Question on personal Finance Concept

Topic : Jobs and Growth Tax Relief Reconciliation Act

Question : Bernie and Pam Britten are a young married couple beginning careers and establishing a household. They will each make about $50,000 next year and will have accumulated about $40,000 to invest. They now rent an apartment but are considering purchasing a condominium for $100,000. If they do, a down payment of $10,000 will be required.
They have discussed their situation with Lew McCarthy, an investment advisor and personal friend, and he has recommended the following investments:
• The condominium - expected annual increase in market value = 5%.
• Municipal bonds - expected annual yield = 5%.
• High-yield corporate stocks - expected dividend yield = 8%.
• Savings account in a commercial bank-expected annual yield = 3%.
• High-growth common stocks - expected annual increase in market value = 10%;
expected dividend yield = 0.

How would you recommend the Brittens invest their $40,000? Explain your answer.

Answer :
While arriving at my recommendations, I have made the following assumptions:
(i) There is no change in %age yields for different assets over the years in futureI suggest, the Brittens invest their 40000 in High yield corporate stocks. This will allow them to earn an extra post tax income of 2304 which they can invest in High Growth Common Stocks which can be liquidated when needed, to fetch a higher return.

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