Provide alternative investment strategy

Assignment Help Financial Management

Reference no: EM132050182

Christopher Maclin, aged 40 is a supervisor at Barnett Co. and earns an annual salary of $100,000. Louise Maclin, aged 38, stays home to care for their newborn twins. She recently inherited $1.3 million (after taxes) in cash from her father’s estate. In addition, the Maclins have $20,000 in cash and $150,000 in Barnett common stock. They are unhappy about portfolio volatility and do not want to suffer a loss of more than 12% in one year. They recently purchased a new home. They need sufficient funds to fund their children’s college education and Christopher plans to retirement at age 65. Christopher is not very knowledgeable about finance but read that small cap and emerging market stocks provide the highest return over the long run. He plans to invest 50% of the inherited money in a small cap fund and the other in an emerging market fund. His wife is concerned about the decision.

She requested

Horizon review her husband’s decision and, if needed, provide an alternative investment strategy.

He plans to invest 50% of the inherited money in a small cap fund and the other in an emerging market fund.

They are unhappy about portfolio volatility and do not want to suffer a loss of more than 12% in one year.

What her husband's have to to do to avoid these things?

Reference no: EM132050182

Questions Cloud

Elimination entry needed to eliminate the gross profit : Prepare the elimination entry needed to eliminate the gross profit that should not be recognized in the consolidated financial statements of December 31, 2016.

Applying the value-at-risk method : Applying the Value-at-Risk Method. You use today’s spot rate of the Brazilian real to forecast the spot rate of the real for one month ahead.

What is the project payback and MIRR : Project K costs $75,000, its expected cash inflows are $10,000 per year for 8 years, What is the project's MIRR? What is the project's payback?

What is the project NPV-IRR and MIRR : Project K costs $70,000, its expected cash inflows are $15,000 per year for 11 years and its WACC is 13%. What is the project's NPV? What is the project's MIRR?

Provide alternative investment strategy : Horizon review her husband’s decision and, if needed, provide an alternative investment strategy.

What is expected value of the npv of project : What is the expected value of the NPV of this project, as measured in USD?

What is maximum you should be willing to pay : You are considering a project that promises you cash flows of 565 USD each year for 3 years. What is the maximum you should be willing to pay?

Which security has a higher effective annual interest rate : Which security has a higher effective annual interest rate? Coupon bond or T-bill.

Describe the par value of common stock : Which item goes not properly describe the par value of common stock?

User Account

All Pages