REPORT PRESENTATION

Elisabeth Jackman

Foundation to Financial Management, FIN2030, SO1

South University Online

Professor: Keith Davis

AMORTIZATIONSimilar to depreciation, amortization is used to write off cost of loss in value but for intangible assets instead of tangible assets (Brigham & Houston, 2012, p. 68).

AMORTIZED LOANSThese are loans that are repaid in equal payments over the life of the loan (Brigham & Houston, 2012, p. 170).

LOAN AMORTIZATION SCHEDULE

Amount borrowed: $100,000

  Years: 5      

  Rate: 6%      

  PMT: −$23,739.64      

Year Beginning Amount (1)

Payment (2)

Interesta (3)

Repayment of Principalb (4)

Ending Balance (5)

1$100,000.00

$23,739.64

$6,000.00$17,739.64

$82,260.36

2 82,260.36 23,739.64 4,935.62 18,804.02 63,456.34

3 63,456.34 23,739.64 3,807.38 19,932.26 43,524.08

4 43,524.08 23,739.64 2,611.44 21,128.20 22,395.89

5 22,395.89 23,739.64 1,343.75 22,395.89 0.00

HOW AMORTIZATIONWORKS

• Payments stay the same every month• Interest decreases with balance• Balance decreases• Amount of principal payment increases as interest

payments decreases but monthly payments stays the same

• Loan steadily picks up speed in losing value until it is paid off to a zero balance.

• Borrower deducts interest component for taxes because the lender reports this amount as taxable income.

Portfolio AnalysisA systematic way to analyze the products and

services that make up an associations business

portfolio (The Forbes Group, n.d., p.1).

A portfolio which consists of stocks. With one stock

there is a stand alone risk. With more stocks an

investor reduces their risk, creating a diverse

portfolio.

INVESTING ONLINESome Stock Trading Sites• E-Trade• Charles Schwab• Scottrade• OptionsHouse• Fidelity• TD Ameritrade

DRIPsDirectinvestments.com

FirstShare

Or information can be found on any company’s site under investor options

BONDS & GOVERNMENT SECURITIES

Types:

U.S. Treasury

Foreign

Municipal

Corporate

Risks:

Default

Inflation

Reinvestment

Maturity

Liquidity

Credit

BOND YIELD COMPARISON

Each type of bond have their own sets of pros and cons, as well as, risks attach to them that an investor should carefully evaluate before deciding what is best investment to make base on their goals.

PORTFOLIO RISK & RETURN

The thought behind risk-return tradeoff is that investors enjoys returns and dislike risks (Brigham & Houston, 2012,p. 258).

Therefore, in an attempt to get investors to ignore their risk aversion, the returns must match the risks. Therefore, the higher the risk, the higher the return.

Portfolio diversity can also reduce risk and give an investor a greater chance at receiving higher returns than they would with a stand alone risks.

CAPM AND BETACapital asset pricing model (CAPM) is based on the idea that any stock’s required rate of return is the same as the risk-free rate of return plus the risk premium after diversification (Brigham & Houston, 2012, p. 268).

The beta coefficient is a metric that shows how the stock’s return moves with the market to determine the market risk level (Brigham & Houston, 2012, p. 274).

CONCLUSIONThere are many aspects to investment that an investor should

take into account when doing any kind of financial investment.

While there are returns (the appealing motivation), there are also

risks to consider (the downside). Therefore, before making any

investment decision an investor should explore their risk levels,

as well as returns. The hope is by doing this, the investor would

reduce their risk while optimizing on their returns.

REFERENCES

• Brigham, E.F. & Houston, J.F. (2012). Foundations of financial management (7th ed) [Vital Source digital version]. Mason, OH: South-Western Cengage Learning

• South University Online. (2010). MGT3002: Foundation to Financial Management: Weeks 2-5: Assignment 2. Retrieved from myeclassonline.com

• The Forbes Group. (n.d.). Portfolio analysis: seperating winners from losers in the association work plan. Retrieved from http://www.forbesgroup.com