Incomplete question. The full question read;
Max and Veronica Shuman, along with their teenage sons, Terry and Thomas, live in Portland, Oregon. Max is a sales rep for a major medical firm, and Veronica is a personnel officer at a local bank. Together they earn an annual income of around $100,000. Max has just learned that his recently departed rich uncle has named him in his will to the tune of some $250,000 after taxes. Needless to say, the family is elated. Max intends to spend $50,000 of his inheritance on a number of long-overdue family items (like some badly needed remodeling of their kitchen and family room, the down payment on a new Porsche Boxster, and braces to correct Tom’s overbite). Max wants to invest the remaining $200,000 in various types of fixed-income securities.
Max and Veronica have no unusual income requirements or health problems. Their only investment objectives are that they want to achieve some capital appreciation, and they want to keep their funds fully invested for at least 20 years. They would rather not have to rely on their investments as a source of current income but want to maintain some liquidity in their portfolio just in case.
Describe the type of bond investment program you think the Shuman family should follow. In answering this question, give appropriate consideration to both return and risk factors.
Answer:
<u>U.S. Treasury issued Bond</u>
Explanation:
Interestingly, the U.S Treasury issued bonds have a maturity period of 20 years or 30 years. This is the right type of investment the Shuman family should follow since we are told, they <em>"want to keep their funds fully invested for at least 20 years."</em>
Also, U.S Treasury issued bonds usually pay interest every six months giving them the opportunity "to maintain some liquidity in their portfolio".
<u>Since this is a government-issued bond the risk of falling to fraud is lesser making it an ideal option for the Shuman family.</u>
