“There is a right way and a wrong way to use stock options in asset allocation.” Evaluate this statement.
> The Sampsons have been evaluating methods for investing money that will ultimately be used to support their children’s college education. They have concluded that a mutual fund is better suited to their needs than investing in individual stocks or indivi
> Ezra works for a firm that offers a 100% match up to 4% of his salary on retirement contributions. How much will Ezra accumulate in 20 years if he contributes 4% of his salary of $100,000 per year assuming his account earns an 8% annual return?
> Lloyd and his wife, Jean, have no retirement plan at work, but they contribute $4,000 each year to a traditional IRA. They are in a 25% marginal tax bracket. What tax savings will they realize for these contributions annually?
> Thomas earns $45,000 per year. What retirement plan should Thomas consider under the following circumstances? a. He works for a large private firm. b. He works at a university. c. He owns a small firm with employees.
> How much would Barry (from problem 1) have at retirement if he had started this plan at age 25? Data from Problem 1: Barry has just become eligible for his employer-sponsored retirement plan. Barry is 35 and plans to retire at 65. Barry calculates that
> Cedrick works for an employer that has a profit sharing retirement system. Assuming Cedrick made $133,000 last year, what is the maximum amount his employer can contribute to his retirement account?
> Briefly describe two popular retirement plans for self-employed individuals.
> Discuss the choices an employee has to manage a retirement account on leaving an employer.
> Discuss profit-sharing and employee stock ownership plans (ESOPs).
> Compare and contrast a Simplified Employee Pension (SEP) plan and a Savings Incentive Match Plan for Employees (SIMPLE).
> Discuss the general characteristics of a 401(k) plan. What is a 403(b) plan?
> Briefly discuss the key retirement planning decisions an individual must make.
> What is a defined- contribution plan? Why are many employers switching to this type of plan? List some of the benefits a defined-contribution plan offers to employees.
> What is a defined-benefit plan? What is vesting? What does it mean to be fully vested?
> Describe how employer-sponsored retirement plans work in general.
> Discuss some of the concerns about the future of Social Security.
> How are the retirement benefits under Social Security calculated? Describe some factors that affect the amount of your benefits.
> How does Social Security fit into retirement planning? How does an individual qualify for Social Security benefits? When do you receive benefits?
> What factors should you consider when deciding how to invest in your defined-contribution retirement fund?
> What is an employer match? Why is it important to take advantage of an employer match?
> How does your retirement age impact the amount of Social Security benefits you will receive?
> Why is it important to begin retirement planning while you are young?
> Explain the tax benefits of investing within a retirement account versus investing outside a retirement account.
> When estimating the future value of a set of annual investments, what factors will affect the amount of funds available to you at retirement?
> When estimating the future value of a retirement investment, what factors will affect the amount of funds available to you at retirement? Explain.
> Why are retirement accounts more beneficial than other investments that could be used for retirement? Describe an effective strategy for retirement planning.
> What is an annuity? What is the difference between a fixed annuity and a variable annuity? What is the main disadvantage of annuities?
> Compare and contrast a traditional IRA with a Roth IRA. Discuss the advantages of each. What factors will affect your choice of IRAs?
> The Sampsons are considering investing in bonds as a way of saving for their children’s college education. They learn that there are bonds with maturities between 12 and 16 years from now, which is exactly when they need the funds for college expenses. D
> The Sampsons are considering investing in bonds as a way of saving for their children’s college education. They learn that there are bonds with maturities between 12 and 16 years from now, which is exactly when they need the funds for college expenses. D
> The Sampsons are considering investing in bonds as a way of saving for their children’s college education. They learn that there are bonds with maturities between 12 and 16 years from now, which is exactly when they need the funds for c
> The Sampsons are considering investing in bonds as a way of saving for their children’s college education. They learn that there are bonds with maturities between 12 and 16 years from now, which is exactly when they need the funds for college expenses. D
> Juana wants to add another asset to her portfolio. She is trying to decide between two assets that have correlations with her portfolio of +.65 and -.12 respectively. Which asset will provide the greatest benefit, and why?
> Explain how economic conditions in the United States influence economies of other countries.
