EGR 403 - Project #2 Group 1 Dr. RosenkrantzNovember 28, 2005 Alex Camerino (Researcher) Juan Cervantes (Technical support) Kevin Curley (Operations Management)

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Presentation transcript:

EGR Project #2 Group 1 Dr. RosenkrantzNovember 28, 2005 Alex Camerino (Researcher) Juan Cervantes (Technical support) Kevin Curley (Operations Management) Eric Tseng (Summarizer)

Overview Comparing three different investment alternatives: 1. CDs 2. Stocks 3. Bonds Determine the most lucrative investment vehicle from the three

Scenario #1 Certificates of Deposit (CDs)  A time deposit held in a bank with a fixed interest rate Limited risk (FDIC insured) Straightforward process  Relatively low rates  Illiquid

Scenario #2 Corporate Securities (Stocks)  A stock is a certificate of ownership in a corporation Liquid High potential for return  High maintenance  Higher risk  Unpredictable (Volatile)  Tax consequences

Scenario #3 Corporate Debt Certificates (Bonds )  A certificate of debt issued to raise funds (Government or Private) Predictable return Decent interest rates Most have fixed interest payments Certain tax advantages  Affected by market (before maturity)  Potential high risk

Analysis Criteria  Ten/twenty year time period  2% Inflation, 3.78% MARR  $5000 Initial Investment  Analysis of a potential emergency at year four CDs  Washington Mutual  10 year, 4% CD  Penalty of 2 years interest if withdrawn early

Analysis Criteria (cont.) Stocks  American Century Blend  Future Worth based on historic rates  $12 Broker Commission Fee Bonds  General Motors  10 year, 8.2% Bond  Bought at face value

Graph of Annual Performance

Future Worth Comparison Results Year CD (Washington Mutual 4%) BOND (GM) STOCKS (American Century Blend) Future worth yr 4 5, , , Future worth yr 10 7, , , Future worth yr 14 8, , , Future worth yr 20 10, , ,756.52

What if an Unplanned Event Occurs? FW year 45, , , Penalty/ Reward Withdraw amount5, , , Health problem, Auto Accident, Law Problem

Conclusion  Bonds and Stocks are more liquid (can be sold at market value), and are better in case of unforeseen circumstances  So which is really the best investment? Well, it depends…

References   finance.yahoo.com finance.yahoo.com  