A finished FIN-375 Topic 7 horizon-matched fund selection example, choosing separate instruments for a four-year down payment and a thirty-year retirement goal, each tested against its deadline. Searches like "fin 375 topic 7 assignment example", "fin375 topic 7 sample" and "fin-375 topic 7 example" land here.
What a finished FIN-375 Topic 7 horizon-matched fund selection looks like
A table of the two objectives opens the finished selection: amount, date and the loss each could survive. The down payment sleeve holds 25,000 today and adds 400 a month. Placed in short-term Treasury bills and a certificate of deposit ladder at an illustrative 4 percent, it reaches about 50,100 on schedule. Placed in a stock index fund at an assumed 7 percent, it could reach about 55,100, but a 30 percent fall spread across the final year would leave about 36,900, and a 5,000 upside is judged not worth a 13,000 shortfall on a fixed date. The retirement sleeve goes the other way: a stock index fund with a bond index fund beside it, since thirty years leaves time to recover from declines the short sleeve could not survive. Fund costs and wrappers get their own comparison.
How a FIN-375 Topic 7 example is structured
The example is arranged as two decisions sharing one investor. The investor's facts come first, including an emergency fund held elsewhere, so neither sleeve has to double as a reserve. The objectives table follows, giving each goal an amount, a date and a tolerance for loss stated in dollars. The down payment section compares short-term instruments with a stock fund, runs both to the purchase date, and shows the stock fund under a bad final year. The retirement section chooses between an actively managed fund and an index fund, and between a mutual fund and an exchange-traded fund holding the same index, comparing expense ratios, trading and tax treatment in a taxable account. A mix of 80 percent stocks and 20 percent bonds is set for the retirement sleeve. The closing section says when the down payment money moves and what event would change either plan.
One investor, two horizons
The down payment and the retirement goal are handled as separate decisions, since a four-year deadline and a thirty-year one call for different instruments.
Loss tolerance stated in dollars
Each goal carries the largest shortfall it could absorb, and for the down payment that figure is close to zero because the purchase date is fixed.
The short sleeve tested in a bad year
A 30 percent fall spread across the final year would leave a stock fund near 36,900 against a 50,000 target, which rules stocks out for this money.
Mutual fund and ETF compared
Two funds tracking the same index are compared on expense ratio, on how each trades and on how often each tends to distribute taxable gains.
A retirement mix with a reason
Eighty percent stocks and twenty percent bonds is justified by thirty years of recovery time, with the circumstance that would lower it named alongside.
Where marks go in FIN-375 Topic 7
Building one portfolio for two goals with very different dates loses the most here, since either the short goal carries stock risk or the long goal sits in cash for thirty years. Picking instruments for their past returns, the stock fund because it earned more last decade, recommends an asset with no account of the risk it brings to a four-year deadline. Loss tolerance described as moderate or conservative, with no dollar figure, cannot be tested. A down payment sleeve never run through a bad final year hides the only scenario that matters for it. Comparing a mutual fund and an exchange-traded fund with no look at costs or tax treatment treats the wrapper as irrelevant. A selection with no rule for when the short money moves leaves that choice to be made under pressure.
Get a FIN-375 Topic 7 example written to your instructions
Send the FIN-375 Topic 7 instructions and the rubric attached in your classroom, with the investor profile or case your section supplies. We write a custom example to them, with each objective given its own horizon and loss tolerance, instruments chosen per goal, the short sleeve tested in a bad year and fund wrappers compared, in 24 to 48 hours. The first one is free.
FIN-375 Topic 7 questions, answered
Why keep the down payment out of stocks if they usually earn more?
Because usually is not enough when the money is needed on a fixed date. Over four years a stock fund might finish ahead, but a single bad year near the end could leave the investor thousands short with no time to recover. In the example, an expected gain of about 5,000 is set against a possible 13,000 shortfall, and the short-term instruments win for this goal.
How does a mutual fund differ from an ETF holding the same index?
The holdings can be nearly identical while the wrapper differs. A mutual fund is bought and sold at its end-of-day net asset value, while an exchange-traded fund trades through the day at market prices, with a bid-ask spread. Exchange-traded funds often distribute fewer capital gains in taxable accounts because of how their shares are created and redeemed. The example compares expense ratios and these features for the funds in the case.
Is the example a plan for my own savings?
No. The investor, the goals and the rates are composites, and the returns are assumptions, not forecasts. Your instruments depend on your own dates, amounts, other savings, taxes and tolerance for loss. The example shows how FIN-375 wants instruments matched to an objective and horizon, as coursework only; a licensed adviser who can see your real circumstances should shape your own plan.