Brad Smitham,, a 53-year-old retail store manager earning $75,000 a year, has worked for the same company during his entire 28-year career. Brad was recently laid off and is still unemployed 10 months later, and his 10 months’ severance pay and 6 months’ unemployment compensation have run out. Because he has consistently observed careful financial planning practices, he now has sufficient savings and investments to carry him through several more months of unemployment. Brad is actively seeking work but finds that he is overqualified for available lower-paying jobs and underqualified for higher-paying, more desirable positions. There are no openings for positions equivalent to the manager’s job he lost. He lost his wife several years earlier and is very close to his two grown children, who live in the same city. Brad has these options: • Wait out the recession until another retail store manager position opens up. • Move to another area of the country where store manager positions are more plentiful. • Accept a lower-paying job for two or three years and then go back to school evenings to finish his college degree and qualify for a better position. • Consider other types of jobs that could benefit from his managerial skills. Required: 1. What important career factors should Brad consider when evaluating his options? 2. What important personal factors should Brad consider when deciding among his career options? 3. What recommendations would you give Brad in light of both the career and personal dimensions of his options noted in Questions 1 and 2? 4. What career strategies should today’s workers employ in order to avoid Brad’s dilemma?
> Under what circumstances would it make sense to convert your traditional IRA to a Roth IRA?
> Describe and differentiate between Keogh plans and individual retirement arrangements. What’s the difference between a nondeductible IRA and a Roth IRA?
> Briefly describe the tax provisions of 401(k) plans and Keogh plans.
> Why is it important to evaluate and become familiar with the pension plans and retirement benefits offered by your employer?
> A couple in their early 30s, Rodney and Carly Madsen recently inherited $90,000 from a relative. Charles earns a comfortable income as a sales manager for System Analytics, Inc., and Carly does equally well as an attorney with a major law firm. Because t
> What is the difference between a profit-sharing plan and a salary reduction, or 401(k), plan?
> Discuss the relationship of retirement planning to financial planning. Do investment and tax planning have a role in retirement planning?
> What’s an international fund, and how does it differ from a global fund?
> What’s the difference between a growth fund and a balanced fund?
> Briefly describe a back-end load, a low load, and a hidden load. How can you tell what kind of fees and charges a mutual fund has?
> What is a 12b-1 fund? Can such a fund operate as a no-load fund?
> What’s the difference between a load fund and a no-load fund?
> What types of ETFs are available to investors?
> What’s the difference between an open-end mutual fund and an ETF?
> Briefly describe the basic structure and investment considerations associated with a REIT. What are the three basic types of REITs?
> Russ Alonzo is 42 years old, single, and works as a designer for a major architectural firm. He is well paid and over time has built up a sizable portfolio of investments. He considers himself an aggressive investor and, because he has no dependents to w
> Describe how the following securities allow investors to participate in the real estate market. a. Stock in real estate–related companies b. Real estate limited partnerships (LPs) or limited liability companies (LLCs)
> Describe the major categories of income property, and explain the advantages and disadvantages of investing in income property. How can a single-family home be used to generate income?
> Why is speculating in raw land considered a high-risk venture?
> Define and briefly discuss the role of each of these factors in evaluating a proposed real estate investment: a. Cash flow and taxes b. Appreciation in value c. Use of leverage
> How important is general market in affecting the price performance of mutual funds?
> Who are the key players in a typical mutual fund organization?
> Describe how to evaluate the attractiveness of investing in an index-based ETF.
> Which would you rather have: $100 in dividend income or $100 in capital gains distribution? $100 in realized capital gains or $100 in unrealized capital gains?
> Identify three potential sources of return to mutual fund investors, and briefly discuss how each could affect total return to shareholders.
> Briefly describe the steps in the mutual fund selection process.
> Like many married couples, Damian and Brandi Woodson are trying their best to save for two important investment objectives: (1) an education fund to put their two children through college; and (2) a retirement nest egg for themselves. They want to have s
> What are the most common reasons for buying mutual funds?
> What are automatic reinvestment plans, and how do they differ from automatic investment plans?
> What are fund families? What advantages do these families offer investors?
> What’s an asset allocation fund? How do these funds differ from other types of mutual funds?
> What is a mutual fund? Why are diversification and professional management so important to mutual funds?
> Briefly discuss some of the different types of common stock. Which types would be most appealing to you, and why?
> Define and briefly discuss each of these common stock measures: (a) book value, (b) ROE, (c) EPS, (d) P/E ratio, and (e) beta.
> What’s the difference between a cash dividend and a stock dividend? Which would you rather receive?
> From a tax perspective, would it make any difference to an investor whether the return on a stock took the form of dividends or capital gains? Explain.
> What is the desired rate of return, and how would it be used to make an investment decision?
> Dwight Fox is a divorced 40-year-old loan officer at a large regional bank; he has a 16-year-old son. He has decided to use his annual bonus as a down payment on a new car. One Saturday afternoon Dwight visits Unique Motors and buys a new car for $32,000
> What is interest on interest, and why is it such an important element of return?
> Briefly describe the two basic sources of return to investors.
> What is meant by the risk-return trade-off? What is the risk-free rate of return?
> What effects do market interest rates have on the price behavior of outstanding bonds?
> Explain the system of bond ratings used by Moody’s and Standard & Poor’s. Why would it make sense to ever buy junk bonds?
> Describe the conversion privilege on a convertible security. Explain how the market price of the underlying common stock affects the market price of a convertible bond.
> What is a convertible bond, and why do investors buy convertible securities?
