1. Investing Inheritance
Erin Camin
John Frederick
Joel Kellogg

2. Problem Statement
What is the best way to invest an
$10,000 inheritance from a
relative?

3. Objectives
To invest the $10,000 into an investment portfolio for
three years that will grow our $10,000 invest to $15,000
for the purpose of using the $5,000 to go on a one week
vacation in three years.
To select a combination of stocks, bonds, mutual funds,
and other investments that will lead a capital gain of
10% per year for three years. It is assumed that after
the third year we will have enough money to go on a
one week vacation.

4. Objectives
To select investments to be placed into the
portfolio that will minimize risks. We will
diversify the portfolio by selecting investments
that will average out the risk and returns. We
will also use currencies and commodities to
hedge the risks of the investments.
Select investments that will continue to grow
beyond the three year investment period.

5. Alternatives
Savings
Certificate of Deposits
(CDs)
Money Markets
Bonds
Mutual Funds
Stocks

6. Weighted Model
Alternatives for Investment
Objectives stocks mutual funds
25% CD, 50%
Mutual funds,
25% Stocks
25% Bonds, 50%
Mutual funds,
25% Stocks
40% CDs,
60% Stocks
50% mutual
funds, 50%
Stocks
75% Stocks,
25% CD
$5000 for vacation after
three years 5208.75 3676.31 3446.59 3446.59 3602.52 4428.97 4190.87
max return of 10% or
more 15% 11.00% 10.38% 10.38% 10.80% 13.00% 12.38%
amount of risk 5 3 3 3.25 3.4 4 4
returns after five years 10113.57 6850.58 6381.50 6381.50 6699.32 8424.35 7920.43

7. Weighted Model Continued
Proportional Scores for Alternatives
Objectives stocks mutual funds
25% CD, 50%
Mutual funds,
25% Stocks
25% Bonds, 50%
Mutual funds,
25% Stocks
40% CDs,
60% Stocks
50% mutual
funds, 50%
Stocks
75% Stocks,
25% CD
$5000 for vacation after
three years 100.0 13.0 0.0 0.0 8.8 55.7 42.2
max return of 10% or
more 100.0 13.5 0.0 0.0 9.2 56.8 43.2
amount of risk 0 125 125 109.375 100 62.5 62.5
returns after five years 100.0 12.6 0.0 0.0 8.5 54.7 41.2

8. Weighted Model Continued
Weighted Scores
Objectives weights stocks mutual funds
25% CD, 50%
Mutual funds,
25% Stocks
25% Bonds,
50% Mutual
funds, 25%
Stocks
40% CDs,
60% Stocks
50% mutual
funds, 50%
Stocks
75% Stocks,
25% CD
$5000 for vacation after
three years 0.2 20 2.6 0.0 0.0 1.8 11.1 8.4
max return of 10% or
more 0.2 20 2.7 0.0 0.0 1.8 11.4 8.6
amount of risk 0.5 0 62.5 62.5 54.7 50.0 31.3 31.3
returns after five years 0.1 10.0 1.3 0.0 0.0 0.9 5.5 4.1
50.0 69.1 62.5 54.7 54.5 59.2 52.5

9. Consequences and Tradeoffs
The risk of the various alternatives.
The stability and limitations of certificates of
deposit (CDs).
Stocks and Mutual Funds: higher return, higher
risk

10. Conclusion
Mutual Funds are the investment of choice
– Lower risk due to diversification of an appropriate
fund
– Potential for higher returns
– Mutual funds fulfill the specified objectives.