“Boy, this is all so confusing,” said Ryan as he stared at the papers on his desk. If only I had taken the advice of my finance instructor, I would not be in such a predicament today.” Ryan Daniels, aged 27, graduated five years ago with a degree in food marketing and is currently employed as a middle-level manager for a fairly successful grocery chain. His current annual salary of $70,000 has increased at an average rate of 5 percent per year and is projected to increase at least at that rate for the foreseeable future. The firm has had a voluntary retirement savings program in place, whereby employees are allowed to contribute up to 11% of their gross annual salary (up to a maximum of $12,000 per year) and the company matches every dollar that the employee contributes. Unfortunately, like many other young people who start out in their first “real” job, Ryan has not yet taken advantage of the retirement savings program. He opted instead to buy a fancy car, rent an expensive apartment, and consume most of his income. However, with wedding plans on the horizon, Ryan has finally come to the realization that he had better start putting away some money for the future. His fiancée, Amber, of course, had a lot to do with giving him this reality check. Amber reminded Ryan that besides retirement, there were various other large expenses that would be forthcoming and that it would be wise for him to design a comprehensive savings plan, keeping in mind the various cost estimates and timelines involved. Ryan figures that the two largest expenses down the road would be those related to the wedding and down payment on a house. He estimates that the wedding, which will take place in twelve months, should cost about $15,000 in today’s dollars. Furthermore, he plans to move into a $250,000 house (in today’s terms) after 5 years, and would need 20% for a down payment. Ryan is aware that his cost estimates are in current terms and would need to be adjusted for inflation. Moreover, he knows that an automatic payroll deduction is probably the best way to go since he is not a very disciplined investor. Ryan is really not sure how much money he should put away each month, given the inflation effects, the differences in timelines and the salary increases that would be forthcoming. All this number crunching seems overwhelming and the objectives seem insurmountable. If only he had started planning and saving five years ago, his financial situation would have been so much better. But, as the saying goes, “It’s better late than NEVER!”
Question 4: . How much would Ryan have to save each month, starting from the end of the next month, in order to accumulate enough money for his wedding expenses, assuming that his investment fund is expected to yield a rate of return of 7% per year and the inflation is 4% annually?
Question 5. If Ryan starts saving immediately for the 20% down payment on his house, how much additional money will he have to save each month? Assume an investment rate of return of 7% per year.
Ryan has finally come to the realization that he had better start putting away some money for the future. His fiancée, Amber, of course, had a lot to do with giving him this reality check. Amber reminded Ryan that besides retirement, there were various other large expenses that would be forthcoming and that it would be wise for him to design a comprehensive savings plan, keeping in mind the various cost estimates and timelines involved. Ryan figures that the two largest expenses down the road would be those related to the wedding and down payment on a house. He estimates that the wedding, which will take place in twelve months, should cost about $15,000 in today’s dollars. Furthermore, he plans to move into a $250,000 house (in today’s terms) after 5 years, and would need 20% for a down payment. Ryan is aware that his cost estimates are in current terms and would need to be adjusted for inflation. Moreover, he knows that an automatic payroll deduction is probably the best way to go since he is not a very disciplined investor. Ryan is really not sure how much money he should put away each month, given the inflation effects, the differences in timelines and the salary increases that would be forthcoming.
“Boy, this is all so confusing,” said Ryan as he stared at the papers on his...
“Boy, this is all so confusing,” said Ryan as he stared at the papers on his desk. If only I had taken the advice of my finance instructor, I would not be in such a predicament today.” Ryan Daniels, aged 27, graduated five years ago with a degree in food marketing and is currently employed as a middle-level manager for a fairly successful grocery chain. His current annual salary of $70,000 has increased at an average rate of 5 percent...
“Boy, this is all so confusing,” said Ryan as he stared at the papers on his desk. If only I had taken the advice of my finance instructor, I would not be in such a predicament today.” Ryan Daniels, aged 27, graduated five years ago with a degree in food marketing and is currently employed as a middle-level manager for a fairly successful grocery chain. His current annual salary of $70,000 has increased at an average rate of 5 percent...
“Boy, this is all so confusing,” said Ryan as he stared at the papers on his desk. If only I had taken the advice of my finance instructor, I would not be in such a predicament today.” Ryan Daniels, aged 27, graduated five years ago with a degree in food marketing and is currently employed as a middle-level manager for a fairly successful grocery chain. His current annual salary of $70,000 has increased at an average rate of 5 percent...
Millhouse graduated 5 years ago with a degree in business administration and is currently employed as a middle level manager for the same firecracker company his dad already worked for. His current annual salary of $60,000 has increased at an average rate of 5% per year and is projected to increase at that rate for the future. The firm has had a voluntary retirement savings program in place, whereby, employees can contribute up to 11% of their gross annual salary...
Looking for the simplest written answers with formulas and a very simple explanation of what you did. Millhouse graduated 5 years ago with a degree in business administration and is currently employed as a middle level manager for the same firecracker company his dad already worked for. His current annual salary of $60,000 has increased at an average rate of 5% per year and is projected to increase at that rate for the future. The firm has had a voluntary...
Robert Johnson is 25 years old. He and his wife Jane have two children, Emmitt and Patricia, ages 2 and 4 respectively. Robert wants to retire in 40 years and build boats. He would like a nice retirement home with some land on a peaceful lake in the mountains of Georgia. Robert believes that to purchase a home and lot in 40 years would cost $300,000 in today’s prices. In forty years Robert also believes he and Patricia can live...
Jimmy and Jane Have Goals Jimmy Johnson is 25 years old. He and his wife Jane have two children, Emmitt and Patricia, ages 2 and 4 respectively. Jimmy wants to retire in 40 years and build boats. He would like a nice retirement home with some land on a peaceful lake in the mountains of Georgia. Jimmy believes that to purchase a home and lot in 40 years would cost $300,000 in today’s prices. In forty years Jimmy also believes...
Jimmy and Jane Have Goals Jimmy Johnson is 25 years old. He and his wife Jane have two children, Emmitt and Patricia, ages 2 and 4 respectively. Jimmy wants to retire in 40 years and build boats. He would like a nice retirement home with some land on a peaceful lake in the mountains of Georgia. Jimmy believes that to purchase a home and lot in 40 years would cost $300,000 in today’s prices. In forty years Jimmy also believes...
John Smith is 30 years old and graduated from CSUSM some years back, with a Business degree and an emphasis in Marketing. John is currently employed as a Marketing Manager at a well-known corporation. He has progressed well in his career, with the ultimate goal of becoming the company’s CEO. John’s current salary of $78,000 has increased at an average rate of 5% per year, with routine merit raises, and he expects it keep increasing. John’s firm, ABC Corporation, has...
John Smith is 30 years old and graduated from CSUSM some years back, with a Business degree and an emphasis in Marketing. John is currently employed as a Marketing Manager at a well-known corporation. He has progressed well in his career, with the ultimate goal of becoming the company’s CEO. John’s current salary of $78,000 has increased at an average rate of 5% per year, with routine merit raises, and he expects it keep increasing. John’s firm, ABC Corporation, has...