Apple Inc - Allocation of Amount, Euro Bund Futures, Return Outcomes - Example

UNDERGRADUATE SPRING 2009 PROJECT WORK: PERSONAL FINANCE Business Portfolio for the period between March 23, – May 23, SUBMITTED BY SUPERVISION BY DR. ARUNA DHADE Table of Contents Content Page # Introduction 3 Euro Bund Futures 4 Apple Stock 6 Return Summary 7 Conclusion 7 References 10 Appendices 11 Introduction Investment is a use of financial resources for generating income (Berhanu, 2003; Mejorada, 2011). It is also referred as a purchase of foreign stocks (Strong, 2009). Investment with confidence is the key investment philosophy. This philosophy is based on thinking that the new investor should have some sort of investment confidence and this investment confidence should be driven through understanding the basics of the financial markets. As currently the some basic rules of the financial markets have already been learned and appropriately understood as well, the provided investment opportunity in the bond and stock market would provide a way to enhance the practical issues relating the financial markets. For this purpose, both bond and stock markets are highly relevant for increasing the basic but practical understanding of the changes in such markets. Risk and return are inbuilt in all types of investment. It is unavoidable or nearly impossible to have such investment which is completely risk-free and full of return. Based on this investment reality, the investment goal is to have investment experience with the international bond market and the international stock market as well. In which, the focus will be to have maximum return from the investment (investment goal). And the investment objectives include selecting such international stock which has higher chances of returns in the near future because the total investment period is one month and this selection would be essential for generating the maximum return from the investment. In addition, the international bond market is considerably complex because it has different features and complex set of arrangements which make it difficult for new investor to obtain maximum return from the international bond market. However, it is an established fact that the internationals bonds are considered as a secure form of investment because the international investors and their markets remain stable and consistent as well. As a result, understanding the international bonds will be another key investment objective which will be obtained through this business experience. Allocation of Amount table Funds Percentage Investment Period Resources Euro Bund Futures 3,50,000 35 per cent 1-30 May, 2014 http://www.investing.com/rates-bonds/euro-bund-historical-data Apple Inc 3,00,000 30 per cent 1-30 May, 2014 http://www.investing.com/equities/apple-computer-inc-historical-data This table shows the division of available amount for investment. In which 50 per cent of the amount has been used in the Euro Bund Futures and the remaining 50 per cent has been invested in the stock of Apple Inc. The reason behind the equal sharing is that both investment are important and offer a different opportunity for understanding the international bond and stock market as well. And through this understanding, future investment policy will be determined. Euro Bund Futures Date Transaction Available QAR/Euro Bond Rate Total Euros Total number of bonds 01.5.14 Conversion rate 3,50,000 (Qatari Riyals) 0.199 69,650 02.5.14 Buy 144.800 481 30.5.14 Sell 146.810 70,616 30.5.14 Conversion rate 3,53,080 (QR) 0.20 30.5.14 Profit (QAR) 3,080 The Euro Bund Futures provided profit. On May 1, 2014, the investment period was started and it was essential to make investment in the international bond market. After much consideration, finally