Finance 215 Essay

1192 Words Oct 21st, 2013 5 Pages
Assignment 2: Kristin Decides to Try Her Hand at Investing

Katherine Druin

Professor Karaffa

Fin 215


Kristin Earhardt is a 26-year-old management trainee at a large chemical company. She is single and has no plans for marriage. Her annual salary is $34,000 (placing her in the 15% tax bracket), and her monthly expenditures come to approximately $1,500. During the past year or so, Kristin has managed to save around $8,000, and she expects to continue saving at least that amount each year for the foreseeable future. Her company pays the premium on her $35,000 life insurance policy. Because Kristin's entire education was financed by scholarships, she was able to save money from the summer and
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Some examples of things that she could loan her money out to are the government or a corporation. Bonds are set at a certain interest rate when they are issued, and the person borrowing the money from you promises to pay the initial amount of the bond back plus the interest rate that has been set. Bonds eventually mature, they aren’t an ongoing thing. Therefore, when it comes to the time of maturity, Kristin will then be able to collect her money from them, and then what she earned as interest.
2. Discuss the likelihood of Kristin earning a satisfactory return if she invests her $15,000

in (a) blue-chip stocks, (b) growth stocks, (c) speculative stocks, (d) corporate bonds, or

(e) municipal bonds

(a) Blue-chip stocks are very quality stocks as well as reliable stocks. The are stocks that are good to have in both good times and bad. Some examples of these stocks include Wal-Mart and AT&T. With these examples, I can tell you that people are always going to shop at Wal-Mart, as well as buy phones from AT&T and have a cell phone plan. People simply can’t live without these things, even in hard times. If Kristin researched blue-chip stocks, and figured out which ones should would want her money to go into, I think she would be happy with the returns in the end. (b) As far as growth stocks, Kristin would have to make sure that she invested in the right ones as well. Just because a lot of things on the stock market have failed, doesn’t mean that

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