Juliette and Jason are in their mid 40's, and married with 4 teenage children. They have $50,000 in surplus funds which they would like to invest into company ABC as they believe this to be a solid company with healthy dividends. Although purchasing shares in only one company does not offer diversification, and will increase the risk of the investment, Juliette and Jason are diversified in their superannuation funds and this keeps it simple for illustrative purposes. The problem is that Juliette has a much greater tolerance for risk than her husband. She is prepared to borrow 70% of the value of the total investment. Jason on the other hand is only prepared to borrow 50% of the value of the total investment.

Answer rating: 100% (QA)

If ABC shares are purchased for 50000 and the company is doing well the share price will increase an... View the full answer