Having Just Returned from Serving with the U

question 134

Multiple Choice

Having just returned from serving with the U.S. Marines in Afghanistan, Nick has managed to save most of his earnings. He has enrolled in the local community college and he is back living with his parents while he assimilates back into U.S. life. As his business major friend, he has come to you for advice. He would like to see his $40,000 savings grow, yet he knows that he will need it in about five years when he and his girlfriend are out of school and make plans to get married. He also worries that his car may break down and he will need to invest in another used car. Which of the following would you suggest for Nick?

• A) In order for Nick to see growth, he will need to place the entire $40,000 in one stock offering. You suggest a biotech stock that promises growth.
• B) Nick is still young. He needs to consider high-growth, higher-risk stocks and corporate bonds. He is young enough to recoup his investment if it should experience a loss.
• C) Nick should determine what types of companies he is passionate about. He should lead with his heart, but should be warned that some of those companies will produce better yields than others.
• D) Since liquidity is a concern, Nick would do best to diversify into four to eight different investments, and keep a reasonable amount in cash (a savings account) for emergencies.

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Definitions:

Total Expenses

The sum of all costs and expenditures that a business incurs during a given period, including operating expenses, cost of goods sold, and other charges.

Variable Cost

Costs that vary directly with the level of production or sales volume, such as materials and labor.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity, allowing better comparisons and analysis of performance.

Employee Salaries

Regular payments made by an employer to an employee, typically on a monthly or biweekly basis, in exchange for the employee's work.