Victor and Maria Hernandez Wonder About Investing Victor and Maria have decided to increase their contribution to their investment portfolio since Victor is now age 59 and thinking about retiring in five years. For years, they have followed a moderate-risk investment philosophy and put their money in suitable stocks, bonds, and mutual funds. The value of their portfolio is now $420,000, and this is in addition to their paid-for rental property, which is worth $300,000. They plan to invest about $12,000 every year for the next five years. 1, Why should Victor and Maria consider buying common stock as an investment with the additional money? Why or why not? 2, Maria bought a stock with a market price of $50 and a beta value of 1.9, what would be the likely price of an $12,000 investment after one year if the general market for stocks rose 5 percent? Round your answer to the nearest dollar. Do not round intermediate calculations. 3, What would the same investment be worth if the general market for stocks dropped 7 percent? Round your answer to the nearest dollar. Do not round intermediate calculations.

Personal Finance
13th Edition
ISBN:9781337669214
Author:GARMAN
Publisher:GARMAN
Chapter15: Mutual And Exchange Traded Funds
Section: Chapter Questions
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Q1, Victor and Maria Hernandez Wonder About Investing

Victor and Maria have decided to increase their contribution to their investment portfolio since Victor is now age 59 and thinking about retiring in five years. For years, they have followed a moderate-risk investment philosophy and put their money in suitable stocks, bonds, and mutual funds. The value of their portfolio is now $420,000, and this is in addition to their paid-for rental property, which is worth $300,000. They plan to invest about $12,000 every year for the next five years.

1, Why should Victor and Maria consider buying common stock as an investment with the additional money? Why or why not?

2, Maria bought a stock with a market price of $50 and a beta value of 1.9, what would be the likely price of an $12,000 investment after one year if the general market for stocks rose 5 percent? Round your answer to the nearest dollar. Do not round intermediate calculations.

3, What would the same investment be worth if the general market for stocks dropped 7 percent? Round your answer to the nearest dollar. Do not round intermediate calculations.

4, Review the types of stocks that you think Victor and Maria might prefer as investments. Explain why.

5, Discuss the positives and negatives of preferred stock for Victor and Maria.

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