You work as a financial advisor for a wealth management company. A new client requested an appointment with you and your team of advisors. The client won a state lottery and must select either an annuity of one million dollars per year for 20 years or a cash option for the prize. The latter will be computed using an interest factor of 5%. The client needs immediate advice regarding the choice of payment method. Secondly, the client wants written recommendations for the investment of the proceeds along with detailed support for such recommendations. The client will consider common and preferred stock, taxable and tax exempt bonds, options and other investment vehicles you suggest as appropriate. The following are required:

Submission A –

1. Before recommending the payment option, develop a list of questions for the client so you can prepare an investor profile that will be used to make specific recommendations. At a minimum, consider the investor’s age, marital status, dependents, appetite for risk, tax bracket, short and long-term goals and other factors you consider relevant.

2. Calculate the net proceeds from the lottery under each payment option.

Submission B –

1. Prepare a detailed recommendation for your client’s consideration. This should begin with a detailed investor profile that is based on the questions developed in Submission A above. Develop the profile and answers to the questions using your creativity and imagination.

2. Recommend the prize option your client should select based on the profile.

3. List your investment recommendations in detail. For example, 200 shares of Exxon common stock costing $18,000. Recommendations should be based on recent stock prices. Provide your rationale for each recommendation including but not limited to EPS, diluted EPS, beta, dividends, free cash flow, stock buy backs, splits, company prospects, and interest rates. The rationale should indicate the worthiness of the investment along with why it is appropriate for the client.

4. If you recommend the annuity, specific recommendations need only be made for the first payment. A general plan should be included for subsequent payments.