Chapter_Assignments

Jaquida Pittman March 30, 2010 Chapter 14 Assignments FIN 101 Kathy Ashman Personal Finance in Practice Year 1= (2500*10% = 250) 250 + 2500 = 2750 2 = (2750+2500 = 5250 x 10%=525) 525 + 5250 = 5775 3 = (5775+2500 = 8275 * 10%= 828) 828+ 8275 = 9103 4 = (9103+2500 = 11603 * 10%= 1160) 1160 + 11603 =12763 5 = (12763+2500 = 15263 * 10%= 1526) 1526 + 15263 = 16789 6 = (16789+2500 = 19289 * 10%= 1929) 1929 + 19289 = 21218 7 = (21218+2500 = 23718 *10%= 2372) 2372 + 23718 = 26090 8 = (26090+2500 = 28590 *10%= 2859) 2859 + 28590 = 31449 9 = (31449+2500 = 33949 *10%= 3395) 3395 + 33949 = 37344 10 = (37344+2500 = 39844 *10%= 3984) 3984 + 39844 = 43828 Most of the answers starting with the third year are rounded. Problems 1. Total Assets $108,800 -_ Total Liabilities $16,300 Net Worth $92,500 3. Total Assets $427,000 - Total Liabilities $111,000 Net Worth $316,000 6. a) 40 years = $5,000 * 21.725( 40 year interest @ 8%) $108,625 Social Security payments $15,000 * 40 years $600,000 + Amount in IRA account $ 5,000 Janine’s IRA will be worth $713,625 b) Janine would have to accumulate $161,375 in her company’s 401(k) plan in order to reach her retirement income goal. 8. You would have to withdrawal $340 a month to reduce this nest egg to zero in in 20 years You can withdrawal $230 per month for as long as you live and still leave this nest egg intact. Question 1. I would probably spend 4% Other expenses 5% Personal insurance and pensions 4% Entertainment 2% Contribution 8% Clothing and personal care 14% Medical care 14% Food 14% Transportation 35% Housing Case in Point 1. The major reason for employees’ loyalty was because after a certain number of years working with a company, you will become full entitled to receive 100% of the company’s contributions to the plan on your behalf. 2. Maureen started saving early at the age of 25 while 10 years later at age 35 Therese started saving for her retirement. 3. Women need to start saving for retirement early because they enter the workforce late, have lower salaries, and have lower pensions. 4. The expenses that may decrease during retirement are clothing for work, dry cleaning, and commuting. The expenses that may increase are insurance, travel, and recreation.