Andrew, age 65, is retiring and has £150,000 to invest. Andrew will not have any other substantial income, and he will be in the 15% marginal income tax bracket. He has invested in bonds in the past, and he plans to be actively involved in this investment.

Mariam, age 47, has £40,000 to invest. She has invested in various types of bonds for 5 years, she considers herself an aggressive investor, and she is in the 28% marginal income tax bracket. Her primary goal is capital appreciation; income is a secondary consideration.

Required:

Discuss with reasons the kind of securities are appropriate for Andrew and Mariam and what women can teach us about investing? (Consider type, risk rating, marginal tax bracket, term, and other relevant factors.) 

Answer the following questions about selecting bonds for Andrew and Mariam’s portfolios:

What sort of characteristics would you look for in a bond chosen for a client with a

high risk tolerance

moderate risk tolerance

low risk tolerance

If you believe that interest rates will decline sharply in the future, what bond characteristics would you search for? 

If you believe that interest rates will rise sharply in the future, what bond characteristics would you search for?