> Why would a global recession possibly limit the potential benefits from international diversification?
> How is a gain or loss calculated from the trading of call options?
> Why can asset allocation be expensive? How can you reduce the costs?
> What is a stock option? Why is it important for an investor to understand how stock options function?
> What is a portfolio? How does a diverse portfolio help reduce risk?
> Over the last month, the Sampsons have been struggling with how to invest their savings to support their children’s college education. They previously considered stocks and bonds and are now seriously considering investing their money in mutual funds. Th
> Over the last month, the Sampsons have been struggling with how to invest their savings to support their children’s college education. They previously considered stocks and bonds and are now seriously considering investing their money in mutual funds. Th
> Over the last month, the Sampsons have been struggling with how to invest their savings to support their children’s college education. They previously considered stocks and bonds and are now seriously considering investing their money in mutual funds. Th
> Explain how mutual funds can help you conduct affordable asset allocation.
> What is a covered call strategy?
> Assume that 11 months ago you purchased stock in XYZ Company for $50 a share. The stock price is now $72 a share but you would like to wait another month before selling the stock in order to pay a lower capital gains tax rate. Explain how you can use a p
> What is meant by correlations among investments? How does correlation impact portfolio risk?
> How might your expectations of economic conditions influence your asset allocation? What is the problem with this strategy?
> How does your risk tolerance affect the asset allocation decision?
> Discuss the role that your stage in life plays in the asset allocation decision.
> What is a put option? How does it work?
> What is a call option? How does it work?
> Explain how your tolerance for risk when investing may have changed by the time you retire, and why.
> What are real estate investment trusts (REITs)? How are they classified? What are some attractive characteristics of REITs? How can REITs help diversify a portfolio?
> How can allocating some of your assets to bonds reduce the level of risk in your portfolio?
> Describe two strategies for diversifying a stock portfolio.
> What factors influence a portfolio’s risk? Explain.
> Why is it important to diversify your financial holdings across financial assets? How does asset allocation enable you to accomplish diversification?
> Mike has decided that it is time he put his money to work for him. He has accumulated a substantial nest egg in a savings account at a local bank, but he realizes that with less than 3% interest he will never reach his goals. After doing some research he
> As a result of watching a financial news network on cable, reading articles in some business magazines, and listening to a coworker tell how her portfolio doubled in value in six months, Brad is now convinced that his financial future lies in the stock m
> As a result of watching a financial news network on cable, reading articles in some business magazines, and listening to a coworker tell how her portfolio doubled in value in six months, Brad is now convinced that his financial future lies in the stock m
> As a result of watching a financial news network on cable, reading articles in some business magazines, and listening to a coworker tell how her portfolio doubled in value in six months, Brad is now convinced that his financial future lies in the stock m
> As a result of watching a financial news network on cable, reading articles in some business magazines, and listening to a coworker tell how her portfolio doubled in value in six months, Brad is now convinced that his financial future lies in the stock m
> As a result of watching a financial news network on cable, reading articles in some business magazines, and listening to a coworker tell how her portfolio doubled in value in six months, Brad is now convinced that his financial future lies in the stock m
> As a result of watching a financial news network on cable, reading articles in some business magazines, and listening to a coworker tell how her portfolio doubled in value in six months, Brad is now convinced that his financial future lies in the stock m
> Why are some U.S. investors attracted to international and global bond funds? What risk is associated with these funds that investors are not subject to when investing strictly in U.S. bond funds? Discuss the expenses associated with international and gl
> List and briefly describe the types of bond mutual funds.
> Why do investors invest in index funds? Discuss the popularity of index fund investment as it relates to expenses. What tax advantage do index funds offer relative to other types of mutual funds?
> List and briefly describe the different types of stock mutual funds.
> Describe the three components of the expense ratio. How can a no-load fund compensate brokers?
> What kinds of expenses do mutual funds incur? How are expense ratios calculated? Why should investors pay attention to expense ratios?
> What is the difference between no-load and load mutual funds? How do loads affect a fund’s return? Why do some investors purchase load funds? How does an investor purchase a no-load fund?
> What is a closed-end fund? Describe how closed-end funds function.
