memo assignment 301 revised
Memo Assignment
Business Writing Across the Board (BWAC)
FINC 301
Background
You are an investment advisor and your clients, Marilyn and David, require your services. Marilyn and David are both 65 and are about to retire. They have no assets other than $1,600,000 in cash savings, and they have no debts. They wish to maintain their current lifestyle during their retirement years. Their current annual living expenses are $120,000. They have no children and they do not wish to bequeath any assets to charity (after their death). Marilyn and David are in excellent health and have a normal life expectancy. They are, however, concerned about the possibility of outliving their retirement income (i.e., longevity risk). They will rely entirely on their cash savings to support themselves financially during their retirement years. Furthermore, they have a strong aversion to risk.
Marilyn and David have decided to use their cash savings to purchase an annuity that will provide them with the necessary income to cover their living expenses over their retirement years. They initially consult with Ms. Sheila Young who is an investment advisor at Merrill Lynch about purchasing their desired annuity. Ms. Young is a very experienced advisor and she claims that she could get Marilyn and David a much higher annual income than they require because she “knows” how to invest their savings in financial instruments that can yield at least 15% per year. This rate of return is well above the current and historical average return for U.S. stocks as measured by the S&P 500 index. Marilyn and David want you to provide a “second opinion” of the analysis done by the Merrill Lynch advisor. Specifically, they want you to write a memo to Ms. Young that compares the two alternatives and highlights the risks and benefits of each alternative. They feel certain that Ms. Young is not giving due consideration to assumptions and variables that will impact their decision (e.g., market risk, the clients’
Business Writing Across the Board (BWAC)
FINC 301
Background
You are an investment advisor and your clients, Marilyn and David, require your services. Marilyn and David are both 65 and are about to retire. They have no assets other than $1,600,000 in cash savings, and they have no debts. They wish to maintain their current lifestyle during their retirement years. Their current annual living expenses are $120,000. They have no children and they do not wish to bequeath any assets to charity (after their death). Marilyn and David are in excellent health and have a normal life expectancy. They are, however, concerned about the possibility of outliving their retirement income (i.e., longevity risk). They will rely entirely on their cash savings to support themselves financially during their retirement years. Furthermore, they have a strong aversion to risk.
Marilyn and David have decided to use their cash savings to purchase an annuity that will provide them with the necessary income to cover their living expenses over their retirement years. They initially consult with Ms. Sheila Young who is an investment advisor at Merrill Lynch about purchasing their desired annuity. Ms. Young is a very experienced advisor and she claims that she could get Marilyn and David a much higher annual income than they require because she “knows” how to invest their savings in financial instruments that can yield at least 15% per year. This rate of return is well above the current and historical average return for U.S. stocks as measured by the S&P 500 index. Marilyn and David want you to provide a “second opinion” of the analysis done by the Merrill Lynch advisor. Specifically, they want you to write a memo to Ms. Young that compares the two alternatives and highlights the risks and benefits of each alternative. They feel certain that Ms. Young is not giving due consideration to assumptions and variables that will impact their decision (e.g., market risk, the clients’