A Family Will Retire in a Few Years

question 54

Multiple Choice

A family will retire in a few years. They have a high tax bracket and are concerned about their after-tax rate of return. A meeting with their financial planner reveals they are primarily focused on safety of principal and they will need a 6% to 8% average rate of return on their portfolio. They desire a diversified portfolio and liquidity is likely to be a concern due to health reasons. If you had to choose from the list below which of the following asset allocations seems to best fit this family's situation?

• A)10% money market; 50% intermediate term bonds; 40% blue chip shares, many with high dividend yields
• B)0% money market; 60% intermediate term bonds; 40% shares
• C)10% money market; 30% intermediate term bonds; 60% high dividend paying shares
• D)5% money market; 35% intermediate term bonds; 60% shares, most with low dividends

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Definitions:

Purchase Contract

A legal agreement between a buyer and a seller detailing the terms and conditions of a purchase.

Return

The profit or loss generated from an investment over a certain period of time.

Compounded Annually

A compound interest calculation made once per year.

Economic Equivalent

A theoretical figure representing the total cost or value of an asset, taking into account factors like inflation, interest rates, and opportunity cost.