the Euro Bund Futures was chosen. This bond was traded in the Euro. As a result, before purchasing this bond from the international market, it was essential that the available 3, 50,000 Qatari riyals should be converted into the Euro. For this purpose, it was necessary to visit the currency exchange shop and convert the riyal into the Euro. However, before converting them, the exchange rate between both currencies was taken into account. On May 1, 2014, the QAR/Euro was 0.199. It meant one Qatari Riyal was equal to 0.199 Euro. As a result, the total amount of Qatari Riyals was multiplied with the Euro rate which generated 69,650 Euros. Now, the total amount of Euros was used for purchasing the Euro Bund Futures. For this objective, it was necessary to obtain the bond rate information and which was 144.800 Euros. Subsequently, this rate was used for dividing the available Euros which provided 651 numbers of bonds from the total investment in the Euro Bund Futures. Later on May 30, 2014, decision was taken to sell the bonds on the rate which was given used for trading the bond. On that day, the bond selling rate was 146.810 per bond and subsequently this rate was multiplied with the number of available bonds after selling them into the international bond trading market. And this sale generated the total 70,616 Euros. However, before going to compute profit or loss amount, it was necessary to convert Euros into the Qatari Riyals. For this purpose, the Qatari Riyal rate against Euro was obtained and this rate was used for dividing the available amount of Euros, the subsequent result generated the amount of 3, 53,080 Qatari riyals. And when this amount is deducted from the initial amount of investment, profit of 3,080 was obtained. Apple (Stock) Date Transaction Available QAR/USD Apple Share Price Total Dollars Total number of shares 01.5.14 Conversion rate 3,00,000 (Qatari Riyals) 0.2747 82,410 02.5.14 Buy 84.50 975 30.5.14 Sell 90.43 88,169 30.5.14 Conversion rate 3,20,965 (QR) 0.2747 30.5.14 Profit (QAR) 20,965 (QR) The investment in stock generated profit. Investment in Apple Inc started on May 1, 2014. For this investment, 3, 00,000 Qatari riyals were allocated for the purpose of investment. Before going to purchase the stocks of Apple Company, it was necessary to convert the available amount of Qatari riyals into the dollars because the stocks are Apple were traded in the dollar currency. As a result, the exchange rate between Qatari Riyal and dollar was determined. On this day, one Qatari Riyal was equal to 0.2747 dollar. Consequently, the Qatari riyals were multiplied with this exchange rate which provided $82,410. On the next day, the purchase decision was taken and the gathered amount of dollars was used for purchasing the stocks of Apple. On this day, buying price was $84.43 being trade in the international stock market. Subsequently, this rate was used for dividing the total dollars and that provided 975 stocks of Apple. After keeping the stocks for one month period, it was decided to sell them on the last trading day. On that day, the selling price of Apple was $90.43 and this rate was multiplied with the total stocks which provided the actual amount of total stock investment ($88,169). However, this amount was in dollar consequently it was converted into the Qatari riyal with the exchange rate of the same day and the exchange rate was 0.2747. And the total number of dollars was divided by the exchange rate which provided 3, 20,965. This amount was more than the starting investment and overall 20,965 Qatari riyals were declared as profit from the stock investment. Chapter three: Return outcomes Return summary Funds Percentage of net Investment Investment Period Profit/(loss) Bond 3,50,000 35 per cent 1-31.5.2014 