Client 1:

Ezra, age 26, is single. However, he is dating and preparing to get engaged. He will need roughly $5,000 for an engagement ring almost immediately, and expects he will need $10,000$15,000 for the wedding in the next 1224 months. He is currently employed and earns about $70,000 a year in salary. This salary is enough to cover all his taxes and normal living expenses of approximately $4,800. This leaves him with about $1,000 in savings each month ($350 to 401K, $650 to savings). He has been able to save roughly $15,000 to date in a 401K plan from work and about $20,000 in cash savings. His 401K plan has been invested 100% in the stock market, including some sector-specific funds. His other savings have been in interest-bearing savings and cash substitutes such as money market funds. He recently received a windfall of $60,000, and this prompted him to come to you for some advice. The following are few of Ezras comments to help guide your thoughts:

1. I understand I am young, so I need to take on as much risk as I can.
2. I am willing to lose 3040% on my invested capital if the return is commensurate.
3. I do like to have a decent sized cushion in the bank in case something happens at my job.
4. I dont foresee my risk tolerance changing after I get married.
5. Do you have any good stock tips?

Client 2:

Jacob and Rachel, 53 and 52 respectively, are married with four children. Two of the children are currently in college, and two are in high school. They expect the other two children to attend college. The couple has done relatively well for themselves and earn roughly $275,000 before tax between the two of them, which equates to $190,000 after taxes. They live well below their means, and this should allow them to cover all of their childrens college expenses out of pocket, but it will not leave much for them to save over the next six to eight years. Through savings and portfolio growth, they have managed to accumulate $900,000. To this point, they have been moderately aggressive (7075% equities) with their portfolio, but they feel that they need to begin preparing the portfolio for partial retirement in eight years, and full retirement in 13 years.

1. I know we still need to be somewhat aggressivewe could live until were 90so we need to plan for some growth even in retirement.
2. We definitely cant afford to take a big hit in our portfolio. We dont have enough time to recover.
3. Our jobs allow us to work part-time in retirement, and we will probably do so as long as we are able.
4. What do bond yields look like today?
5. I think well need to draw on 35% of our portfolio in retirement. Wed like to earn enough income from the portfolio to cover that.

A. Analyze each clients financial documentation in order to perform the following evaluative activities. Be sure to support your analysis with relevant client information.

1. Explain the clients risk tolerances.

2. Explain the clients return objectives.

3. Explain the clients liquidity objectives.

B. Using the three objectives above, write a brief investment statement classifying the clients into one of the following categories: growth, income, or capital preservation. Justify your response with specific client information