Question

You are a financial adviser and the following information is an extract of data you gathered as part of fact finding during an initial client consultation for married couple Janet and Steven Blake. Janet works as a Teacher and Steven works as town planner at the local government. The have two children who are aged 12 and 14.

The Blake’s life goal has been to buy a property in the country and live the quiet life 10 years from now. They need to save a $200,000 deposit to achieve this dream. They have $60,000 invested now and they estimate they can save $5000 p.a. for 5 years and then $10,000 p.a. for the 5 years following this. They have come to you see if they can achieve this goal.

**Required:**

Calculate the future value of the investment portfolio 10 years from now assuming it will earn a 5% p.a. after tax. In this calculation you should include the FV of the current investments and the FV of the contributions that Blake’s estimate that they make over the next 10 years. Assume that contributions are made at the end of the year and that the first contribution will be made 365 days from now. Finally, explain one strategy that Janet and Steven could reach their goal more quickly and show the influence that this will have.

Future value FV = PV(1 +
i)^{n}

Annuity (Future value) FV = PMT[(1 + i)^{n} – 1]/ i

Please write details of the calculations and strategy

Answer #1

Future Value of savings after 10 years = PV x (1 + i)^n = 60,000 x (1 + 5%)^10 = $97,733.68.... 1)

Future Value after five years of annuity = PMT x ((1 + i)^n - 1) / i = 5,000 / 5% x [(1 + 5%)^5 - 1] = $27,628.16

Its value in year 10 = 27,628.16 x (1 + 5%)^5 = $35,261.31... 2)

Future Value of second annuity = 10,000 / 5% x [(1.05^5 - 1) = $55,256.31... 3)

=> Total Value = $188,251.30

They will fall short of their target and hence, in order to achieve the target they might want to increase their annual savings.

Question 1: Case study
You are a financial adviser and the following information is an
extract of data you gathered as part of fact finding during an
initial client consultation for married couple Janet and Steven
Blake. Janet works as a Teacher and Steven works as town planner at
the local government. The have two children who are aged 12 and
14.
Janet and Steven would like to know how much money they will
receive after paying tax and expenses...

You are a young personal financial adviser. Molly, one of your
clients approached you for a consultation about her plan to save
aside $450,000 for her child’s higher education in the United
States 15 years from now. Molly has a saving of $120,000 and is
considering different alternative options:
Investment 1: Investing that $120,000 in savings account for 15
years. There are two banks for her choice. Bank A pays a rate of
return of 8.5% annually, compounding semi-annually. Bank...

You are a young personal financial adviser. Molly, one of your
clients approached you for a consultation about her plan to save
aside $450,000 for her child’s higher education in the United
States 15 years from now. Molly has a saving of $120,000 and is
considering different alternative options:
Investment 1: Investing that $120,000 in savings account for 15
years. There are two banks for her choice. Bank A pays a rate of
return of 8.5% annually, compounding semi-annually. Bank...

You are a young personal financial adviser. Molly, one of your
clients approached you for a consultation about her plan to save
aside $450,000 for her child’s higher education in the United
States 15 years from now. Molly has a saving of $120,000 and is
considering different alternative options:
Investment 1: Investing that $120,000 in savings account for 15
years. There are two banks for her choice. Bank A pays a rate of
return of 8.5% annually, compounding semi-annually. Bank...

You are a young personal financial adviser. Molly, one of your
clients approached you for consultation about her plan to save
aside $450,000 for her child’s higher education in United States 15
years from now. Molly has a saving of $120,000 and is considering
different alternative options: Investment 1: Investing that
$120,000 in a saving account for 15 years. There are two banks for
her choice. Bank A pays a rate of return of 8.5% annually,
compounding semi-annually. Bank B...

Question 2
You are a young personal financial adviser. Molly, one of your
clients approached you for consultation about her plan to save
aside $450,000 for her child’s higher education in United States 15
years from now. Molly has a saving of $120,000 and is considering
different alternative options:
Investment 1: Investing that $120,000 in a saving account for 15
years. There are two banks for her choice. Bank A pays a rate of
return of 8.5% annually, compounding semi-annually....

Take control of your life. How much do you need to save for
retirement at age 67 today on a monthly basis. If you started 10
years ago, how much would you have had to save on a monthly
basis?
How many years until you retire?
How many months until you retire?
Assume you will earn 6% return on your savings.
Assume you will need $500,000 to retire.
How much do you need to save monthly to reach this goal?...

10)You have just retired with $1,000,000 in savings. This is the
amount that you will be drawing down for the rest of your life. You
expect to earn 6% and withdraw $70,000 per year. You also want to
leave an inheritance of $100,000 to your favorite charity. How long
can you rely on your savings? Assume that your first withdrawal
will occur one year from today.
Use Excel’s =NPER(RATE,PMT,PV,[FV],[TYPE]) function.
RATE is 6%, PMT is $70,000, PV is $1,000,000, FV...

You would like to have enough money saved to receive $200,000
per year after retirement so that you and your family can lead a
good life for 30 years (from age 65 to 95). You will make your
first withdraw of $200,000 at the end of year when you are 65. If
you will be 35 years old when you graduate and plan on making
savings contributions at the end of your first year out of school,
how much would...

You are currently 30 years old. You would like to retire at 65
and be able to withdraw $85,000 for 25 years after the retirement
at the beginning of each year. The first withdrawal will occur the
day your retire. You have managed to save $50,000 that you will
invest in an IRA. In addition to your initial $50,000 investment,
how much will you have to deposit into the IRA every year starting
one year from now in order to...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 19 minutes ago

asked 20 minutes ago

asked 29 minutes ago

asked 31 minutes ago

asked 40 minutes ago

asked 40 minutes ago

asked 45 minutes ago

asked 49 minutes ago

asked 49 minutes ago

asked 55 minutes ago

asked 1 hour ago

asked 1 hour ago