Sam and Betty are a married couple with two children, ages 7 and 9.  Both Sam and Betty are full-time employed and their children are kept by a part-time housekeeper after school.  Sam is 37 and has a corporate pension plan provided by his employer.  Betty is 35 and participates in her firm’s 401(k) program.  The couple just bought a new home and sold the old one.  From the proceeds of the sale of the old home, they realized a profit of $32,000 which they plan to invest for their retirement.  They have stated their basic objectives as long-term growth, but are willing to accept market fluctuations. Which of the following types of mutual funds should their registered representative recommend?
A) 20% Government securities, 30% municipal bonds, 50% high-yield bonds.
B) 25% conservative growth, 75% aggressive growth.
C) 25% bond and preferred stock, 50% growth and income, 25% municipal bonds.
D) 50% bond and preferred stock, 50% Ginnie Mae.
The correct answer is B)
Many questions of this nature are open to interpretation, but in this case, the couple appears to be financially able to take the risks they mentioned in their objectives. The major problem facing them is that of loss of purchasing power. No debt instrument will provide any kind of hedge against inflation. A conservative growth fund should provide stability and growth while an aggressive growth provides opportunity for accelerated returns.


  1. Is a financial advisor required to have a degree?

    Discover the minimum educational requirements and financial licenses needed to become a financial advisor in the modern corporate ...
  2. If I have only a limited amount of time to study for the Series 6, what should I ...

    Learn what to focus on when studying for the Series 6 while reviewing important aspects of the exam, including its content ...
  3. What role does the 'chip cycle' play in the electronics sector?

    Read about some of the best and most popular test prep classes for the Series 6 FINRA securities licensing exam, including ...
  4. What does passing the Series 6 enable me to do?

    Learn more about the Series 6, what the examination and license are and what the license enables an individual to buy, sell ...
  1. Series 6

    A securities license entitling the holder to register as a limited ...
  2. Series 79

    A examination to ensure a candidate is qualified to become a ...
  3. Research Analyst

    A person who prepares investigative reports on equity securities. ...
  4. Series 34

    An exam required for individuals seeking to engage in off-exchange ...
  5. Financial Advisor

    One who provides financial advice or guidance to customers for ...
  6. Series 23

    An exam offered by the Financial Industry Regulatory Authority ...

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!