As an individual with available liquidity on hand you have a choice to make an i
ID: 2740585 • Letter: A
Question
As an individual with available liquidity on hand you have a choice to make an investment in a company. You may choose to purchase a bond or purchase stock. You are in your mid-50s and the funds you are willing to invest represent 30% of your net worth and 50% of your liquidity. The company has been in business for 15 years and has issued bonds in the past.What is your thought process in order to make a decision? What do you want to review in the company? What do you want to know?
Give all the details as to what would be your criteria, with full details, prior to making a decision. Be specific, ranging from YOU personally to the COMPANY. At the end make a decision as to what you would do. As an individual with available liquidity on hand you have a choice to make an investment in a company. You may choose to purchase a bond or purchase stock. You are in your mid-50s and the funds you are willing to invest represent 30% of your net worth and 50% of your liquidity. The company has been in business for 15 years and has issued bonds in the past.
What is your thought process in order to make a decision? What do you want to review in the company? What do you want to know?
Give all the details as to what would be your criteria, with full details, prior to making a decision. Be specific, ranging from YOU personally to the COMPANY. At the end make a decision as to what you would do. As an individual with available liquidity on hand you have a choice to make an investment in a company. You may choose to purchase a bond or purchase stock. You are in your mid-50s and the funds you are willing to invest represent 30% of your net worth and 50% of your liquidity. The company has been in business for 15 years and has issued bonds in the past.
What is your thought process in order to make a decision? What do you want to review in the company? What do you want to know?
Give all the details as to what would be your criteria, with full details, prior to making a decision. Be specific, ranging from YOU personally to the COMPANY. At the end make a decision as to what you would do. What is your thought process in order to make a decision? What do you want to review in the company? What do you want to know?
Give all the details as to what would be your criteria, with full details, prior to making a decision. Be specific, ranging from YOU personally to the COMPANY. At the end make a decision as to what you would do.
Explanation / Answer
Ans;
Since I am in mid-50s & amount to be invested represent 30% of my networth & 50% of my liquidity, I need to invest funds in less risky area with maximum liquidity.
In order to decide on whether to invest in stock or bond, following parameters need to be analysed:
1. Return on capital in the company
2. Time for Realization of capital on sale of bonds / shares
3. Interest & debt paying capacity of the company
4. Credit Rating of bonds issued / to be issued by company
5. Comparison between cost of equity in the company & expected market return to decide whether stocks are undervalued or overvalued.
6. Time frame of my investment
7. Rest Portfolio mix so that after investment in shares / bonds, portfolio needs to be most liquid & less risky.
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