Lily Smith is a 27-year-old management trainee at a large chemical company. She is single, has an annual salary of $34,000 (placing her in the 15% tax bracket),and her monthly expenditures come to approximately $1,400. During the past year, she managed to saved around $8,000 and she expects to continue saving at least that amount each year for the future. Her company pays the premium on her $34,000 life insurance policy . Because her entire education was financed by scholarships, she was able to save money from the summer and part-time jobs she held as a student. Altogether, she has a nest egg of nearly $16,000, out of which she'd like to invest about $12,000. She'll keep the remaining $4,000 in a bank CD that pays 3% interest and will use this money only in an emergency. She can afford to take more rest than someone with family obligations can, but she doesn't with to be speculator , she simply wants to earn an attractive rate of return on her investments.

Questions:

1. What chance does she have of earning satisfactorily return if she invest $12,000 in (a.) blue chip stocks, (b.) growth stocks (c.) speculative stocks, (d) corporate bonds or (e) municipal bonds.

2. Discuss the factors you would consider when analyzing these alternate investments vehicles?