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Manal Elkhoshkhany
Manal Elkhoshkhany, Bachelor's Degree
Category: Multiple Problems
Satisfied Customers: 9876
Experience:  Completed by BA degree in 1988 and graduated with a GPA of 4.0
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You have new clients, Erik and Senta Bruckner. They are in

Customer Question

You have new clients, Erik and Senta Bruckner. They are in their mid- 30s and have two children, Stella and Chloe, ages 6 and 8. The Bruckners’ primary financial objective is to provide for their children’s college education. Their secondary objective is to plan for retirement. They own a home with a mort-gage and have total family income of $ 100,000. Senta’s employer provides medical insurance and life insurance. She participates in her employer’s 401( k) ­retirement plan and currently has $ 40,000 in the plan. The funds are invested in her company’s stock. Erik is self- employed and works from their home. He has not established a retirement plan. After ­deducting the amount of the mortgage, the family has total assets of $ 200,000 available for investing in addition to the $ 40,000 in the retirement account. The Bruckners want sufficient liquid assets to cover six months’ income as a precaution ( 0.5 3 $ 100,000 5 $ 50,000). At least 20 percent of the $ 50,000 should be in exceedingly liquid assets, but the remaining 80 percent may be invested elsewhere provided that the assets meet the objective to pro-vide sufficient liquidity. The remaining assets ($ 150,000) are available for other investments. These funds could be allocated in numerous ways. Since the couple is generating income, you expect the Bruckners to conclude that income- producing bonds are not a necessary component of their portfolio. That conclusion, however, is not necessarily correct. Bonds do offer potential diversification and may be included as part of any tax- deferred retirement account. The interest income will not be taxed until the proceeds are removed from the retirement account and the flow of interest income will compound over time. If Senta’s employer offers a bond fund as part of the retirement plan, selecting the bond fund instead of the company’s stock makes sense from an overall asset allocation perspective. You decide to develop a sample asset allocation illustration. Once the Bruckners have grasped the concept, you can further subdivide the allocation. The starting amount is $ 240,000: the $ 40,000 in the retirement account, the $ 50,000 needed for liquid assets, and the $ 150,000 balance. You decide that the retirement account should be invested in bonds and the liquid assets should be in a money market mutual fund that stresses federal government Treasury bills. The balance should be divided equally between large cap and smaller cap stocks. To illustrate the allocation and its possible results over time, prepare answers to the following questions. 1. How much is allocated to each class of assets?
Submitted: 2 years ago.
Category: Multiple Problems
Expert:  F. Naz replied 2 years ago.
Please complete data and information and also mention your deadline, thanks.
Expert:  Manal Elkhoshkhany replied 2 years ago.
Hello and thank you for requesting me to answer your post.
Please click on the following link to download the solution:
https://app.box.com/s/z304t0rzvl8w44wuzk1eo27r2yf617kv
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