Question: Janet just graduated from a women s college in Mississippi with
Janet just graduated from a women’s college in Mississippi with a degree in business administration, and she is about to start a new job with a large financial services firm based in Tampa, Florida. From reading various business publications while she was in college, Janet has concluded that it probably is a good idea to begin planning for her retirement now. Even though she is only 22 years old and just beginning her career, Janet is concerned that Social Security will not be able to meet her needs when she retires. Fortunately for Janet, the company that hired her has created a good retirement and investment plan that permits her to make contributions every year. Janet is now evaluating the amount she needs to contribute to satisfy her financial requirements at retirement. She has decided that she would like to take a trip as soon as her retirement begins (a reward to herself for many years of excellent work). The estimated cost of the trip, including all expenses such as meals and souvenirs, will be $120,000, and it will last for one year (no other funds will be needed during the first year of retirement). After she returns from her trip, Janet plans to settle down to enjoy her retirement. She estimates she will need $70,000 each year to be able to live comfortably and enjoy her “twilight years.” The retirement and investment plan available to employees where Janet is going to work pays 7 percent interest compounded annually and it is expected this rate will continue as long as the company offers the opportunity to contribute to the fund. When she retires, Janet will have to move her retirement “nest egg” to another investment so she can withdraw money when she needs it. Her plans are to move the money to a fund that allows withdrawals at the beginning of each year; the fund is expected to pay 5 percent interest com- pounded annually. Janet expects to retire in 40 years, and, after taking an online “life expectancy” quiz, she has concluded that she will live another 20 years after she returns from her around-the-world “retirement trip.” If Janet’s expectations are correct, how much must she contribute to the retirement fund to satisfy her retirement plans if she plans to make her first contribution to the fund one year from today and the last contribution on the day she retires?
Answer to relevant QuestionsAssume that you are nearing graduation and that you have applied for a job with a local bank. As part of the bank’s evaluation (interview) process, you have been asked to take an exam that covers several financial analysis ...How might an investor’s tax situation affect his or her decision to purchase stocks of companies in the early stages of their lives, when they are growing rapidly and paying little or no dividends, versus stocks of older, ...Jones Brothers Clothing just issued preferred stock with a face value equal to $80 that pays a 10 percent annual dividend. If the stock currently yields 8 percent, what is its market value?Ralph Rafferty purchased Gold Depot at the beginning of January for $25 per share. Ralph received a $1.25 dividend payment from the company at the end of December. At that time, the stock was selling for $27.50 per share. ...Bayboro Sails is expected to pay dividends of $2.50, $3.00, and $4.00 in the next three years—that is, D1 = $2.50, D2 = $3.00, and D3 = $4.00, respectively. After three years, the dividend is expected to grow at a constant ...
Post your question