information for Sampsons Case 6 Excel
The Sampsons have just started saving $800 per month. This money will be placed in CDs every month. These funds, earmarked for a down payment on a car and their children’s college education, are not available to the Sampsons until the CDs mature.
1)The Sampsons are starting to save money but still have not made any decision about investing their money in CDs. They are now concerned about potential repair expenses for Sharon’s car. They would like to have sufficient liquidity so that if they need to buy her a new car immediately, they could afford a down payment without being forced to cash in CDs early (because they would be charged a penalty). How might they revise their CD investing strategy to increase their liquidity?
2)Advise the Sampsons on money market investments they should consider to provide them with adequate liquidity.
Information for Sampsons Case 1 Excel
Recall that the Sampsons have a goal of saving about $300 per month ($3,600 per year) for their children’s college education. They want to estimate how this money would grow over time if they invest it in stock. Dave and Sharon have never owned stock before.
The Sampsons expect that under normal conditions, the stock would generate a return of about 5% per year over time. However, they recognize that there is uncertainty surrounding the return. They believe that the stock will generate an annual return of only 2% if stock market conditions are weak in the future, but it could generate an annual return of 9% if stock market conditions are strong.