3,080 (Profit Stocks 3,00,000 30 per cent 1-31.5.2014 20,965 (Profit) Total Profit 24,046 (Profit) Overall, this summary table exhibits that the stock investment decision was correct. From the bond investment, profit of 3080 was obtained whereas the stock investment generated the total profit of 20,965 in a period of one month. When the profit of bond is added to the profit of stock investment, the total profit became 24046 Qatari riyals. Conclusion Based on the provided outcome, it can be figured out that the international bond market is complex and this has proven by the fact that the investment on the Euro bund futures has not generated any profit of 3080 has been provided. The reason of this loss is the fact that the bonds were purchased expensively and they were sold inexpensively. At the time of purchasing, the purchase price was 144.800 and the selling price was 146.810. In other words, the increase in the bond price mainly contributed to the occurrence of profit in this bond investment. However, the investment did provide a reasonable investment experience that the QAR/Euro exchange rate, in fact, increased the earning. For example, while purchasing Euros, the price was 0.199 and 0.20 was the selling price which reflected that some appreciation in the exchange rate was recorded which benefited the entire conversion process. However, the appreciation amount was very small consequently it did not show much effect on the overall bond investment. Overall, this investment experience clearly enabled to understand the complexity involved in the process of buying and selling the bonds particularly in the international bond market. Moreover, the experience also provided that certain things must be considered before investing in the international bonds. Firstly, the nature and type of the international bond and how their rates are fluctuated are some of those questions that must be answered before entering into the international bond market. By knowing such information, it would become much easier to take appropriate investment decision in which investment objectives can be determined and subsequently achieved through a careful process of investment in such markets. Moreover, before buying any bond, it must be ensured that the bond must not lose its value at least its fundamentals must be strong and must not experience decline under the normal trading days. Achieving profit in the stock market provides that investment in Apple would be a lucrative investment option. Before investing into the stock market, it was decided that the stock investment would be done only in those sectors which have higher chances of generating returns for the new investors. As it is commonly understood that the technology-based companies always generate more revenue through launching new and unique devices and gadgets, this understanding paid off and the investment in the stocks of Apple generated the highest amount of returns. Overall, the investment generated profit. This indicates that the investment philosophy and investment objectives were achieved through investing in the international bond and stock markets. The net profit amount of 24, 046 for a new investor gives a considerable boost and confidence which could be used for deciding further future investment decisions. If the net profit figure is compared with the initial investment amount, the result would indicate that more than 2.45 per cent return has been achieved on the total invested amount. Similarly, if the same net profit is compared with the amount invested in the stock, the result highlights that more than 6 per cent return has been obtained, demonstrating that the investment in the stocks of Apple produced the better results. References Berhanu, D.G. (2011). Institutions and Investment in Sudan: Socio-Economic and Institutional Foundations of Reconstruction and Development. New Jersey, NJ: Transaction Publishers. Mejorada, N.D. (2003). Investment Management. Quezon City: JMC Press. Strong, R. (2009). Portfolio Construction, Management and Protection. 