EGR 403 Project

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EGR 403 - Project 2 Group 1 Dr.
Rosenkrantz November 28, 2005
Investment Options

• Alex Camerino (Researcher)
• Juan Cervantes (Technical support)
• Kevin Curley (Operations Management)
• Eric Tseng (Summarizer)

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Overview

• Comparing three different investment
  alternatives
• CDs
• Stocks
• Bonds
• Determine the most lucrative investment vehicle
  from the three

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Scenario 1Certificates 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

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Scenario 2Corporate 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

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Scenario 3Corporate 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

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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• Penalty of 2 years interest if withdrawn early

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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

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Graph of Annual Performance
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Future Worth Comparison Results
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What if an Unplanned Event Occurs?
Health problem, Auto Accident, Law Problem
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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

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References

• www.scottrade.com
• finance.yahoo.com
• www.fmsbonds.com
• www.bigcharts.com