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You have someone who is interested in starting a systematic investment program and is willing to invest $100 per month. Assume he or she will get a 10% return. If he or she starts investing at ages 25, 26 or 30, what would be the final value at age 65? What is the cost of waiting 1 year or 5 years?

Contributions starting at age 25: _______________

Amount if contributions started at age 26: _______________

Amount if contributions started at age 30: _______________

Cost of waiting 1 year between ages 25 and 26: _______________

Cost of waiting 5 years from ages 25 to 30: _______________

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Jamar Ferry
Jamar FerryLv2
28 Sep 2019

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Problem 1:


Paltrow Company made an investment in another that guarantees cash flow $ 22,500 each year for the next five years. If the company uses a discount rate of 15% on their investments, what is the present value of this investment?


Problem 2:


The company Argentinian Grill has a 7-year loan $ 23.500 with the local bank. His plan is to start paying the loan in seven equal installments starting today. If the interest rate
It is 8.4%, calculates the annuity payment.

Problem 3:


You currently have 25 and want to retire at the age of 65. As a complement to other sources of retirement, you could deposit $ 3,000 at the end of each year in an IRA. This financial instrument would earn 9.75% over the next 40 years.

a) How much money will accumulate at the end when you turn 65?

Problem 4:
Solve each situation separately, where P = principal; r = interest rate; t = time in years; I = interest and future value FV =

A) P = $ 10.800; r = 6.50%; t = 7 years; I =?

B) I = $ 1.550; t = 11 months r = 7.75%; P =?

C) P = $ 30.500; r = 6.75%; t = 10; VF =

D) FV = $ 320,000; r = 5.40% compounded monthly; t = 30; P =?

b) If you decide to wait 10 years to begin to deposit, how much money will accumulate to reach age 65?

c) Discuss the impact of waiting 10 years on the accumulated amount.

Problem 5:

You want to start a bakery business. For this, you will need a capital of $ 75,000 to start operating. If you have to operate within four years. What sum must now invest 12% quarterly composite, the amount needed to keep and operate your business?

** NOTE** IT IS VERY IMPORTANT TO COMPLETE THE ENTIRE EXERSICE. INCLUDE ALL THE CALCULATIONS, PLEASE, THANK

John is an attorney in a small firm, he is 32 years old and currently earning $78,000 a year. John must continue paying back his student loan by making monthly payments of $300 per month for the next three years at an interest rate of 5% per year. John is married and has three children, Billy, age 2. Cindy, age 6, and sally, age 10. Johns wife, Mary, currently is a stay-at-home mom. When billy is old enough to attend school, Mary hopes to get a job as an administrative assistant in the children's school. That position pays about $20,000 per year. Mary has a high school diploma and a certificate showing she completed one year of practical secretarial training. Mary is 34 years old. John and Mary pay $900 per month for their home mortgage, which will be paid off in 20 years. The interest rate on their mortgage is 4.0%. (Their current equity in the home is $36,000.) The couple own two cars, both 10 years old, and personal property (such as clothes, electronics, furniture, etc) valued at $45,000. Their investments include checking, savings, and mutual fund accounts equal to $8,000. John has no life insurance. Mary has a $25,000 whole life insurance policy that was given to her by her parents when she turned 18. If John should die, Mary would receive approximately $5,000 per year for each child 18 years of age or younger.

John and Mary spend almost all of John's take-home pay each month. They are able to save $300 per month that they deposit into a tax-deferred college fund for the children. The college fund has been earning a respectable rate of return of about 7% per year. Their other investments earn about 5% per year. John is worried about what may happen to his family if he should die. He is considering the purchase of life insurance and asks for your advice.

1) Assuming neither John nor Mary will receive large inheritances, how much life insurance do you think John needs? Calculate the amount using the needs approach. Show all calculations and explain your answer. Also indicate the type of insurance you would recommend, whole life or term. If you recommend term, specify length of the term policy.

2) Assume that John and Mary purchase a whole life policy on John's life in the amount you determined in part 1. (If the amount you determined is less than $200,000, assume an amount of $200,000) Fifteen years later, John decides he doesnt want to make any more premium payments. Which non-forfeiture option would you recommend? Explain the selection.

3) Assume that John and Mary purchase a whole life policy on John's life in the amount you determined in part 1. (If the amount you determined is less than $200,000, assume an amount of $200,000) John dies at age 55. Which settlement option would you recommend? explain your selection and note any assumptions made.

Your clients, Jerry and Jenny, are 25 years old. They have come to you for assistance with planning for the cost their child’s education and their retirement. They would like to know if they are on track to reach these two goals. Below are the facts about the family.

Jenny currently earns $150,000 and they expect to need $150,000 per year in today’s dollars in retirement. Jerry is a stay-at-home dad.

Jenny plans to retire at age 67, and they expect to live until age 100.

They also expect that Social Security will provide $40,000 of benefits in today’s dollars at age 67.

Jenny has been saving $5,000 annually in her 401(k) plan.

Their son, Jazz, was just born and is expected to go to college in 18 years.

They want to save for Jazz’s college education, which they expect will cost $20,000 in today’s dollars per year and they are willing to fund 5 years of college. They want all funds needed for Jazz’s college education available the first year Jazz starts college.

They were told that college costs are increasing at 7% per year, while general inflation is 3%.

They currently have $100,000 saved in total and they are averaging a 10% rate of return and expect to continue to earn the same return over time.

1. Calculate the current cost of Jazz’s college education.

2. Calculate the capital needs of the couple at retirement and the current value (today’s value) of their retirement needs.

3. Provide the couple with a summary of their goals with the current total amount needed to reach their goals, showing how you arrived at the total.

4. Given their current resources, does the couple have sufficient resources to achieve their goals? Using calculations, show and explain your answer to the couple.

5. Using calculations and explanations provide the couple with three alternatives for meeting their goals.

6. In your own words, provide the couple with the advantages and disadvantages of two accounts and/or investment instruments that are used specifically to save for college education expenses. Which would you recommend and why?

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