5th edn. Ohio: South-Western Cengage Appendices Apple INC (USD). http://www.investing.com/equities/apple-computer-inc-historical-data Date Last Open High Low Vol. Change % May 30, 2014 90.43 91.14 92.02 89.84 141.01M -0.37% May 29, 2014 90.77 89.69 90.98 89.68 94.12M 1.83% May 28, 2014 89.14 89.43 89.98 89.11 78.92M -0.27% May 27, 2014 89.38 87.98 89.41 87.95 87.22M 1.88% May 23, 2014 87.73 86.75 87.82 86.64 58.05M 1.13% May 22, 2014 86.75 86.66 87.12 86.30 50.22M 0.15% May 21, 2014 86.62 86.26 86.67 86.01 49.25M 0.27% May 20, 2014 86.39 86.36 86.63 85.82 58.71M 0.02% May 19, 2014 86.37 85.41 86.76 85.33 79.44M 1.18% May 16, 2014 85.36 84.09 85.36 83.63 69.09M 1.47% May 15, 2014 84.12 84.96 85.23 84.01 57.71M -0.85% May 14, 2014 84.84 84.63 85.34 84.53 41.60M 0.02% May 13, 2014 84.82 84.57 84.93 84.39 39.94M 0.15% May 12, 2014 84.69 83.93 84.81 83.91 53.33M 1.24% May 09, 2014 83.65 83.51 83.75 82.90 72.90M -0.42% May 08, 2014 84.00 84.04 84.92 83.77 57.57M -0.73% May 07, 2014 84.62 85.04 85.33 83.96 70.72M -0.35% May 06, 2014 84.92 85.97 86.34 84.92 93.64M -1.08% May 05, 2014 85.85 84.31 85.86 84.29 71.77M 1.42% May 02, 2014 84.65 84.62 84.89 84.24 47.88M 0.18% May 01, 2014 84.50 84.57 84.97 83.77 61.05M 0.24% Highest: 92.02 Lowest: 82.90 Difference: 9.12 Average: 86.17 Change %: 7.2 Funds Percentage of net Investment Investment Period Profit/(loss) Bond 3,50,000 35 per cent 1-31.5.2014 3,080 (Profit Stocks 3,00,000 30 per cent 1-31.5.2014 20,965 (Profit) Net Profit 24,046 (Profit) Euro Bund Futures Date Transaction Available QAR/Euro Bond Rate Total Euros Total number of bonds 01.5.14 Conversion rate 3,50,000 (Qatari Riyals) 0.199 69,650 02.5.14 Buy 144.800 481 30.5.14 Sell 146.810 70,616 30.5.14 Conversion rate 3,53,080 (QR) 0.20 30.5.14 Profit (QAR) 3,080 Apple Date Transaction Available QAR/USD Apple Share Price Total Dollars Total number of shares 01.5.14 Conversion rate 3,00,000 (Qatari Riyals) 0.2747 82,410 02.5.14 Buy 84.50 975 30.5.14 Sell 90.43 88,169 30.5.14 Conversion rate 3,20,965 (QR) 0.2747 30.5.14 Profit (QAR) 20,965 (QR) Funds Percentage Investment Period Resources Euro Bund Futures 3,50,000 35 per cent 1-30 May, 2014 http://www.investing.com/rates-bonds/euro-bund-historical-data Apple Inc 3,00,000 30 per cent 1-30 May, 2014 http://www.investing.com/equities/apple-computer-inc-historical-data 8 2014-05-30 0.2015 1 QAR = 0.2015 EUR as of May 30, 2014 3.6408 0.7336 9 2014-05-29 0.2019 1 QAR = 0.2019 EUR as of May 29, 2014 3.6407 0.7352 10 2014-05-28 0.2021 1 QAR = 0.2021 EUR as of May 28, 2014 3.6407 0.7358 11 2014-05-27 0.2014 1 QAR = 0.2014 EUR as of May 27, 2014 3.6409 0.7334 12 2014-05-26 0.2012 1 QAR = 0.2012 EUR as of May 26, 2014 3.6413 0.7328 13 2014-05-23 0.2016 1 QAR = 0.2016 EUR as of May 23, 2014 3.6412 0.7339 14 2014-05-22 0.2011 1 QAR = 0.2011 EUR as of May 22, 2014 3.641 0.7323 15 2014-05-21 0.2007 1 QAR = 0.2007 EUR as of May 21, 2014 3.6408 0.7306 16 2014-05-20 0.2004 1 QAR = 0.2004 EUR as of May 20, 2014 3.6412 0.7298 17 2014-05-19 0.2003 1 QAR = 0.2003 EUR as of May 19, 2014 3.6407 0.7294 18 2014-05-16 0.2005 1 QAR = 0.2005 EUR as of May 16, 2014 3.6406 0.73 19 2014-05-15 0.2003 1 QAR = 0.2003 EUR as of May 15, 2014 3.6407 0.7294 20 2014-05-14 0.2003 1 QAR = 0.2003 EUR as of May 14, 2014 3.6408 0.7291 21 2014-05-13 0.2005 1 QAR = 0.2005 EUR as of May 13, 2014 3.6408 0.7299 22 2014-05-12 0.1997 1 QAR = 0.1997 EUR as of May 12, 2014 3.6408 0.7269 23 2014-05-09 0.1996 1 QAR = 0.1996 EUR as of May 9, 2014 3.6408 0.7267 24 