Personal Financial Planning 13th Edition by Lawrence Gitman,Michael Joehnk,Randy Billingsley

Exercise 1

A couple in their early 30s, Charles and Sherry Ashcroft recently inherited $90,000 from a relative. Charles earns a comfortable income as a sales manager for Transportation Logistics, Inc., and Sherry does equally well as an attorney with a major law firm. Because they have no children and don't need the money, they've decided to invest all of the inheritance in stocks, bonds, and perhaps even some money market instruments. However, because they're not very familiar with the market, they turn to you for help.
Critical Thinking Questions
1. What kind of investment approach do you think the Ashcrofts should adopt-that is, should they be conservative with their money or aggressive Explain.
2. What kind of stocks do you think the Ashcrofts should invest in How important is current income (i.e., dividends or interest income) to them Should they be putting any of their money into bonds Explain.
3. Construct an investment portfolio that you feel would be right for the Ashcrofts and invest the full $90,000. Put actual stocks, bonds, and/or convertible securities in the portfolio; you may also put up to one-third of the money into short-term securities such as CDs, Treasury bills, money funds, or MMDAs. Select any securities you want, so long as you feel they'd be suitable for the Ashcrofts. Make sure that the portfolio consists of six or more different securities, and use the latest issue of The Wall Street Journal or an online source such as http://finance.yahoo.com to determine the market prices of the securities you select. Show the amount invested in each security along with the amount of current income (from dividends and/or interest) that will be generated from the investments. Briefly explain why you selected these particular securities for the Ashcrofts' portfolio.