Question

Jill and Sam are a young couple seeking financial advisement. The following are the mandatory financial requirements; account balances; $500,000.00 balance in savings, $500,000.00 in need of loans (mortgages, car loans, and credit cards), and $500,000.00 available for investment (bonds, stock, funds, T-Bills, etc.). All mortgage loan products and yields are to be calculated for twenty-year terms and all deposit accounts or investments accounts are to be calculated for one full year (including all dividends as appropriate).

1) Identify, discuss 10 financial products that can be used, define them (mortgage, savings account, DDA..etc) All products and services listed should be age appropriate.Define and describe the product attributes and the functions of each products, the cost associated with each of the products, (i.e. monthly checking fees),

Answer 1

10 different financial products are as under:

1) certificate of deposits: they are issued by banks and carry interest more than saving account varies from weeks to years. These are for specific period and having low risk.

2) saving account: these are safe as compared to others mode of investment however it Carrie's low level of interest

3) government bonds: these are issued by government hence have nil Risk level and carries higher interest rate than certificate of deposits or saving account. There period is from 1 to 5 years

4) car loan: tendency of loans on vehicle is generally for 5 years and Carrie's interest rate from 11% to 17% yearly.

5) housing loan: for the purpose of purchase, construction of houses, Jill and sam can take home loan, interest rate on which is around 8 % to 12%. Period of home loan is from 5 years to 30 years depending on the credibility of Jill and Sam

6) mutual funds: mutual funds are generally known as polling of funds wherein the different investors invest in a consortium which further invest in different portfolios according to risk appetite of investors

7) T -Bills issues by banks are also quite popular. As name reflects its issued for particular timeframes which can be redeem on maturity and with penalty pre maturity.

8) Equity stocks: these are completely market driven and specific to companies performance in whose stock the investments has been made. It follows the policy of high risk high gain

9) private bonds: Private co. With the objective of arranging funds issues bonds which Carrie's interest rate more than fixed deposits. Their interest rate is from 9% to 17% depending on credibility of issuer.

10) credit cards: credit cards allows the holder to spend on its purchasing etc. A particular limited amount and allows on a average 45 days for the payment of dues. Issuers enjoy commissions and interest on default in payment of dues and holder enjoys 45 days credit period.