| Course | WMBA 6070 Managerial Finance |
|---|---|
| Week | Week 2 |
| Paper type | Discussion post |
| Length | About 590 words, 4 pages |
| Format | Discussion post, APA 7 citations |
| School | Walden University |
| Program | Master of Business Administration (MBA) |
| Updated | October 2026 |
Free sample paper for WMBA 6070 Week 2
Week 2 Discussion: Risk, Return and Which Investment to Hold
The Crane Fund Belongs in Treasury Bills, Not the Index Fund: Choosing Among Three Investments for Money a Rigging Company Needs in Eighteen Months, and Answering Two Classmates Who Chose Stocks
Brightwater Crane and Rigging, the composite crane rental firm I am using this term, has set aside $1.5 million to replace two aging rough-terrain cranes in about eighteen months. Until then the money sits in a bank account earning almost nothing. The owners asked which of three investments the fund should hold.
Table 1
Three Investments for an Eighteen-Month Fund
| Investment | Average yearly return expected | Yearly volatility (standard deviation) | |
|---|---|---|
| Ladder of Treasury bills and notes maturing in 6 to 18 months | About 4.4% | Under 0.5% | |
| Short-term investment-grade corporate bond fund | About 5.3% | About 2.5% | |
| Broad U.S. stock index fund | About 9% | About 17% | |
Treasury figure reflects one-year and two-year par yields of 4.47% and 4.80% on October 9, 2026 (U.S. Department of the Treasury, 2026); bond and stock figures are illustrative long-run assumptions.
The fund should hold the Treasury ladder. The stock fund offers roughly twice the expected return, but expected return is not what the owners need. They need $1.5 million to be there in eighteen months. Markowitz (1952) established that a holding's appeal depends on its variability as well as its average return, and the risk that matters here is the chance of having less money than the purchase requires.
A rough calculation makes the point. With an expected return of 9 percent and a standard deviation of 17 percent, an eighteen-month holding period in stocks carries close to a 25 percent probability of ending below its starting value, and about a one-in-eight chance of losing more than 10 percent, or $150,000, under a normal approximation. A loss that size would force Brightwater to borrow at its 7 percent line rate or delay the cranes. The bond fund's chance of a loss over the same period is under 1 percent, but its extra return of about one point, around $20,000 over eighteen months, comes with credit and interest rate risk the firm does not need to take. The Treasury ladder gives up that extra return in exchange for knowing the amount and timing of every payment. Brealey et al. (2023) note that matching an investment's maturity to the date the money is needed removes interest rate risk, and the ladder is built to mature as the purchase approaches.
Would anyone hold the bond fund here, given that the extra return is small and the money is spoken for?
Reply to Kevin
Kevin, you chose the stock fund because its expected return over eighteen months is about $200,000, far more than the ladder's. That is true on average. But Brightwater cannot use an average; it needs the money on a specific date. If stocks fall 15 percent in the months before the purchase, as they have in several recent years, the firm faces a shortfall of $225,000 exactly when it must pay. Is there a version of your recommendation that limits that risk, such as moving the fund to bills a year before the purchase?
Reply to Rachel
Rachel, your point that inflation erodes cash is right, and it is the strongest case against keeping the fund in the bank. But at about 4.4 percent the Treasury ladder earns well above the Federal Reserve's 2 percent inflation goal, so it protects purchasing power in ordinary conditions without equity risk. The stock fund's real advantage appears over long horizons, which this fund does not have.
References
Brealey, R. A., Myers, S. C., & Allen, F. (2023). Principles of corporate finance (14th ed.). McGraw Hill.
Markowitz, H. (1952). Portfolio selection. The Journal of Finance, 7(1), 77-91. https://doi.org/10.1111/j.1540-6261.1952.tb01525.x
U.S. Department of the Treasury. (2026). Daily Treasury par yield curve rates [Data set]. https://home.treasury.gov/resource-center/data-chart-center/interest-rates
Reading the WMBA 6070 Week 2 instructions
Risk and return discussions in managerial finance usually give students two or three investments with expected returns and a measure of spread and ask which one a stated firm should hold. The post must commit to one holding, say why the bigger average return lost, and then take on peers who chose differently. Instructors look for reasoning that ties the choice to the firm's purpose and horizon, not to general risk preferences. Posts typically stay under four hundred words, with two replies. Using current market data, such as Treasury yields, makes the comparison concrete. A rough probability of loss over the holding period, explained in plain language, often persuades classmates more than the standard deviation figure alone.
Inside the WMBA 6070 Week 2 example
The post states the fund's purpose and date, then sets out three investments in a small table with real Treasury yields and illustrative bond and stock assumptions. It picks the Treasury ladder and grounds the choice in Markowitz's point that risk and return must be weighed together. A paragraph estimates the chance of loss over eighteen months for stocks and bonds and prices the bond fund's small extra return. It notes, citing Brealey and colleagues, that matching maturities to the purchase date removes interest rate risk. A question asks whether anyone would hold the bond fund. One reply grants a classmate's higher expected return and asks how the firm would cope with a shortfall at the purchase date; the other answers an inflation concern with the ladder's yield against the Federal Reserve's 2 percent goal. Margin comments flag the purpose and the loss estimate.
Where the marks sit in the WMBA 6070 Week 2 rubric
Graders reward a clear choice tied to the firm's purpose and horizon. Explaining why a higher expected return was rejected, with a quantified view of downside risk, shows understanding of risk beyond a single statistic. Using current market data adds credibility. A reply scores well by granting what a peer got right about returns and then asking how the crane fund would survive a bad quarter. The closing question should open a real disagreement. Rubrics also value plain explanations of statistical ideas for a general reader. Timely posting on separate days and correct citations, including the data source, settle the remainder of the discussion grade.
WMBA 6070 Week 2 help: mistakes that cost marks
Start with when the money is needed and what happens if it is short. Then compare the investments on that basis, not on expected return alone. Estimate, even roughly, how likely each investment is to lose money or fall short over the holding period. Use current yields where you can and cite them. Students often lose marks by choosing the highest return without addressing risk, or by declaring an investment safe without saying over what period. Another common gap is replying to classmates with agreement only. Grant what is right in an opposing view, then test it against the firm's purpose. Keep the post within the limit. If you need a custom sample post for an investment choice your organization faces, send us the options and the horizon.
Get a WMBA 6070 Week 2 example written to your instructions
Post the Week 2 instructions, the data table your classroom supplied, and however many replies count toward the grade; a completed post and its two replies land inside 24 to 48 hours, the first one free. Where a specific risk measure is named in the rubric, flag it and the sample runs on that one.
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WMBA 6070 Week 2 questions, answered
Where can I find a free WMBA 6070 Week 2 sample paper?
Read the full risk and return post for a crane company's replacement fund, replies included, here.
Which investment does the post choose?
A ladder of Treasury bills and notes maturing as the crane purchase approaches.
Why not the stock fund?
Over eighteen months it has roughly a one-in-four chance of losing money when the fund is needed on a set date.
What do Treasuries yield?
About 4.47 percent for one year and 4.80 percent for two years on October 9, 2026.
Which theory supports the choice?
Markowitz's portfolio selection, which weighs risk alongside expected return.