Consider the following simple case: Jean is a retired widow with approximately $700,000 in assets. Jean earns a small amount of income from a part-time job, receives Social Security payments, and collects income from investments. Jean owns a home and leads a modest lifestyle. Jean needs to decide how to invest her assets and set a realistic spending policy. The following exhibit lists key data to help answer these questions and frame the problem: AssetsTOTAL EQUITIES $ 415,000 TOTAL BONDS $ 125,000 HOME $ 130,000 Income Assets $ 12,000 Other $ 11,000 Expenses $ 26,500 

a. What information is needed to advise her effectively? 

b. What needs to be done to determine the best course of action for her assets? 

c. Based on the limited information, does Jean appear to be a sophisticated investor? 

d. How much risk (consider one definition) is Jean willing to assume, both financially and emotionally? 

e. What is Jean's investment horizon? 

f. How should these things influence the recommended asset allocation and asset class selection? 

g. Propose a mix of stocks, bonds, and cash for Jean. What's a reasonable spending policy? From where will the cash flow come?

Answer rating: 100% (QA)

ANSWER We have this information for Jean Assets TOTAL EQUITIES 415000 TOTAL BONDS 125000 HOME 130000 Income Assets 12000 Other 11000 Expenses 26500 It is evident that adding up the assets together res... View the full answer