2014-05-08 0.1984 1 QAR = 0.1984 EUR as of May 8, 2014 3.641 0.7225 25 2014-05-07 0.1974 1 QAR = 0.1974 EUR as of May 7, 2014 3.6411 0.7188 26 2014-05-06 0.1972 1 QAR = 0.1972 EUR as of May 6, 2014 3.6406 0.7179 27 2014-05-05 0.1980 1 QAR = 0.1980 EUR as of May 5, 2014 3.6405 0.7207 28 2014-05-02 0.1980 1 QAR = 0.1980 EUR as of May 2, 2014 3.6404 0.7209 29 2014-05-01 0.1980 1 QAR = 0.1980 EUR as of May 1, 2014 Retrieved: http://www.likeforex.com/misc/historical-rates.php?f=QAR&t=EUR&y=2014&page= Euro Bund Futures Date Last Open High Low Change % May 30, 2014 146.810 146.630 146.840 146.520 -0.08% May 29, 2014 146.930 147.080 147.120 146.650 -0.07% May 28, 2014 147.040 146.500 147.090 146.410 0.44% May 27, 2014 146.400 146.020 146.540 145.900 0.21% May 26, 2014 146.090 146.060 146.210 145.850 0.00% May 23, 2014 146.090 145.990 146.200 145.950 -0.01% May 22, 2014 146.100 145.750 146.240 145.670 0.17% May 21, 2014 145.850 146.280 146.320 145.750 -0.16% May 20, 2014 146.090 146.090 146.340 145.950 -0.12% May 19, 2014 146.270 146.340 146.580 146.070 -0.04% May 16, 2014 146.330 146.630 146.760 146.250 -0.22% May 15, 2014 146.650 145.780 146.750 145.730 0.56% May 14, 2014 145.840 145.280 145.970 145.250 0.36% May 13, 2014 145.310 144.680 145.330 144.650 0.37% May 12, 2014 144.770 144.720 144.840 144.620 -0.06% May 09, 2014 144.860 144.920 145.030 144.710 -0.02% May 08, 2014 144.890 144.550 144.960 144.340 0.24% May 07, 2014 144.550 144.780 144.890 144.290 -0.08% May 06, 2014 144.670 144.630 144.780 144.410 0.01% May 05, 2014 144.660 144.830 144.920 144.620 -0.10% May 02, 2014 144.800 144.750 144.970 144.110 Source: http://www.investing.com/rates-bonds/euro-bund-historical-data Saturday 31 May 2014 1 QAR = 0.2747 USD QAR USD rate for 31/05/2014 Friday 30 May 2014 1 QAR = 0.2747 USD QAR USD rate for 30/05/2014 Thursday 29 May 2014 1 QAR = 0.2747 USD QAR USD rate for 29/05/2014 Wednesday 28 May 2014 1 QAR = 0.2747 USD QAR USD rate for 28/05/2014 Tuesday 27 May 2014 1 QAR = 0.2747 USD QAR USD rate for 27/05/2014 Monday 26 May 2014 1 QAR = 0.2746 USD QAR USD rate for 26/05/2014 Sunday 25 May 2014 1 QAR = 0.2745 USD QAR USD rate for 25/05/2014 Saturday 24 May 2014 1 QAR = 0.2747 USD QAR USD rate for 24/05/2014 Friday 23 May 2014 1 QAR = 0.2747 USD QAR USD rate for 23/05/2014 Thursday 22 May 2014 1 QAR = 0.2746 USD QAR USD rate for 22/05/2014 Wednesday 21 May 2014 1 QAR = 0.2747 USD QAR USD rate for 21/05/2014 Tuesday 20 May 2014 1 QAR = 0.2747 USD QAR USD rate for 20/05/2014 Monday 19 May 2014 1 QAR = 0.2747 USD QAR USD rate for 19/05/2014 Sunday 18 May 2014 1 QAR = 0.2747 USD QAR USD rate for 18/05/2014 Saturday 17 May 2014 1 QAR = 0.2747 USD QAR USD rate for 17/05/2014 Friday 16 May 2014 1 QAR = 0.2747 USD QAR USD rate for 16/05/2014 Thursday 15 May 2014 1 QAR = 0.2747 USD QAR USD rate for 15/05/2014 Wednesday 14 May 2014 1 QAR = 0.2747 USD QAR USD rate for 14/05/2014 Tuesday 13 May 2014 1 QAR = 0.2747 USD QAR USD rate for 13/05/2014 Monday 12 May 2014 1 QAR = 0.2747 USD QAR USD rate for 12/05/2014 Sunday 11 May 2014 1 QAR = 0.2748 USD QAR USD rate for 11/05/2014 Saturday 10 May 2014 1 QAR = 0.2746 USD QAR USD rate for 10/05/2014 Friday 9 May 2014 1 QAR = 0.2746 USD QAR USD rate for 09/05/2014 Thursday 8 May 2014 1 QAR = 0.2747 USD QAR USD rate for 08/05/2014 Wednesday 7 May 2014 1 QAR = 0.2747 USD QAR USD rate for 07/05/2014 Tuesday 6 May 2014 1 QAR = 0.2747 USD QAR USD rate for 06/05/2014 Monday 5 May 2014 1 QAR = 0.2747 USD QAR USD rate for 05/05/2014 Sunday 4 May 2014 1 QAR = 0.2747 USD QAR USD rate for 04/05/2014 Saturday 3 May 2014 1 QAR = 0.2747 USD QAR USD rate for 03/05/2014 Friday 2 May 2014 1 QAR = 0.2747 USD QAR USD rate for 02/05/2014 Retrieved: http://www.exchangerates.org.uk/QAR-USD-exchange-rate-history.html Read More