Program After nearly 14 years of marriage, Harry and Belinda’s finances have improved, even though they have incurred debts for an automobile loan and a condominium. Plus they now have a 5-year-old son, Benjamin. They have not yet saved enough for retirement, so they want to catch up. Harry’s 401(k) retirement account at work is currently worth only $44,000 and Belinda’s at her workplace is $105,000, but they do have $24,000 in investments outside their employers’ retirement plans.
Therefore, the Johnsons have decided to seriously forgo some current spending for the next three years to concentrate on getting a solid investment program under way while they still have two incomes available and before they expand their family. In addition to continuing their contributions to their 401(k) programs at work, they are willing to accept a moderate amount of risk and expect to invest $800 per month over the next three years. Respond to the following questions:
(a) In what types of investments (choose only two) might the Johnsons place the first annual installment of $9,600? Review Figures 13-1 on page 394 and 13-2 on page 396 for ideas and available options. Give reasons for your selections.
(b) In what types of investments might they place the second $9,600? Why?
(c) What types of investments should they choose for the third $9,600? Why?