1. Sheldon Cooper and Amy Farrah live in Pasadena, California; have as a new investment goal to create a college fund for their newborn daughter. They estimate that they will need $200,000 in 18 years. Assuming that the Cooper-Fowler family could obtain a return of 5 percent, how much would they need to invest annually to reach their goal? Use Appendix A-3 or the Garman/Forgue companion website.
2. Mary Cooper, Sheldon’s mother, who lives in Texas, wants to help pay for her grandchild’s education. How long will it take Mary to reach her goal of $200,000 if she invests $10,000 per year, earning 6 percent? Use Appendix A-3 or the Garman/Forgue companion website.
3. If one year of college currently costs $15,000, how much will one year cost Michelle Spindle’s newborn daughter, Melissa, in 18 years, assuming a 5 percent annual rate of inflation? Use Appendix A-1 or the Garman/Forgue companion website.
4. Kunal Nayyar from California, had $50,000 in investments at the beginning of the year that consisted of a diversified portfolio of stocks (40 percent), bonds (40 percent), and cash equivalents (20 percent). His returns over the past 12 months were 13 percent on stocks, 6 percent on bonds, and 1 percent on cash equivalents.
(a) What is Kunal’s average return for the year?
(b) If Kunal wanted to rebalance his portfolio to its original position, what specific actions should he take?
5. Jordan and Jeremy, who are twins living in Rexburg, Idaho, took different approaches to investing. Jordan saved $2000 per year for ten years starting at age 23 and never added any more money to the account. Jeremy saved $2000 per year for 20 years starting at age 35. Assuming that the brothers earned a 6 percent return, who had accumulated the most by the time they reached age 63? Use Appendix A-1 and Appendix A-3 or the Garman/Forgue companion website.

  • CreatedNovember 26, 2014
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