The paper "Understanding of the Investment Market to both Maureen and Tom " is an outstanding example of a finance and accounting case study. As Maureen is retired I advise her to go for short term investment options which will generate income for her. They go hand in hand with Maureen’ s priorities of getting income and make the money work for her. She will earn income and secure a comfortable retirement. This is how Maureen should have invested her funds. Maureen wants to invest in relatively low-risk returns that would guarantee returns to supplement their income and invest capital in hand.
These investment options provide for low risk while for Tom they guarantee high returns. 2.0. Short - term investment These are viable options for investments that Maureen can choose as they take one year or less to mature. This short term investments mature very fast. Short term investments often are known as money-oriented, the reason being they are traded in the money market which trades the financial market for short term marketable monetary assets (Myles 2009). Maureen should invest $80,000 previously for bank shares. 2.1 Certificate of deposit This is a type of debt.
It is issued by banks. They indicate a specific sum of money has been deposited by the issuing depository organization. Although Maureen has invested in bank shares and has not enjoyed the returns, this certificate of deposit can be withdrawn any time, hence income. It bears a date of maturity together with specified interest rate and can be given in any denomination. For big money-market investors, banks allow their huge-denomination certificates of deposits to be marketed as negotiable certificates of deposits (Marcus 2005).
Maureen’ s $65,000 previously for manages Australian share fund should be invested here. 2.2. Treasury bills They are issued by the government. They have maturities of less than one year these instruments would suit Maureen as they are risk-free. They have the unique feature of being issued at a discount from their face value and the difference between the face value and the discount price is the only sum which is paid at the maturity for these short term securities because the interest is not paid in cash, only accrued (Frank 1999).
The other important feature of Treasury-bills is that they are risk-free securities, they are not affected by inflation, and the Treasury-bill will pay the fixed stated yield with certainty. Treasury-bills are issued on an auction basis. The first allocated pension of $350,000 would earn Maureen good returns as treasury bills are risk-free and are for a short period of time. 2.3. Commercial paper It is a form of a promissory. It is in most cases not secured. Since this is only affordable by companies Maureen should have invested her allocated pension to buy a commercial paper.
This is because they mature faster and have good returns. Big and good funded companies have found that getting funds from investors directly through the commercial paper is less costly than relying on bank loans (Ibbotson 2002). Commercial paper is issued by the firm or through an intermediary. It is issued at a discount. The most common maturity range of commercial paper is 30 to 60 days or less. It is riskier than government bills because there is a larger risk that a company will default in payment.
Maureen should invest her allocated pension two of $400,000 here. This will earn returns and will get to invest more frequently as possible because they are short term
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