Reference no: EM133068777

Background: 

Your client's knowledge of financial theory and financial mathematics is now better than what it was because of your previous report. Similar to the prior report, your client has completed some research and has found a number of investments that need to be assessed to identify whether they may be viable investment options. Your client has specific investment criteria with the suggested investments being based on this criterion. The client therefore does not expect you to identify additional investment options.

As  your  client  wishes  to  invest  into  securities  for  retirement,  only  the  viability  of the investment(s) should be considered in this report.Lastly, while you expect that your client has a good base salary you have little knowledge of their assets or liabilities or overall financial position, hence it is impossible to know how many of these investments your client can purchase / invest. Therefore, you are expected to provide advice on each investment in isolation from the other investments, i.e. not as a portfolio of investments.

Client's Financial Questions:

• Provide a brief discussion detailing the risks inherent in stock returns in a portfolio of shares using the concepts of standard deviation and diversification as a basis for your discussion.
• Under what conditions can a firm's weighted average cost of capital be used for assessing new projects?
• Your client is considering buying some corporate bonds. She would like to know the difference between current yield and yield to maturity, hence she asks you to 'compare and contrast current yield and yield to maturity' for her.
• Discuss the merits and shortcomings of using the payback period for capital budgeting decisions.