John and Susan Smith are in their mid 30s and have two children, a 4-year-old and a 2-year-old. Both John and Susan work and do not currently need additional income. They have determined they want to conservatively invest so that they will have funds for their childrens' college in about 12-15 years. Which of the following investments would best meet their goal? A) Common Stocks. B) Laddered Treasury Notes. C) Laddered Zero-Coupon Bonds. D) Preferred Stocks.

Question

Alison Sherman

Business

18 December, 01:45

John and Susan Smith are in their mid 30s and have two children, a 4-year-old and a 2-year-old. Both John and Susan work and do not currently need additional income. They have determined they want to conservatively invest so that they will have funds for their childrens' college in about 12-15 years. Which of the following investments would best meet their goal? A) Common Stocks. B) Laddered Treasury Notes. C) Laddered Zero-Coupon Bonds. D) Preferred Stocks.

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Answers (1)

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Larry Morales · Answer 1

Laddered Zero-Coupon Bonds would best meet their goal.

Explanation:

Those bonds that will not pay interest in the life of bonds refers to Zero Coupon Bonds. The investors will be getting this type of bonds with greater discount from their original value. These will be achieved by them during the time of the maturity of that bond.

In the given example, John and Susan Smith do not wish to have additional income in their current state and want to gain some investment in future for the purpose of making their children college studies. The period of waiting is about 12-15 years and hence they can make investments in Laddered Zero-Coupon Bonds.