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Pryanka Lee is currently working in a series of temporary jobs with variable hours, so her monthly income is unpredictable. Her financial goal for the near term is to save as much as possible for retirement and accumulate liquid assets in case she becomes unemployed again. Within ten years, she wants to purchase a new $25,000 vehicle and take vacations costing $3,000 to $5,000 per year. After that, retirement is on the horizon. Lee would like to live off his investments and Social Security.

Fortunately, Lee has accumulated significant assets to help achieve her goals. His net worth is $700,200. This includes $406,172 in a former employer's 401(k), $102, 413 in seven different mutual funds, $5,750 in savings and checking accounts, and $25,865 in 14 certificates of deposit. Approximately 90% of Lee's portfolio is invested in growth or growth and income mutual funds, including five different Vanguard funds and five different Fidelity funds. Lee's $110,000 house is owned free and clear, along with $30,000 of property and a $20,000 car, and she has no other debts.

Lee's monthly expenses were not listed. She did note, however, that he put 15% of her salary, when she was working, into a 401(k). Currently, she invests all surplus funds in two Vanguard index funds. Lee's financial data is meticulously kept in a series of computer-generated tables. She is single, lives alone, and has no financial dependents.

As for insurance, Lee has $14,000 of life insurance. Her former employer pays all but $24 a month toward the cost of major medical health coverage and she has $500,000 of auto and homeowner's liability. She has never had disability coverage and wonders if she should buy a long-term care insurance policy since he will have nobody to care for him when he gets older. Lee has a will that was last reviewed in 1994.

1. Discuss the strengths and weaknesses of Lee's financial situation.

2. Correct any misinformation that Lee has about financial conditions.

3. Comments about Lee's cash flow.

4. Calculate the savings required to reach Lee’s financial goals.

5. Recommend 3 to 5 action steps to improve Lee's financial situations.

6. Recommended financial products such as bank accounts, insurance policies, and mutual funds for Lee.

Roy Bemmer, 54, has lots of concerns about his finances such as "should I chance taking

$5,000 and investing it aggressively?" and "How well am I able to retire at age 60 or 62?" Bemmer is also very concerned about unemployment. His income last year was $83,866, but he expects to earn only $27,000 this year. Earlier this year, he was downsized and

took early retirement in order to keep his medical benefits. He was also laid off previously in the late 1990s. Right now, he is living "paycheck to paycheck."

Bemmer is currently working in a series of temporary jobs with variable hours, so his monthly income is unpredictable. His financial goal for the near term is to save as much as possible for retirement and accumulate liquid assets in case he becomes unemployed again. Within ten years, he wants to purchase a new $25,000 vehicle and take vacations costing $3,000 to $5,000 per year. After that, retirement is on the horizon. Bemmer would like to live off his investments and Social Security.

Fortunately, Bemmer has accumulated significant assets to help achieve his goals. His net worth is $700,200. This includes $406,172 in a former employer's 401(k), $102, 413 in seven different mutual funds, $5,750 in savings and checking accounts, and $25,865 in

14 certificates of deposit. Approximately 90% of Bemmer's portfolio is invested in growth or growth and incomemutual funds, including five different Vanguard funds and five different Fidelity funds. Bemmer's $110,000 house is owned free and clear, along with $30,000 of property and a $20,000 car, and he has no other debts.

Bemmer's monthly expenses were not listed. He did note, however, that he put 15% of his salary, when he was working, into a 401(k). Currently, he invests all surplus funds in two Vanguard index funds. Bemmer's financial data is meticulously kept in a series of computer-generated tables. He is single, lives alone, and has no financial dependents.

As for insurance, Bemmer has $14,000 of life insurance. His former employer pays all but $24 a month toward the cost of major medical health coverage and he has $500,000 of auto and homeowner's liability. He has never had disability coverage and wonders if he should buy a long-term care insurance policy since he will have nobody to care for him when he gets older. Bemmer has a will that was last reviewed in 1994.

Give 5 financial recommendations

In an archaeological dig, a wooden boat is found.  Radiocarbon analysis reveals that the wood has a ¹⁴C/¹²C ratio that is 72.5% of that found in living organisms. 

Carbon-14 radioactive decays follows  -order kinetics.

From your textbook, what is the carbon-14 half-life value, in years? 

What is the value of the kinetic rate constant, k, associated with this half-life?  (in yr^-1)

Approximately how old, in years, is this boat? 

Suppose that the government of a small open economy decides to abolish an investment tax credit while decreasing other taxes to keep tax revenue at its current level.

(a) Using the model that determines the real exchange rate, the result of the government’s abolishment of the investment tax credit, what is the small open economy’s real exchange rate? How about its level of net exports?

(b) Instead of the policy change above, suppose that the government of a foreign large open economy increases tax rates. Show the impact that this policy will have on a small open economy.

(c) As a result of the foreign government’s contractionary fiscal policy, what happens to the small open economy’s real exchange rate? How about it net exports?

Suppose a small open economy with perfect capital mobility faces a rise in real interest rates abroad (for an unspecified reason). We assume that inflationary expectations are constant around the world.

a) If this small open economy has a flexible exchange rate, what will be the effects on its real GDP, its real interest rate, its exchange rate and its net exports?

b) If this small open economy has a fixed exchange rate (and decides to keep it fixed), what will be the effects on its real GDP, its real interest rate and its net exports?

c) If the government wants to protect the value of the currency in part a), what fiscal policy would you recommend? What will be the consequence on domestic GDP?

d) If the government wants to protect the value of the currency in a) but prefers to do so through monetary policy, what would you recommend? What will be the consequence on the Domestic GDP?