Two friends each invested $20,000 of their own (equity) funds. Stan, being more conservative, purchased utility and

Question:

Two friends each invested $20,000 of their own (equity) funds. Stan, being more conservative, purchased utility and manufacturing corporation stocks. Theresa, being a risk taker, leveraged the $20,000 and purchased a $100,000 condo for rental property. Considering no taxes, dividends, or revenues, analyze these two purchases by doing the following for one year after the funds were invested.

(a) Determine the year-end values of their equity funds if there was a 10% increase in the value of the stocks and the condo.

(b) Determine the year-end values of their equity funds if there was a 10% decrease in the value of the stocks and the condo.

Stocks
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