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Saving for Retirement. Suppose you are a 25-year-old employee earning $35,000 per year salary. You plan to retire in 40 years at age 65. Assume that the Central Bank is successful at maintaining inflation at its target rate of 2% over the next 40 years and also assume that your salary not only keeps up with inflation, but you also advance in your career, receiving salary increases resulting from your greater experience level (and presumed higher productivity). Therefore, suppose your salary increases at 3% per year = inflation rate + a real growth of 1% per year. • In 2057, your expected salary is = Po(1+i)n = (35,000)(1+i)40 = _____________. [Use Table A-3, assuming n = 40 and i = 3%.] • You expect to retire in 2057 at age 65. Financial advisors indicate that you will need about 80% of your salary at retirement in order to live at about the same standard of living. Therefore, you want to have how much available in your first year of retirement? Amount needed in first year of retirement = (0.8)$____________ (your salary at retirement calculated in problem above) = $________________. • Suppose you anticipate an annual retirement income (e.g., perhaps Social Security or other defined benefit retirement plan) of $60,000 in 2057 [i.e., the present Social Security retirement indexed to inflation, but also assuming retirement plans are struggling to meet financial commitments]. Your personal savings must cover the shortfall of $_______________. • Based on long-term stock/bond market returns, financial advisors suggest that a safe withdrawal rate from one’s retirement nest egg [to avoid depleting the nest egg prematurely] is about 4%. Thus, if a 4% withdrawal rate = $____________ (shortfall from above), you need (25)($___________) = $______________ nest egg at retirement to sustain your retirement. • Given that you need a total nest egg of $_______________ in 2057, how much do you need to save annually to achieve this goal? Assume a diversified portfolio of stocks and bonds generates a CAGR of 7%. Use Annuity Table A-4, assuming n = 40 and i = 7%. My target savings rate per year = $_________________/(factor in Annuity Table) = $________________, or $_________ per month.
Given a MPT with a starting pool balance of $1,000,000, whose underlying collateral is a group of 10 year FRMs with annual payments, interest rate on the underlying mortgages=10%, servicing fees=0.5%, and prepayment projected to be 10% annually, what..
How do societal expectations affect corporations and their initiatives? Give an example of a company that had to alter a product or service because of society's concerns about its health, moral, or social impacts.
Company - entirely equity financed 18 million shares of common stock outstanding Stock = $37.50 per share Wants to purchase land for $105 million. Purchase will increase company's annual pretax earnings by $21.5 million in perpetuity. What is price p..
On Friday, December 12, the March 2016 S&P Index futures contract (i.e., the S&P contract which expires in March of next year) closed at 2000, down 40 points on the day. The value of the contract is set at 250 × the index. How much value did each con..
Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 6%, What is BEA's unlevered beta before restructuring? Use mark..
Identify the Generally Accepted Accounting Principles used to create a financial plan. Explain the relevance of each Generally Accepted Accounting Principles to the financial plan.
Carol has won a prize in the "Wait To Spend" lottery. Specifically Carol has won the amount of $1500 but she must wait for 10 years to receive the money. Carol is in real need of cash and would rather receive a different prize: $525 today and then re..
Cray-Z Consultants provides management accounting advice to not-for-profit firms. It employs three levels of consultants, based on experience and education: partner, senior, and associate. When Cray-Z considers bidding on jobs, it estimates the costs..
netflix swot analysis project1.please read all you can find on netflix from the time of the 2011 debacle over quikster
Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of $650,000. The lot was recently appraised at $695,000. At the time of the purchase, the company spent $31,000 to grade the lot and another $3,500 to build a small buildi..
You borrow $25,000 to be repaid in 12 monthly installments of $2,292.00. The annual interest rate is closest to: a. 1.5 percent. b. 12% c. 18% d. 24% Could you please add complete formulas and excel functions
Drogo, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 16 years to maturity that is quoted at 105 percent of face value. The issue makes semiannual payments and has an embedded cost of 10 percent annually. Wh..
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