Reference no: EM133058000
1) You plan to buy the house of your dreams in 5 years. You have estimated that the price of the house will be $314,404 at that time. You are able to make equal deposits every month at the end of the month into a savings account at an annual rate of 8.49 percent, compounded monthly. How much money should you place in this savings account every month in order to accumulate the required amount to buy the house of your dreams?
2) An investor earns 9.36 percent before tax and is subject to a 35 percent tax on such earnings. Calculate the investor's after-tax rate of return. Round the answer to two decimals in percentage form.
3) An investor makes a deductible (before-tax) contribution of $1,201 to a traditional IRA. The IRA contribution grows at an 8.77 percent before-tax rate of return compounded annually for 10 years when it is distributed. The distribution is subject to a 24 percent tax. Calculate the dollar amount of IRA distribution the investor is left with after paying taxes.
4) Sarah earns 10.89 percent on her investment for the year. However, inflation for the year is 1.11 percent. What is her real inflation-adjusted rate of return?
5) A client's child will be attending college in 7 years. Assume current tuition and fees are $42,518, and inflation for college costs averages 3.55 percent. She can earn 4.59 percent on the money she invests for this purpose. The client wants to know how much she will need to set aside today to pay the first year's tuition and fees.
6) Mary's son will be attending college in 7 years. Assume current tuition and fees are $39,323, and inflation for college costs averages 7.5 percent. Mary can earn 4.0 percent on the money she invests for this purpose. Mary wants to know how much she will need to set aside today to pay the first year's tuition and fees.
7) A client's child will be attending college in 6 years. Assume current tuition and fees are $37,091, and inflation for college costs averages 3.7 percent, and she can earn 8.3 percent on the money she invests for this purpose. The client wants to know how much she will need to set aside today to pay four years of tuition and fees.
8) Anna's daughter will be attending college in 6 years. Assume current tuition and fees are $40,292, and inflation for college costs averages 6.7 percent, and Anna can earn 2.3 percent on the money she invests for this
purpose. Anna wants to know how much she will need to set aside today to pay four years of tuition and fees.
9) Your retired client has accumulated investment and retirement assets totaling $7,522,000 and is happy with an after-tax lifestyle of $370,000 a year. He is going to spend this amount every year forever. Leaving aside issues of inflation, what should his after-tax current yield be to covers his cost of living?
10) Your retired client has accumulated investment and retirement assets totaling $8,872,000. Assume the client expects to live for another 25 years and that he assumes an annual inflation rate of 1.21 percent. To leave his heirs the future value of the $8,872,000 at the end of the 25 years, the value of the assets at that time would need to grow to $_____.
11) Your retired client has accumulated investment and retirement assets totaling $3,082,000. Assume the client expects to live for another 26 years and that he assumes an annual inflation rate of 4.5 percent. To leave his heirs the future value of the $3,082,000 at the end of the 26 years, and maintain an inflation-adjusted lifestyle of $204,000 a year for all 26 years, the client's investments would have to earn an average of ______ percent a year for the entire 26 years.