Case Study Example

Case Study: Financial Planning

1. Develop a Scenario (Examples)

a. Income $85,000 annually

b. Age 45 year old male

c. Family Wife & three kids ages 17, 14, 10

d. Savings $150,000

e. Cash Surplus $75,000

f. Inflation Expectations:

Today, most economists favor a low, steady rate of inflation. Low (as opposed to zero or negative) inflation reduces the severity of economic recessions by enabling the labor market to adjust more quickly in a downturn, and reduces the risk that a liquidity trap prevents monetary policy from stabilizing the economy. Some insight can be gained from consumer expectations as it may provide clues to their borrowing and purchasing habits over the coming months. If consumers expect higher rates of inflation then they may be less likely to make big purchases, such as property, because of the increase in interest rates that can accompany inflation.

g. Interest Rates:

h. Market Rates of Return:

Understanding the Stock Market Average Rate of Return and the historical stock market rate of return is based on just comprehending exactly what the rate or return (ROR) / return on investment (ROI) means. This is defined as the ratio of money earned (gained) or lost on a stock relative to the total amount of money or capital invested in that particular stock. The total money earned can be in the form of interest, dividends, cash profit or loss and net income or loss. The total money invested is known as the asset, capital, principal, or the cost basis of the investment in the stock.

According to Yahoo! Finance, the average return for common stocks since 1926 has been 10.5 percent. This amount includes both stock price growth and dividends earned. Keep in mind, however, that performance has varied radically from one decade to the next. In the 1950s and 60s, for example, the average return was around 15 percent, but the 1970s provided investors less than a 5 percent...