Sam, 30, earns $60,000 annually, expecting a 2% salary increase yearly. His current job also includes a fully paid health insurance plan and right now he has no retirement savings. He recently inherited $100,000 and plans to save 5% of his salary each year for retirement. He's paid bi-weekly but will invest his savings annually. Deposits will be made annually into an investment starting a year from now, with the last deposit at age 65 when he plans to retire. Sam is considering three investment options for maximizing his inheritance and salary savings for retirement: a. A low-risk money market fund by "RTM Funds" with an expected annual return of 3 %. b. A diversified fund named "Bluewater fund" by "Canada Mutual Fund" with a historical average growth rate of 10 %, although it carries significant risks. In past 10 years, the returns have had a range from 2% to 16%. c. An RRSP account, expected to yield an average annual return of 6%, invested in a mix of Canadian government bonds, highly rated Canadian and U.S corporate bonds, and stocks of stable Canadian and U.S companies. The RRSP has lower volatility compared to the "Bluewater fund." In past 10 years, the fund has generated returns as low as 4% and as high as 8%. Hence the return volatility of investing in the RRSP is less than that of the "Bluewater fund". Given the risk / return characteristics of the different investment vehicles, Sam is currently evaluating the following investment options for retirement. Option 1: Invest the $100,000 in the money - market fund and allocate salary savings to the "Bluewater fund." Option 2: Invest the $ 100,000 in the money - market fund and allocate salary savings to the "RRSP fund." Option 3: Invest the $100,000 in the money - market fund, with half of salary savings in the "RRSP fund" and the other half in the "Bluewater fund." Option 4: He will invest the $100,000 (inheritance) in the money - market fund (today). In addition, he will investment 30% of his savings from the salary into the "RRSP fund" and the rest in the "Bluewater fund". Sam is considering an alternative: pursuing an MBA using part of the inheritance. The program costs $40,000, lasting 2 years. Sam will pay the total cost upfront, starting the program today. Working part-time during the MBA, he will lose savings, requiring $ 20,000 from the inheritance to offset reduced earnings. Health insurance from the university, costing $3,000 annually, brings the total program cost to $46,000. During the MBA, Sam won't invest the remaining inheritance due to unforeseen events. After completing the MBA, Sam anticipes a potential promotion to a $70,000 salary in year three, growing at 3% annually. If promoted, he plans to save 6% of his salary, starting three years from now and continuing until age 65. The remaining inheritance will be invested three years from today, with an expected value of $36,000 accounting for interest in a savings account, assuming no unforeseen financial expenses occur. Considering the MBA option and a three-year delay in retirement investments, Sam evaluates the following strategies: Option 5: Invest inheritance and salary savings in the "Bluewater fund" (first deposit in three years). Option 6: Invest inheritance in the money-market fund (three years from today) and salary savings in the "Bluewater fund." Option 7: Invest inheritance in the "Bluewater fund" (three years from today). Allocate half of salary savings to the "RRSP fund" and the other half to the "Bluewater fund" (first deposit in three years). With a goal of a comfortable retirement for at least twenty years until age 85, Sam seeks the best savings strategy, considering retirees' feedback about CPP income not being sufficient after retirement. Questions 3 and 4: (USE FORMULAS in answer) 3. Briefly discuss which set of options are relatively less risky and which set of options are relatively more risky. 4. What quantitative and non- quantitative factors should Sam consider in making the decision in terms of pursuing the MBA program?

Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $ 45,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today, at which time he will receive 24 additional annual payments. Annual inflation is expected to be 3%. He currently has S115, 000 saved, and he expects to earn 9% annually on his savings. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.

A woman is planning for retirement in 30 years and decides she can deposit $6,000 each year on December 31 into a retirement savings plan that she expects will pay 6% interest.  In 20 years she also expects to receive a small inheritance of $12,000 that she can also put into her retirement fund. The woman anticipates that her retirement fund will need to last 20 years; she estimates that she will need $60,000 at the end of each year in retirement to cover her living expenses. Her plan is flawed.  How much extra does she need to save every year (rounded to dollars and cents) to achieve her goals? (Do not round interim calculations)

Barry, age 45, works for an advertising company, where he earns $75,000. Barry would like to retire at age 65. He earns 9% on his investments, and inflation has averaged only 3% annually. Assuming he is expected to live until age 90 and he has a wage replacement ratio of 80% (in today's dollars), how much will Barry need to have accumulated when he retires to maintain his current lifestyle during retirement?   A) $1,100,265   B) $2,322,382   C) $1,490,653   D) $1,863,311

Eugene began to save for his retirement at age 35, and for 15 years he put $ 325 per month into an ordinary annuity at an annual interest rate of 8% compounded monthly. After the 15 years, Eugene was unable to make the monthly contribution of $ 325, so he moved the money from the annuity into another account that earned 8% interest compounded monthly. He left the money in this account for 15 years until he was ready to retire. How much money did he have for retirement? If Eugene had waited until he was 44 years old to start saving for retirement and then decided to put money into an ordinary annuity for 21 years earning 8% interest compounded monthly, what monthly payment would he have to make to accumulate the same amount for retirement as you found in the first part of the question?

Eugene began to save for his retirement at age 30, and for 11 years he put $ 275 per month into an ordinary annuity at an annual interest rate of 7% compounded monthly. After the 11 years, Eugene was unable to make the monthly contribution of $ 275, so he moved the money from the annuity into another account that earned 11% interest compounded monthly. He left the money in this account for 24 years until he was ready to retire. How much money did he have for retirement?

At 20 years old, Josh is an avid saver. He wants to put an equal amount each year from age 21 to 50 (30 years) such that starting at age 65 he can make a guaranteed annual withdrawal of $55,000 forever without touching the corpus, which will be the inheritance money for his family. He will make no deposits during the years of age 51 through 65. At a conservative return of 4.5% per year for all the years, what amount must he invest each year from age 21 through 50? The amount that must be invested each year is $ ?

Jim, aged 62, was retrenched and has been unemployed for ten months, but is still looking for work. He has $620,000 in super and, based on advice received, decides to purchase a 4 - year annuity of $24,000 p.a. payable monthly and indexed at 3% p.a. He can obtain this at a yield of 5.1% from a commercial provider. How much does Jim's annuity cost to purchase?

George plans to retire in 15 years. His current household expenses are $91000 per year. He estimates that when he retires, he will no longer have $4400 in monthly mortgage payments, $6600 in annual commuting expenses, and $28000 in annual budgeted 401(k) contributions. However, he does expect that his health-care costs will rise by $5300 per year and his entertainment expenses to total $8800 each year. What will be his estimated retirement expenses, in today’s dollars, if using the adjusted expense method?     $17700   $8950   $60800

Marc has nothing saved for retirement. He wants to receive $46,000.00 per year for 5 years during retirement. The first of these payments will be received in 7 years. Marc can earn a return of 9.38 percent per year. How much does Marc need to save each year for 6 years to have exactly enough to meet his retirement goal if he makes his first annual savings contribution in 1 year and all savings contributions are equal? O $21,324.88 (plus or minus 10 dollars) O $25,513.05 (plus or minus 10 dollars) O $23,325.15 (plus or minus 10 dollars) O $20,819.31 (plus or minus 10 dollars) O none of the answers are within 10 dollars of the correct answer