The triplets are now entering high school and Jamie Lee and Ross are comfortable with their financial and investment strategies. They budgeted throughout the years and are on track to reach their long-term investment goals of paying the triplets' college tuition and accumulating enough to purchase a beach house to enjoy when Jamie and Ross retire.

Recently, Ross inherited $50,000 from his uncle's estate. Ross would like to invest in stocks to supplement their retirement income goals.

Jamie Lee and Ross have been watching a technology company that has an upcoming ini- tial public offering and several other stocks for well-established companies, but they are unsure which stocks to invest in and are also wondering if their choices will fit their mod- erate risk investment strategies. They want to make the best decisions they can to maximize chances they will benefit from positive investment returns.

Questions

1. What is the benefit to Jamie Lee and Ross of investing in a company's IPO? Will they be guaranteed a large return from this investment? At this life stage, would you recom- mend that Jamie Lee and Ross invest in an IPO? Why or why not?

2. Jamie Lee's father suggested that they purchase stock in a company that he has held shares in for decades. They want to take advantage of the stock tip, but Jamie Lee and Ross are trying to decide between purchasing the company's common stock and pre- ferred stock. What are the advantages to each type of stock?

3. Currently, the economy is in the recovery stage. Referring to Exhibit 12-3, what types of stock would you suggest for Jamie and Ross to invest in considering their life stage and current moderate investment strategies? What characteristics are associated with the types of investments you suggested?

4. Suppose Jamie Lee and Ross are evaluating corporate stocks to add to their investment portfolio. Using "Your Personal Financial Plan" sheet 38, select a company from your own personal experiences, such as an automobile or technology company, and research the information needed to complete the worksheet.

a. Do you suggest that Jamie Lee and Ross invest in this company? Provide support for your evaluation based on "Your Personal Financial Plan" sheet 38 research find- ings for that company.

b. If they should invest in that company, how much of their $50,000 inheritance should they allocate toward the purchase of shares in that company?

c. Regardless of your position on whether they should invest in your chosen company, if Jamie Lee and Ross went ahead and purchased shares of stock in that company, how many shares could they purchase with the $50,000?

d. What would be the total transaction cost if they purchased the shares online?