A man, age 60, amassed 20,000 shares of Yahoo.com stock. What should he do, it represents his retirement savin

Question

Three Scenarios

1. Microsoft drops the bid for Yahoo and the stock falls to $20 per share. However, you forecast that stock will increase to $35 in 3 yrs.

2. Yahoo mangement accepts the Microsoft offer and Walter can sell his shares in one year for $29.86.

3.Walter can sell his stock immediately for $26.63 per share.

Walter can invest in a diversified portfolio of stocks which yield 12% per year.

What is the right financial answer for Walter? (Has he won the lottery)?

Answer 1

Sell now, and buy the diversified stock. In three years time, at 12% growth, $26.63 will be worth more than $35, without speculation or the risks.