AI-generated content will result in a grade of zero.

All answers must be typed in Times New Roman (size 12, doublespaced).

Learning Outcomes:

After completion of Assignment, the students will be able to understand the following

CLO4:Demonstrate the valuation methods used for the valuation of the common forms of debt, equity, property, and derivative securities.

CLO5:Illustrate asset models of a stochastic nature that are appropriate to the management of liabilities.

The assignment consists of two parts:

Part 1: Assignment Questions (10 Marks)

A. Bond Selection and Interest Rate Expectations:

Should an investor who expects interest rates to decline seek low- or high-coupon bonds? Relate your answer to duration and price sensitivity.

B. Warrant Pricing and Investor Behavior:

Why do investors tend to pay a smaller premium for a warrant as the price of the stock goes up?

C. Stock vs. Options: Risk and Loss Analysis

Assume you wish to control the price movement of 100 shares of stock. You may buy 100 shares of stock directly or purchase a call option on the 100 shares. Which strategy is likely to expose you to the larger potential dollar amount of loss? Which strategy is likely to expose you to the larger potential percentage loss on your investment?

D. Hedging Strategies Using Financial Futures

How can using the financial futures markets for interest rates and foreign exchange help financial managers through hedging? Briefly explain and give one example of each.

Part 2: Presentation (10 Marks):

Presentation Guidelines

Each group will deliver a short presentation (up to 12 minutes) summarizing their report and key findings.

Four marks will be allocated for the overall quality, organization, and clarity of the presentation.

Three marks will be awarded based on each students ability to clearly explain their own section and respond to questions related to it.

Three marks will be awarded for each students understanding of the other sections prepared by group members, including the introduction and conclusion, demonstrated through answering related questions.

Note: Slides (6-8) used during the presentation should be included as images at the end of the report.

Answers

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