The Jacksons have recently started saving about $300 per month ($3600 per year) for their children’s...

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The Jacksons have recently started saving about $300 per month ($3600 per year) for their children’s education. They are currently investing this amount in bank CDs each month, but they are now considering investing in stock instead. The Jacksons have never owned stock before.
The Jacksons are currently earning an interest rate of 5% on their CDs. If they invest in a specific stock from this point on, they will achieve an annual return ranging from 2 to 9%. The stock will generate an annual return of only 2% if stock market conditions are weak in the future, but it could generate an annual return of 9% if the stock market conditions are strong. The Jacksons want to compare the potential returns of investing in stock to the CDs.

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chapter 11 Instruction : Complete problem 1 below. Use Times New Roman font, size 12, double-spaced ( mix one page) If need use ch-11 in the book ( book is attached) Problem 1: The Jacksons have recently started saving about $300 per month ($3600 per year) for their children’s education. They are currently investing this amount in bank CDs each month, but they are now considering investing in stock instead. The Jacksons have never owned stock before. The Jacksons are currently earning an interest rate of 5% on their CDs. If they invest in a specific stock from this point on, they will achieve an annual return ranging from 2 to 9%. The stock will generate an annual return of only 2% if stock market conditions are weak in the future, but it could generate an annual return of 9% if the stock market conditions are strong. The Jacksons want to compare the potential returns of investing in stock to the CDs. Compare the returns from investing in the bank CDs to the possible returns from the stock over the next 12 years by filling in the following table: CD: Annual Return=5%Weak stock market conditionsStrong stock market conditionsAmount invested per year$3600$3600$3600Annual return5%2%9%Value of investment in 12 years$$$ Explain to the Jacksons why there is a trade off when investing in bank CDs versus stock to support their children’s future college education. Advise the Jacksons on whether they should invest their money each month in bank CDs, in stocks, or in some combination of the two, to save for their children’s college education. The Jacksons are considering investing in an initial public offering (IPO) of a high-tech firm, since they have heard that the return on IPOs can be very high. Advise the Jacksons on this course of action. Refer to the following links on information about IPOs and provide citations for any other sources that you use to answer this question. HYPERLINK "http://www.investopedia.com/terms/i/ipo.asp" \l...

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David · Accepted Answer

SOLUTION: 
Certificate of Deposit: Certificate of Deposit can be defined as the certificate under which the 
bearer is entitled to receive interest. It has a maturity date, fixed interest rate and can be used in 
any denomination. These are usually issued by commercial banks and are insured by FDIC. 
Their term ranges from one month to five years. It is also called as promissory note issued by 
bank. It restricts the holders from withdrawing funds on demand. The withdrawal of money is 
possible but a penalty amount needs to be paid on it.  
Common Stock: Common Stock can be defined as the security that shows ownership in a 
company. The holders of common stock can exercise control by election of board of directors 
and voting on corporate policy. These shareholders have the right to company’s assets in case of 
liquidation.

The Jacksons have recently started saving about $300 per month ($3600 per year) for their children’s education. They are currently investing this amount in bank CDs each month, but they are now...

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