1. Using Table as a guide, prepare a similar schedule and calculate a required annual savings amount for each activity. How much must Judy save and invest each year (assume end-of-year payments) to achieve all of her goals?
2. Using your analysis from Question 1, prepare a savings schedule similar to the one shown in Table.
3. Do you think that Judy will be able to meet her savings requirements, assuming taxes and 401(k) contributions will take about 40 percent of her income? Discuss your response.
Judy Shipley graduated recently from Columbia University with an M.B.A. degree. Judy had five years of experience with a stockbrokerage firm before she entered Columbia, and this experience plus a very salable degree have landed Judy a fantastic position as an assistant portfolio manager with a mutual fund company. Her starting salary will be $110,000.
Judy is unmarried and not contemplating marriage in the immediate future. She currently has no debts and no significant assets. Judy will move to Philadelphia shortly, with all moving expenses paid by her new employer.
Judy has assembled a list of goals that she would like to achieve over the next 10 years. The list does not include a retirement goal because her employer has a 401(k) plan in which she will participate. Judy hopes that her high income will support an ambitious goal plan because she wants to avoid any short-term debt. Judy anticipates an inflation rate of 4 percent on all the activities except the down payment on the town house. She has learned that housing prices in the neighborhood she favors have been increasing at an 8 percent rate. She will use that figure. Because Judy intends to make rather conservative investments, an investment rate of 6 percent seems reasonable to use.

  • CreatedMarch 19, 2015
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