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Terry about her decision and explained that she had found several
stocks that she thought looked ―sort of interesting.‖ She described
them as follows: •
North Atlantic Swim Suit Company. This
highly speculative stock pays no dividends. Although the earnings of
NASS have been a bit erratic, Sara feels that its growth prospects
have never been brighter—―what with more people than ever going to
the beaches the way they are these days,‖ she says. •
Town and
Country Computer. This is a long-established computer firm that
pays a modest dividend yield (of about 1.50%). It is considered a
quality growth stock. From one of the stock reports she read, Sara
understands that T&C offers excellent long-term growth and capital
gains potential. • Southeastern Public Utility Company. This income
stock pays a dividend yield of around 5%. Although it’s a solid
company, it has limited growth prospects because of its location. •
International Gold Mines, Inc. This stock has performed quite
well in the past, especially when inflation has become a problem. Sara
feels that if it can do so well in inflationary times, it will do even
better in a strong economy. Unfortunately, the stock has experienced
wide price swings in the past. It pays almost no dividends. Questions
a.
What do you think of the idea of Sara keeping ―substantial
sums‖ of money in savings accounts? Would common stocks make
better investments for her than savings accounts? Explain. b. What is
your opinion of the four stocks Sara has described? Do you think they
are suitable for her investment needs? Explain. c. What kind of
common stock investment program would you recommend for Sara?
What investment objectives do you think she should set for herself,
and how can common stocks help her achieve her goals?
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FIN 402 Week 3 Assignment Case Problem 6.1, 6.2, 7.1, 7.2,
8.1, 8.2, 9.2
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