David Emmanuel H.

Dionisio
MD18-008702 FinMan Mid-term paper

1. A person will never know if what they put their time and effort in will come back with a
positive result. One example is that of a cookie shop. If you place all your resources on
one type of cookie, there will be a point where the cookies will not make any more money
because of the oversaturation. But if you use the resources to make Choco-chip, peanut
butter, and vanilla cookies, there would be a variety that will keep the people buying for
because of the variety of products or investments. This is reflected in stocks as if you
place all your money in one stock, and that stock crashes, then you would end up losing
most of what you invested on it. It would be better do diversify and place your money in
different companies.
And in the management of these finances, we use something called a Sharpe ratio which
can tell us if the investments are going to be good or not based on the earnings minus
the amount of risk of the investment divided by the changing prices of the market price.
To sum it up, if you have a lower risk and lower volatility, the higher the ratio indicating
a higher number of returns. And if there are higher risks and volatility, the smaller the
ratio, indicating a lower number of returns. Information ratio on the other hand is used
to measure the investments returns with a benchmark.

2. ATRAM should charge a trust fee because ATRAM is the one responsible for moving
the money around. This fee covers the charges that are made when investing/handling
the money. In comparison to a mutual fund, a target fund is managed so that the end
would always be a return even if it is small. For a mutual fund, it can be mismanaged
where all the money invested could be lost.

6. I believe that the top three risks are country risk, foreign currency risk, and credit/default
risk. Country risk is defined as the risk in investing in a country where there are political,
economic, and social structures may be unfavorable. I believe it is the first key risk
especially for our country, because no one would want to risk investing in a country that
has a lot of issues. This just does not make sense as your money can be lost easily.
The second key risk; foreign currency risk, is the risk an investor makes when investing
in a foreign country where we do not know if their currency will become more expensive.
An example would be those who invested in the US dollar before, because right now the
exchange is higher if sold for Ph peso. And lastly the credit/default risk is the risk one
takes investing in someone who may not be able to pay back on time. The reliability of
the investment paying back on time can greatly affect the ability for an investor to acquire
more capital to invest in something new.
9. The advantages of ATRAM GAFF over ATRAM would be that ATRAM GAFF has a
deadline. It has a targeted point at when it will pay off the investors such as that of a
target fund. It is also more advantageous because, since it is a fund where all the
investments are first collected in a bigger pool and then reinvested, there are cheaper
costs when they are invested. The advantages of ATRAM on the other hand would be
that there might be a higher return compared to ATRAM GAFF, but this would come at
a higher risk with a crash being considered a loss already.