> What is an open-end mutual fund? What types of companies usually manage open-end funds? Describe how these funds work on a day-to-day basis.
> What is a mutual fund’s net asset value (NAV)? How is the NAV calculated and reported?
> List three reasons for investing in mutual funds.
> What are mutual funds? What two broad categories of mutual funds exist, and how are they different? Do investors select the securities the mutual fund invests in?
> What factors do you need to consider when deciding whether to add mutual fund investing to your financial plan?
> What are international bond funds? What specific type of risk do these funds have that domestic bond funds do not have?
> What is a life-cycle fund? What are the advantages of this type of mutual fund?
> What is a fund family? What are the benefits of using a fund family?
> Discuss diversification among mutual funds. Describe some strategies that make diversification more effective. What is a mutual fund supermarket?
> Explain how Lipper indexes are used.
> Where can an investor find price quotations for closed-end and open-end funds? What information will be provided in a quotation for open-end funds? What information will be provided in a quotation for closed-end funds?
> What is a prospectus? How does an investor obtain one? What information does a prospectus provide?
> What should investors consider when deciding whether to purchase shares of a mutual fund? What characteristics of a mutual fund should be considered? Briefly discuss each characteristic.
> Discuss return and risk as they relate to bond mutual funds. What type of risk are all bond funds subject to? What other risk is associated with some bond funds? Describe the trade-off between risk and the expected return of bond mutual funds.
> Is a stock mutual fund’s past performance necessarily an indicator of future performance? What type of risk affects all stock mutual funds? Describe the trade-off between the expected return and risk of stock funds.
> Describe the three ways a mutual fund can generate returns for investors.
> Ronnie owns 600 shares of a stock mutual fund. This year he received dividend distributions of 60 stock mutual fund shares ($40 per share) and long-term capital gain distributions of 45 stock mutual fund shares (also $40 per share). What are the tax cons
> Rena purchased 200 shares of a no-load stock mutual fund. During the year she received $3 per share in dividend distributions, $200 in long-term capital gain distributions, and capital gains of $1,100 when she sold the stock after owning it eight months.
> In the past, some mutual funds often engaged in a practice called “after-hours trading” that allowed some of their larger shareholders to reap profits or avoid losses in a manner not available to all investors. To understand how this practice works, one
> John is a relatively conservative investor. He has recently come into a large inheritance and wishes to invest the money where he can get a good return, but not worry about losing his principal. His broker recommends that he buy 20-year corporate bonds i
> What if Mark’s Treasury bond in the previous problem had a coupon rate of 9% and new bonds still had interest rates of 8%? For what price should Mark sell the bond in this situation?
> Mark has a Treasury bond with a par value of $30,000 and a coupon rate of 6%. The bond has 15 years to maturity. Mark needs to sell the bond and new bonds are currently carrying coupon rates of 8%. At what price should Mark sell the bond?
> Emma is considering purchasing bonds with a par value of $10,000. The bonds have an annual coupon rate of 8% and six years to maturity. The bonds are priced at $9,550. If Emma requires a 10% return, should she buy these bonds?
> Mia wants to invest in Treasury bonds that have a par value of $20,000 and a coupon rate of 4.5%. The bonds have a 10-year maturity, and Mia requires a 6% return. How much should Mia pay for her bonds, assuming interest is paid annually?
> Timothy has an opportunity to buy a $1,000 par value municipal bond with a coupon rate of 7% and a maturity of five years. The bond pays interest annually. If Timothy requires a return of 8%, what should he pay for the bond?
> Katie paid $9,400 for a Ginnie Mae bond with a par value of $10,000 and a coupon rate of 6.5%. Two years later, after having received the annual interest payments on the bond, Katie sold the bond for $9,700. What are her total tax consequences if she is
> Bonnie paid $9,500 for corporate bonds that have a par value of $10,000 and a coupon rate of 9%, payable annually. Bonnie received her first interest payment after holding the bonds for 11 months and then sold the bonds for $9,700. If Bonnie is in a 35%
> Nancy and Al have been planning their retirement since they married in their early 20s. In their mid-40s and with two children in college, they are finding it harder to save and fear they will fall short of the savings needed to reach their retirement go
