Given Calvin’s financial resources and investment objectives, what kinds of mutu

timer Asked: Aug 23rd, 2015

Question Description

Calvin Jacobs is a widower who recently retired after a long career with a major Midwestern manufacturer. Beginning as a skilled craftsman, he worked his way up to the level of shop super- visor over a period of more than 30 years with the firm. Calvin receives Social Security benefits and a generous company pension. Together, these amount to over $4,500 per month (part of which is tax-free). The Jacobs’s had no children, so he lives alone. Calvin owns a 2-bedroom rental house that is next to his home, and the rental income from it covers the mortgage payments for both the rental house and his house.

Over the years, Calvin and his late wife, Allie, always tried to put a little money aside each month. The results have been nothing short of phenomenal. The value of Calvin’s liquid investments (all held in bank CDs and savings accounts) runs well into the 6 figures. Up to now, Calvin has just let his money grow and has not used any of his savings to supplement his Social Security, pension, and rental income. But things are about to change. Calvin has decided, “What the heck, it’s time I start living the good life!” Calvin wants to travel and, in effect, start reaping the benefits of his labors. He has therefore decided to move $100,000 from a savings account to 1 or 2 high-yielding mutual funds. He would like to receive $1,000 to $1,500 a month from the fund(s) for as long as possible because he plans to be around for a long time.


a.  Given Calvin’s financial resources and investment objectives, what kinds of mutual funds do you think he should consider?

b.  What factors in Calvin’s situation should be taken into consideration in the fund selection process? How might these affect Calvin’s course of action?

c.  What types of services do you think he should look for in a mutual fund?

d. Assume Calvin invests in a mutual fund that earns about 10% annually from dividend income and capital gains. Given that Calvin wants to receive $1,000 to $1,500 a month from his mutual fund, what would be the size of his investment account 5 years from now? How large would the account be if the fund earned 15% on average and everything else remained the same? How important is the fund’s rate of return to Calvin’s investment situation? Explain.

This question has not been answered.

Create a free account to get help with this and any other question!

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors