Concept explainers
a
Case summary:H’s family us experiencing some financial pressures, even though the couple has combined income of $85,000, it is determined that, increment of income is required for emergency fund needs, and they required to save $30,000 annually at 3 percent return. With 25 percent of marginal tax rate they are required to save $9,782 annually. To save annually some of the best available saving options have been discussed.
Characters in the case : MH and JH
Adequate information:H family is experiencing financial pressure, MH is contemplating going to work full time. It is required to determine the effect of family income on emergency fund needs, if they consider to build the college fund to $30,000 how much annual savings they require, if the marginal tax rate is 25 percent how much savings would reduce the effects on taxes.
To determine: Addition of $32,000 to family annual income will affect family’s emergency fund.
Introduction:
Monetary asset management:Is to see that best possible interest earnings and minimizing fees on all of you funds that are available for everyday living expenses, emergencies, savings, and investment opportunities. An effective monetary asset management allows you to earn interest on your money while maintaining adequate liquidity and safety.
b
Case summary:H’s family us experiencing some financial pressures, even though the couple has combined income of $85,000, it is determined that, increment of income is required for emergency fund needs, and they required to save $30,000 annually at 3 percent return. With 25 percent of marginal tax rate they are required to save $9,782 annually. To save annually some of the best available saving options have been discussed.
Characters in the case : HJ and BJ
Adequate information:H family is experiencing financial pressure, MH is contemplating going to work full time. It is required to determine the effect of family income on emergency fund needs, if they consider to build the college fund to $30,000 how much annual savings they require, if the marginal tax rate is 25 percent how much savings would reduce the effects on taxes.
To determine: The amount of savings required annually for next three year to build $30,000 at an assumed rate of 3 percent.
Introduction:
Monetary asset management:Is to see that best possible interest earnings and minimizing fees on all of you funds that are available for everyday living expenses, emergencies, savings, and investment opportunities. An effective monetary asset management allows you to earn interest on your money while maintaining adequate liquidity and safety.
c
Case summary:H’s family us experiencing some financial pressures, even though the couple has combined income of $85,000, it is determined that, increment of income is required for emergency fund needs, and they required to save $30,000 annually at 3 percent return. With 25 percent of marginal tax rate they are required to save $9,782 annually. To save annually some of the best available saving options have been discussed.
Characters in the case : HJ and BJ
Adequate information:H family is experiencing financial pressure, MH is contemplating going to work full time. It is required to determine the effect of family income on emergency fund needs, if they consider to build the college fund to $30,000 how much annual savings they require, if the marginal tax rate is 25 percent how much savings would reduce the effects on taxes.
To determine: The effect of 25 percent marginal tax rate on after tax returns of H’s savings.
Introduction:
Monetary asset management:Is to see that best possible interest earnings and minimizing fees on all of you funds that are available for everyday living expenses, emergencies, savings, and investment opportunities. An effective monetary asset management allows you to earn interest on your money while maintaining adequate liquidity and safety.
d
Case summary:H’s family us experiencing some financial pressures, even though the couple has combined income of $85,000, it is determined that, increment of income is required for emergency fund needs, and they required to save $30,000 annually at 3 percent return. With 25 percent of marginal tax rate they are required to save $9,782 annually. To save annually some of the best available saving options have been discussed.
Characters in the case : HJ and BJ
Adequate information:H family is experiencing financial pressure, MH is contemplating going to work full time. It is required to determine the effect of family income on emergency fund needs, if they consider to build the college fund to $30,000 how much annual savings they require, if the marginal tax rate is 25 percent how much savings would reduce the effects on taxes.
To determine: The saving options for H that could reduce the effect of taxes on their savings program.
Introduction:
Monetary asset management:Is to see that best possible interest earnings and minimizing fees on all of you funds that are available for everyday living expenses, emergencies, savings, and investment opportunities. An effective monetary asset management allows you to earn interest on your money while maintaining adequate liquidity and safety.
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Chapter 5 Solutions
Personal Finance (MindTap Course List)
- Parents wanted to save enough money to send their daughter to college. The parents were unable to save money right at birth but rather started saving money when she was 5 years old and will save until she is 18 years old. The parents would like to save up $75,000 to cover tuition and other expenses. How much would the parents need to save each month in order to meet this requirement Assume the parents save the money into an account that generated an interest of 2% per year O a $360 O b. 3370 Oc$400 Od $490arrow_forwardThe expenses associated with sending two children through college prevented Victor and Maria Hernandez from adding substantially to their investment program. Now that their younger son, Joseph, has completed school and is working full time. They would like to build up their investments quickly. Victor is 47 years old and wants to retire early, perhaps by age 60. In addition to the retirement program at his place of employment, Victor believes that their investment portfolio, currently valued at $115,000, will need to triple to $345,000 by his planned retirement time, in 13 years. He and Maria realize that they will have to sacrifice a lot of current spending to save and invest for retirement. What rate of return is needed on the $115,000 portfolio to reach their goal of $345,000 (assuming no additional contributions)? Use Appendix A-1 or visit the Garman/Forgue companion website. Round your answer to the nearest whole number. Round ‘Future Value of a Single Amount’ in intermediate…arrow_forwardLike many married couples, Morgan and Thomas Jensen are trying their best to save for two important investment objectives: (1) an education fund to put their two children through college; and (2) a retirement nest egg for themselves. They want to set aside $100,000 per child by the time each one starts college. Given that their children are now 10 and 12 years old, Morgan and Thomas have 6 years remaining for one child and 8 for the other. As far as their retirement plans are concerned, the Jensens both hope to retire in 20 years, when they reach age 65. Both Morgan and Thomas work, and together, they currently earn about $90,000 a year. The Jensens started a college fund some years ago by investing $6,000 a year in bank CDs. That fund is now worth $67,000 (assume that the fund is split in half for each child). They also have $52,000 that they received from an inheritance invested in several mutual funds and another $22,000 in a tax-sheltered retirement account. Morgan and Thomas…arrow_forward
- Your parents will retire in 18 years. They currently have $250,000 saved, and they think they will need $1,000,000 at retirement. What annual intrest rate must they earn to reach their goal, assuming they don't save any additional funds?arrow_forwardJoann wants to save for her daughter's education. Tuition costs $9,000 per year in today's dollars. Her daughter was born today and will go to school starting at age 18. She will go to school for 4 years. She can earn 12% on her investments and tuition inflation is 6%. How much must she save at the end of each year if she wants to make her last savings payment at the beginning of her daughter's first year of college? $1,889 $2,117 $2,370 $1,700arrow_forwardbut tion Johnny wants to save some money for his daughter Alexis's education. Tuition costs $12,500 per year in today's dollars. Alexis was born today and will go to school starting at age 18. She will go to school for 4 years. Johnny can earn 11% on his investments and tuition inflation is 7%. How much must Johnny save at the end of each year, if he wants to make his last savings payment at the beginning of his daughter's first year of college? O a. $2,694.56. b. $2,789.04. X OC. $2,861.65. O d. $3,176.43.arrow_forward
- A) Ms. Diana wants to take off next three years of work to travel around the world. Sheestimates her average annual cash need is $20,000. If she needs more funds, she will arrangefrom alternative ways i.e. taking loans or doing some odd jobs etc.Ms. Diana believes that she can invest her savings at 10% until she depletes her funds.You are required to find out how much she should invest now to fund her future cashflow if she is able invests at 10% annually OR what amount she has to invest if she onlyearns 7% annually.The relevant factors from table you will need for this calculation are given below.a) Future value interest factor for a one-dollar annuity compounded from the table at 10% is3.3100 and at 7% is 3.2149 on period#3b) Present value interest factor for a one-dollar annuity discounted from the table at 10% is2.4869 and at 7% is 2.6243 on period#3B) What is the difference between Present value & Future value?___________________________________________arrow_forwardYour parents will retire in 18 years. They currently have $250,000, and they think they will need $1,000,000 at retirement. What anual interested rate must they earnto reach their goal, assuming they dont save any additional funds?arrow_forwardbelinda and harry have discussed starting a family but decided to wait for perhaps five more years in order to get their careers moving along well and getting their personal finances solidly on the road to success.they also know that having children is expensive. the government's figure is extra expense of a child would be $16,000 a year through high school graduation. how much money will they likely cumulatively spend on a child over 18 years assuming a 3 percent inflation rate?arrow_forward
- Nathan and Stephanie are saving for their daughter's college education. Their daughter, Paige, is now 8 years old and will be entering college 10 years from now (t = 10). College tuition and expenses at State U. are currently $16,000 a year and are expected to increase at a rate of 4% a year. They expect Paige to graduate in 4 years (if Paige wants to go to graduate school, she's on her own). Tuition and other costs will be due at the beginning of each school year (at t = 10, 11, 12, and 13). So far, Nathan and Stephanie have built up $9,000 in the college savings account. Their long-run financial plan is to contribute $3,000 a year at the beginning of each of the next five years (at t = 0, 1, 2, 3, and 4). Then they plan to make 6 equal annual contributions at the end of each of the following 6 years (t = 5, 6, 7, 8, 9, and 10). Their investment account is expected to earn 8%. How large must the annual payments be in the subsequent 6 years (t = 5, 6, 7, 8, 9, and 10) to meet their…arrow_forwardDirections: Answer the following questions. Provide necessary computations. 1. The Madrigal family is experiencing some financial pressures, even though the couple has a combined income of P1,236,000 per annum. Their home loan will start this year and their eldest daughter, Julieta, will start college in only three years. Alma is contemplating saving for this coming year and told her husband, Pedro, to plan for an emergency fund. Alma's monthly salary is P29,000. a) How much should be the three-month emergency funds of Alma? b) How much should be the three-month emergency funds of Pedro? c) If the couple decided to have five-month emergency funds, how much should be their combined emergency funds?arrow_forwardto help George and Jude Sullivan determine how much they need to retire early in about 20 years. Both have promising careers, and both make good money. As a result, they’re willing to put aside whatever is necessary to achieve a comfortable lifestyle in retirement. Their current level of household expenditures (excluding savings) is around $75,000 a year, and they expect to spend even more in retirement; they think they’ll need about 125 percent of that amount. (Note: 125 percent equals a multiplier factor of 1.25.) They estimate that their Social Security benefits will amount to $20,000 a year in today’s dollars and that they’ll receive another $35,000 annually from their company pension plans. George and Jude feel that future inflation will amount to about 3 percent a year, and they think they’ll be able to earn about 6 percent on their investments before retirement and about 4 percent afterward. Find out how big their investment nest egg will have to be and how much they’ll have…arrow_forward
Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning