Pretend that you face these six choices for investments: a stock that has apprec

ID: 2640544 • Letter: P

Question

Pretend that you face these six choices for investments:

a stock that has appreciated in value by 25% in each of the past 5 years and pays no dividends;

a stock that has appreciated by 5% in each of the past 5 years and pays an 8% dividend each year;

a bond that returns 5% each year;

a mutual fund of international stocks that has appreciated by as much as 45% but depreciated by as much as 30% during the past 10 years;

a mutual fund of US consumer products company stocks that has consistently appreciated by 12% for the past 5 years;

a mutual fund of bonds that has consistently appreciated by 7% for the past 10 years.

Choose three of these investments for your portfolio. What are your investment objectives? Why did you choose those three?

Investment objective: Earning regular income from investment with capital appreciation to beat the inflation.

The portfolio will include first, second and third security. The reasoning behind investing in these securities is illustrated below.

The first security has a good record of value appreciation in last five years.

The second security has good record of paying dividends and appreciation.

The third security is bond which provides yearly return of 5%.

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