Atlas Investment Management

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Case Background The case is about an investment decision to be made by Atlas Investment Management for their clients Green hills. The case is dated at January, 2002. Atlas Investment managed a $600 million fixed-income portfolio for Green Hills. The way these transactions were conducted was that Green hills trustees would provide AIM with some medium term goals, Atlas then got back to Green Hills with some recommendations out of which Green hills chose one. Green hills typically held bonds purchased for more than one year. Trustees of green hills laid stress on preserving their principal amount. But as interest rates in the economy fell, they took a more aggressive stance. They decided to ask for higher returns although their requirement for safety was still there. John Galt and his associates came up with four shortlists. The first, as suggested by Bob was a choice between two bonds – a 7.875% bond of GE Capital, a subsidiary of General Electric or a 7.6% bond of Motorola. Both bonds were investment grade and were to mature five years later. The third choice suggested by Roger was an 11.25% bond of Trump Atlantic City. It was four and half years away from maturity and was rated CC by Standard and Poor's. The fourth choice as suggested by Brian was a 3.625 % Treasury note that was to mature in 6 years. The reasoning he put behind this is that Green Hills' trustees have chosen 8 Treasury bonds out of the last 10 bonds recommended. The objective of the case is to make an investment decision based on various criteria such as default risk, interest rate risk, Yield to Maturity, Credit risk and other paramaters. Background knowledge required The following concepts are required: Bond: A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate.

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