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FIN 403 · Unit 2 of 6

Portfolio Theory and Diversification

Portfolio Management and Asset Allocation

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Learning objectives

After completing this unit, you will be able to:

  • Apply frameworks to case studies and projects
  • Apply the frameworks in "Portfolio Theory and Diversification" to a real management decision
  • Make progress on your Applied project applied project

Why this matters

Portfolio Theory and Diversification is essential to Portfolio Management and Asset Allocation. Lessons build fluency with anchor-company examples, worked problems, and assessments on the unit page.

Lesson

Unit overview

Complete all 4 lessons in order. Each lesson follows the program authoring standard: conceptual prose, worked examples, practice problems, and managerial judgment prompts. Finish unit exercises and the knowledge check before marking the unit complete.

Connection to applied work

This unit feeds directly into Applied project. As you read, capture notes, examples, and data you can reuse in that deliverable. Strong students finish each unit with a draft section of their project, not just highlights.

Practice

  1. Write a one-page summary of this unit in your own words without looking at the lesson.
  2. Find a real company example (public filing, news article, or personal experience) that illustrates the main concept.
  3. Draft one paragraph recommending an action a manager should take based on this unit.
  4. Add at least three terms from this unit to your course glossary.

Knowledge check

Answer these without notes before marking the unit complete:

  1. What is the central idea of "Portfolio Theory and Diversification"?
  2. What mistake do beginners most often make when applying this material?
  3. How does this unit help you complete Applied project?
  4. What is one decision you face this month where this unit applies?

Key takeaways

  • Apply frameworks to case studies and projects
  • Business concepts only matter when they change a decision.
  • Your FIN 403 assessment (Portfolio Management and Asset Allocation. Six units covering applied topics in this concentration.) rewards applied understanding, not memorization.

Unit assessment

Complete each section below. Score 80%+ on the quiz to finish this unit's assessment.

50% applied project30% case work20% knowledge checks

Exercises

Apply what you learned in this unit with structured practice.

ExerciseApplied practice: Portfolio Theory and Diversification45 min
Complete a focused practice exercise on **Portfolio Theory and Diversification**. 1. Choose a real company, product, or situation you know. 2. Apply one core framework from this unit to analyze it. 3. Write your analysis in 300–500 words with a clear recommendation. 4. Cite at least one credible source.

Deliverable

300–500 word analysis document saved to your portfolio under FIN 403.

Rubric

  • • Framework applied correctly (not just named)
  • • Specific evidence from a real example
  • • Clear recommendation with tradeoffs acknowledged
  • • Professional writing with source citation
ExerciseDrill: Portfolio Theory and Diversification30 min
Work through the practice problems in the unit lesson without looking at notes. Then check your work against the lesson and write a short reflection: - What you got right - One mistake you caught - One concept to review before the next unit

Deliverable

Problem solutions + 150-word reflection in your FIN 403 workbook.

Rubric

  • • Attempted all practice items before checking answers
  • • Honest reflection on errors
  • • Identifies a specific review action

Model / spreadsheet

Build or extend a spreadsheet model tied to this unit.

ModelStructured model: Portfolio Theory and Diversification60 min
Create a structured analytical model for **Portfolio Theory and Diversification**. Document your assumptions, calculations, and conclusions in a format appropriate to FIN 403 (diagram, table, or written model). Connect outputs to a decision a manager would make.

Deliverable

Structured model document (2+ pages) · One-paragraph summary of key insight from the model · Screenshot or export saved to portfolio

Rubric

  • • Assumptions stated explicitly
  • • Logic is auditable (formulas or steps visible)
  • • Output answers a specific business question
  • • Sensitivity or scenario considered

Knowledge quiz

Check your understanding before marking the unit complete.

1. Crestline Holdings reports $1.20B revenue and $156M EBITDA. In Portfolio Theory and Diversification, Victoria Hale's team focuses on which primary discipline?

2. Which mistake from the unit lessons is most costly at Crestline's $420M net debt scale?

3. In the Crestline worked example for Understanding Portfolio Theory and Diversification, what is the correct managerial read?

4. Crestline Industrial Solutions generates $480M revenue. A lesson concept in Portfolio Theory and Diversification applies most directly when:

5. Base net leverage at Crestline is roughly 2.69x ($420M / $156M). Which scenario test best matches unit practice problems?

6. Lesson exercises require students to complete practice problems before solutions. For Evaluating Trade-offs in Portfolio Theory and Diversification, step 1 should be:

7. Which evidence label fits historical Crestline segment margins without a forward test?

8. Ian Cho, Marcus Webb, and Elena Park disagree about Portfolio Theory and Diversification. Best next step per lessons:

Next unit: Asset Classes and Capital Market Assumptions →