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

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

3. 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

4. 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

5. 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

6. 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of a potential emergency at year four CDs  Washington Mutual  10 year, 4% CD  Penalty of 2 years interest if withdrawn early

7. 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

8. Graph of Annual Performance

9. Future Worth Comparison Results Year CD (Washington Mutual 4%) BOND (GM) STOCKS (American Century Blend) Future worth yr 4 5,849.295,340.007,556.52 Future worth yr 10 7,401.2213,380.0013,926.09 Future worth yr 14 8,658.3818,324.1228,873.91 Future worth yr 20 10,955.6223,254.4414,756.52

10. What if an Unplanned Event Occurs? FW year 45,849.296,640.008,282.61 Penalty/ Reward-608.00785.00-12.00 Withdraw amount5,241.297,425.008,270.61 Health problem, Auto Accident, Law Problem

11. 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…

12. References  www.scottrade.com www.scottrade.com  finance.yahoo.com finance.yahoo.com  www.fmsbonds.com www.fmsbonds.com  www.bigcharts.com www.bigcharts.com