Personal Finance 1st Edition by Jack R. Kapoor

Exercise 14

Matching Mutual Funds with Investor Needs. This chapter classified mutual funds into different categories based on the nature of the fund’s investments. Using the following information, pick a mutual fund category that you consider suitable for each investor described and justify your choice. (Obj. 2)

a. A 25-year old single investor with a new job that pays $30,000 a year?

   Mutual fund category:__________________________

   Why?_______________________________________

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b. A single parent with two children who has just received a $300,000 divorce settlement, has no job, and has not worked outside the home for the past five years.

Mutual fund category:____________________________

Why?_________________________________________

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c. A husband and wife who are both in their early 60s and retired.

Mutual fund category____________________________

Why?_________________________________________

Step 1 of 3

(a) A 25-year old single investor with a new job that pays $30,000 a year.

Age = 25 years

Amount received from the job = $30,000 per year

Mutual fund category will be stock fund which is aggressive.

The main reason for choosing this fund is the age of the investor is 25 years who is very young. Generally, young investor will opt for aggressive growth fund because they will be in a position to take more risk and will expect higher return. They can also opt for normal growth fund. More emphasis will be given to growth funds. Generally growth funds will invest in such company which have higher potential to grow and gives a higher return on investment.