Life Situation Financial Data With three dependent children, the Brocks are asse
ID: 2749703 • Letter: L
Question
Life Situation
Financial Data
With three dependent children, the Brocks are assessing their life insurance. Pam has $5,000 of coverage. Josh has life insurance coverage equal to approximately eight times his annual salary.
With approximately 20 years to retirement, Pam and Josh Brock want to establish a more aggressive investment program to accumulate funds for their long-term financial needs. Josh does have a retirement program at work. This money, about $110,000, is invested in various conservative mutual funds.
In addition, the Brocks established their own investment program about four years ago, and today they have about $36,000 invested in conservative stocks and mutual funds. In addition to their investment program, the Brocks have accumulated $11,000 to help pay for the children’s college educations. Also, they have $5,000 tucked away in a savings account that serves as the family’s emergency fund. Finally, both will qualify for Social Security when they reach retirement age.
Q4. Describe an investment portfolio (asset types, allocation, risk-return) that you would recommend for the Brocks.
Life Situation
Financial Data
Pam, 43Josh, 45
3 Children, ages 16, 14 and 11 Monthly income $4,900 Living expenses $4,450 Assets $262,700 Liabilities $84,600 Emergency Fund $5,000
Explanation / Answer
4) The Brocks have net assets far larger than their liabilities ,the time of 20 years to retirement is very large enough to take excessive risks.In addition the Brocks have Social Security when they reach retirement age so they should not have any financial problem after retirement.They need to meet expenses of their living which are totally met by their monthly income therefore they can invest their assets in more risky portfolio.Threfore the risk allocation for them is high enough and return required is moderate to meet children education expenses and their retirement goals.The appropriate asset allocation would be majority(50-80%) invested in equity ,(20-40%) in Bonds and the rest in alternative investments.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.