> Are junk bonds and zero coupon bonds the same? Explain. What are the basic tax features of a tax-exempt municipal bond?
> What’s the difference between a secured bond and an unsecured bond?
> Go to the asset allocation tool provided at the following internet site: http://www.ipers.org/calcs/AssetAllocator.html Enter assumptions that fit your current and anticipated situation and produce an asset allocation recommendation. Then add 20 years to
> Calvin and Danielle Perkins, ages 30 and 28, were recently married in Kansas City. Calvin is an electrical engineer with Analytical Solutions, a computer component design firm. Danielle has a master’s degree in education and teaches at a local middle sch
> What are DRPs, and how do they fit into a stock investment program?
> Summarize the evidence on the potential cost of being out of the stock market during its best months.
> Describe the various types of risk to which investors are exposed.
> Explain the difference between a bull market and a bear market. Discuss the frequency with which returns as bad as those during 2007–2009 occur. How would you characterize the current state of the stock market?
> Contrast the NASDAQ and National Market System with the OTCBB.
> Describe the operations of the NASDAQ market. Compare it with an exchange, such as the NYSE.
> What are regional exchanges, and what role do they play?
> What is the difference between the broker and dealer markets?
> How does a primary market differ from a secondary market? Where are most securities traded: in the primary or the secondary market?
> What, if anything, can be gained from keeping track of your investment holdings?
> Luis Barillas and his wife, Dora, have been married for two years and have a 1-year-old son. They live in Charlotte, North Carolina, where Luis works for Advanced Marketing Analytics. He earns $3,200 per month, of which he takes home $2,300. Luis and his
> Briefly describe the concept of asset allocation and note how it works.
> What is day trading, and how is it different from the more traditional approach to investing?
> Briefly describe several types of online investment tools, and note how they can help you become a better investor.
> Describe the Internet’s impact on the world of investing.
> Briefly describe the DJIA, S&P 400, S&P 500, NASDAQ Composite, Russell 2000, and Dow Jones Wilshire 5000 indexes. Which segments of the market does each measure track?
> What role do market averages and indexes play in the investment process?
> Briefly discuss the four basic types of information that you, as an investor, should follow.
> What is a short sale? Explain the logic behind it. How much could be gained or lost on a short sale investment?
> Describe how the return on an investment is calculated.
> Name and describe three basic types of orders.
> Walter Burton was a self-employed window washer earning approximately $700 per week. One day, while cleaning windows on the eighth floor of the Commercial Bank Building, he tripped and fell from the scaffolding to the pavement below. He sustained severe
> What is arbitration? Does SIPC require the use of arbitration in investor disputes?
> What is the SIPC, and how does it protect investors?
> Describe the role that discount brokers play in carrying out security transactions. To whom are their services especially appealing?
> Briefly discuss the relationship between investing and personal financial planning.
> What are deductibles? Do they apply to either liability or medical payments coverage under the homeowner’s policy?
> Describe replacement-cost coverage and compare this to actual cash value coverage. Which is preferable?
> Describe (a) types of losses, (b) persons, and (c) locations that are covered under a homeowner’s policy.
> What types of property are covered under a homeowner’s policy? When should you consider adding a PPF to your policy? Indicate which of the following are included in a standard policy’s coverage: (a) an African parrot, (b) a motorbike, (c) Avon cosmetics
> Describe how the co-insurance feature works.
> Explain the right of subrogation. How does this feature help lower insurance costs?
> Darrell and Lena Jennings are a two-income couple in their early 30s. They have two children, ages 6 and 3. Darrell’s monthly take-home pay is $3,600, and Lena’s is $4,200. The Jennings feel that, because theyâ&#
> Explain the principle of indemnity. Are any limits imposed on the amount that an insured may collect under this principle?
> Briefly describe key aspects of the claims settlement process, explaining what to do after an accident, the steps in claim settlement, and the role of claims adjustors.
> Differentiate between captive and independent insurance agents. What characteristics should you look for in an insurance agent and an insurance company when you’re buying property or liability insurance?
> What is a personal liability umbrella policy? Under what circumstances might it be a wise purchase?
> Briefly describe the following supplemental property insurance coverage: (a) earthquake insurance, (b) flood insurance, and (c) other forms of transportation insurance.
> Discuss the role of financial responsibility laws and describe the two basic types currently employed.
> Describe the important factors that influence the availability and cost of auto insurance.
> Define no-fault insurance and discuss its pros and cons.
> Explain the nature of (a) automobile collision insurance and (b) automobile comprehensive insurance.
> Briefly explain the major types of coverage available under the personal auto policy (PAP). Which persons are insured under (a) automobile medical payments coverage and (b) uninsured motorist’s coverage?
> Jun Hsieh, a 38-year-old widowed mother of three children (ages 12, 10, and 4), works as a product analyst for Panama Hats. Although she’s covered by a group life insurance policy at work, she feels, based on some rough calculations, that she needs addit
> Briefly explain the fundamental concepts related to property and liability insurance.
> What is the objective of workers’ compensation insurance? Explain its benefits for employees who are injured on the job or become ill through work-related causes.
> Who is eligible for Medicare and Medicaid benefits? What do those benefits encompass?
> Briefly explain how an HMO works. Compare and contrast group HMOs, IPAs, and PPOs.
> Describe the features of traditional indemnity (fee-for-service) plans and explain the differences between them and managed care plans.
> What is group health insurance? Differentiate between group and individual health insurance.
> Why is it important to consider benefit duration when shopping for disability income coverage?
