Chapter 17, Problem 6DTM

You are given $50,000 to invest (not pay bills).  How do you invest the money? Explain why this is a good investment(s) and how it would benefit one's financial goals.

​(Related to Checkpoint​ 5.4) ​ (Present value)  Sarah Wiggum would like to make a single investment and have ​$2.0 million at the time of her retirement in 35 years. She has found a mutual fund that will earn 4 percent annually. How much will Sarah have to invest​ today? If Sarah earned an annual return of 14 ​percent, how soon could she then​ retire?   a.  If Sarah can earn 4 percent annually for the next 35 ​years, the amount of money she will have to invest today is ​$nothing. ​(Round to the nearest​ cent.)

1. Shanice Johnson, of Philadelphia, Pennsylvania, wants to invest $4,000 annually  for her retirement 30 years from now. She has  a conservative investment philosophy, and expect to earn a return of 3% in a tax-sheltered account. If she took a more aggressive investment approach and earned a return of 5%, how much more would Shanice accumulate? (Hint: use the ordinary annuity formula, as in find the future value of periodic payments made to an interest-bearing account.) 2. List two or three mistakes that people make when planning for retirement. In your opinion, which one might be the most serious one and why?   **PLEASE USE THE FORMULA ***

1. Shanice Johnson, of Philadelphia, Pennsylvania, wants to invest $4,000 annually  for her retirement 30 years from now. She has  a conservative investment philosophy, and expect to earn a return of 3% in a tax-sheltered account. If she took a more aggressive investment approach and earned a return of 5%, how much more would Shanice accumulate? (Hint: use the ordinary annuity formula, as in find the future value of periodic payments made to an interest-bearing account.) 2. List two or three mistakes that people make when planning for retirement. In your opinion, which one might be the most serious one and why?

Jean invests $1000 in Year 1 in a socially responsible fund, and doubles the amount each year after that (so the investment is $1000, 2000, …). (a) If she does this for 10 years, and the investment pays 4% annual interest, what is the future worth of her investment? (b) What are socially/ethically responsible investment funds? How do they differ from other types of investments? Why do people invest in them?

Margaret is planning to invest up to $22,000 in certificates of deposit at City Bank and People's Bank. She wants to invest at least $2000 but no more than $14000 at City Bank. The interest is 6% at City Bank and 7% at People's Bank. This is simple interest for one year. How much should she invest in each bank to maximize her income? What is the maximum income? y

You have discussed your retirement plans with your significant other and plan to move to a state with a lower cost of living upon retirement. You plan on living off $110,000 annually. You understand that your retirement account will likely yield a 5% return. Using the 4% Rule, how much money do you need in your retirement account upon retirement?

Please answer me in typing, avoid images and handwriting.   3.You   have just    made your    first    $5,000 contribution to  your    retirement account. Asuming you   earn   an  11  percent rate   of  return and   make no  additional contributions, what will   your    account be  worth when you   retire in  45  years? What if  you   wait    10  years before contributing?(Does this   suggest an  investment strategy?)

Ora (43) and wants to know about saving for her superannuation when she plans to retire at age 60. At the moment, Ora is single but has some prospects. She currently earns about $110,000 per annum, and her employer will let her salary sacrifice to superannuation. You expect that she could earn a net CPI-adjusted rate of 3% in the long term on any investments based on your assessment of her needs and risk profile. Required a) Assuming Ora wants 75% of her pre-retirement salary as annual income, estimate Ora’s income at age 60.   b) Calculate how much Ora needs to have saved by the time she is 60 to have her pre-retirement salary as annual income during retirement. Assume her adjusted life expectancy is 32 years at the age of 60.   c) Ora would like to make additional superannuation contributions up to the concessional contribution cap of $25,000. Assuming that Ora's employer is required to contribute $10,450 to her super, show the tax effectiveness of salary sacrificing to make…