Question

Congratulations! You just finished up your MHA. You are now making the big bucks!! You are pulling down $75,000 a year. Your estimated payroll taxes are 20%. You also have a small healthcare consultancy and you make $100 a month for your wonderful advice.   

You have a lot of expenses: You bought a new car - the car note is $350 a month. Gas for your car is $50 a month You have a mortgage of $850. Health insurance is $400 You love to eat out and you spent $300 a month in food. You have a student loan payment of $300 You have a credit card monthly statement of $1,100

How much do you have left at the end of this month?

Answer: $1,750

Answer: $2,000

Answer: $1,500

Answer: $5,100

2. You just started this MHA. You are looking forward to the day that you are done and gainfully employed. You really liked this new Honda Accord that just came out (because one of your professors used to work for Honda). Today the cost of that car is $32,000. You are smart and you know you need to put money away today – so that in FIVE years, you can purchase it. You are going to put your money away in index fund that will earn 7% interest. Annual inflation is expected to be 3.2%. How much money do you need to invest today to be able to afford that car?

Answer: $65,000.00

Answer: $32,000.00

Answer: $26,707.27

Answer: $10,000.50

3. You listened to Justin’s lecture and you decided that you want to put $50,000 you have in savings today into a retirement account. The account will have an average annual return of 8%. You are currently 30 years old. You will need these funds when you retire at age 65 (35 years from now). How much money will that be?

Answer: $739,267.21

Answer: $800,000.51

Answer: $50,000.00

Answer: Who cares – I am buying a boat! (Hint – this is a wrong answer)



4. How much do I need to retire? Here are your assumptions. You are 30. You will retire when you are 65. You want $40,000 a year when you retire. You will be an aggressive investor today and have an average market return of 9%. When you retire, you will be conservative in your investing and get into bonds that have a market return of 4.5%. You expect that inflation will be 3%. You currently have $20,000 in savings as of today. You are expecting to live until 85. How much do you need to have saved when you turn 65? (Hint: if you want to work out how much you need to save every year, under PMT, it will be 36 years)

Answer: $1,000,000.00

Answer: $3,200,846.75

Answer: $45,000,000

Answer: $1,940,755.74


5. You are buying a car. You do not like playing the financing game where they leave you in the sales room for an hour to go calculate everything – because you are busy, you got stuff to do. The car costs $15,000. The interest on the car is 2.5% annual. You want to pay it off in 5 years. Tell the salesperson what the car payment will be per month.

Answer: $180.45

Answer: $266.21

Answer: $789.38

Answer: $50.00

6. You just graduated with your LSUS MHA. Healthcare professionals are eager to hire you. You have two competing job offers. Job #1 – offers $50,000 a year with a guarantee raise of 2% a year. Job #2 offers $48,000 with a guarantee of 6% raise every year. You know that you will stay at this job for 5 years minimum. You expect inflation (discount rate) to be around 3%. What job do you take?

Answer: Job #1 – The NPV is $250,450

Answer: Job #1 – The NPV is $238,051

Answer: Job #2 – The NPV is $246,984

Answer: Job #2 – The NPV is $415,002


7. Was my degree worth it? I went to LSUS for 2 years and did not work. It cost me $35,000 per year (tuition and living). When I graduated I will make $80,000 per year.

If I did not get my MHA, I would make $40,000 a year. I would not have been out-of-pocket any money.   

Regardless, of my decision, I expect to earn 2% increase in salary every year. Inflation will be around 3%. I am currently 30 and I want to retire at age 65.   

Was going to school worth it?

Answer:

Yes – the present value of my degree is $851,673 Answer:

No – I missed a lot of good TV shows Answer:

No – I had to spend $35,000 grand for three years.

8. If I purchase a home for $150,000. I do a fixed 30-year mortgage at 6%. My total fees and percent down on the home equaled $12,500. What would be my annual payment?

Answer: $6,456.72

Answer: $9,376.24

Answer: $10,897.34

Answer: $12,345.67

Answer 1