Eddy and Lilly Garcia thinking about Investing

Eddy and Lilly have decided to increase their contribution to their investment portfolio since Eddy is now age 53 and thinking about retiring in six years. For years, they have followed a moderate-risk investment philosophy and put their money in suitable stocks, bonds, and mutual funds. The value of their portfolio is now $450,000, which is in addition to their paid-for rental property, which is worth $330,000. They plan to invest about $10,000 annually for the next six years.

Why should Eddy and Lilly consider buying common stock as an investment with the additional money? Why or why not?

If Eddy and Lilly bought a stock with a market price of $60 and a beta value of 1.8, what would be the likely price of a $10,000 investment after one year if the general market for stocks rose 6 percent?

What would the investment be worth if the general market for stocks dropped 7 percent?

Review the types of stocks in table 14-1 on page 428 and select two that you think Eddy and Lilly might prefer as investments. Explain why?

Discuss the positives and negatives of common and preferred stocks for Eddy and Lilly.