a turned 75 years old today. It's been five years since grandpa Anton passed away. They enjoyed 52 years of marriage together. Grandma Ethel took the money she was left Grandpas estate and invested it in a 2.5 million certificate of deposit (CD). The CD comes due next week. She can renew it for one year at 8 percent interest. She intends to use the income from the cd plus her monthly social security check to meet her living expenses. At her recent annual physical exam, the doctor announced that Grandma Thea was in excellent condition for her age. It would surprise no one if Grandma Thea continued to live well into her eighties. One of the guests at her 75th party was her 20-year-old nephew, Angel legarde. Angel fancies herself an expert in investments and has suggested to Grandma Thea that she can get a 1 percent higher yield by investing the 2.5 million in 30-years bonds. Please answer the following question: 1. Comment on whether there is business risk or market risk involved with investing in bonds. 2. Indicate how much extra income Grandma Thea will receive a year if she follows Angel's suggestion. 3. If grandma Thea decides to buy the 2.5 Million CD instead of t
Grandma Thea turned 75 years old today. It's been five years since grandpa Anton passed away. They enjoyed 52 years of marriage together. Grandma Ethel took the money she was left Grandpas estate and invested it in a 2.5 million certificate of deposit (CD). The CD comes due next week. She can renew it for one year at 8 percent interest. She intends to use the income from the cd plus her monthly social security check to meet her living expenses.
At her recent annual physical exam, the doctor announced that Grandma Thea was in excellent condition for her age. It would surprise no one if Grandma Thea continued to live well into her eighties.
One of the guests at her 75th party was her 20-year-old nephew, Angel legarde. Angel fancies herself an expert in investments and has suggested to Grandma Thea that she can get a 1 percent higher yield by investing the 2.5 million in 30-years bonds.
Please answer the following question:
1. Comment on whether there is business risk or market risk involved with investing in bonds.
2. Indicate how much extra income Grandma Thea will receive a year if she follows Angel's suggestion.
3. If grandma Thea decides to buy the 2.5 Million CD instead of the bonds, and needs to withdraw her funds after eight months, what type of penalty is she likely to incur?
4. What other type of similar short-term investment might she consider where there would not be penalty for early withdrawal?
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