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# Car, Home, Retirement: What s My Plan? Looking at her schedule, Jocelyn realized that she only had a few hours before her first meeting with

Car, Home, Retirement: What

$$

s My Plan?

Looking at her schedule, Jocelyn realized that she only had a few hours before her first meeting with her financial advisor. She had started her first job in September, earning $

$5$

$0$

$,$

$0$

$0$

$0$

$$as an account executive at a high

$-$

tech firm, and one of the benefits of working at NewTech was a two hour meeting with a financial advisor. The advisor had sent along an email last week:

Exhibit

$1$

: Email

Hi Jocelyn,

I am looking forward to our meeting next Thursday at

$3$

pm

$.$

$$In order to prepare for our meeting, I would like for you to develop a list of short, medium and long

$-$

term savings goals. This will help us work together to figure out:

How much you will need to save

Where you should put your savings

In terms of point #

$2$

$$above$,$ I think that there are three options that you might consider for where to put your savings. I am listing them below as well as how much those investments have typically returned in a year. We want to make sure that you earn the highest returns for your money, so I will likely suggest all stocks but I wanted to make sure you saw that there were other options also.

Savings

$/$

Investment options:

Savings account

$($

$1$

$\%$

$$annual return

$)$

Bonds

$($

$3$

$-$

$5$

$\%$

$$annual returns

$)$

Stocks

$($

$7$

$-$

$9$

$\%$

$$annual returns

$)$

Also, you should know that our firm has some of the best stock mutual funds around, and I look forward to sharing them with you soon.

Regards,

Tommy Stockman

Answer this:

List any concerns you have after reading this email:

Ok

$,$

$$short$,$ medium and long term goals. If that is what he wants, then that is what he will get,

$$

$$Jocelyn thought aloud.

$$

I want a new car in

$3$

$$years$,$ a house in

$1$

$0$

$$and I want to retire in

$3$

$0$

$.$

$$

$$Jocelyn couldn

$$

t wait for the meeting, so she decided to put her spreadsheet skills to the test to see if she could figure out how much she needed to save in order to accomplish these three goals.

She decided to tackle each of her goals from simplest to most challenging. First, she wanted to figure out how much she needed to save for the car down payment. Just to keep her mind focused on the goal ahead, she had this car advertisement set up as the screensaver on her laptop

DRIVE AWAY IN THIS BEAUTY TODAY!

BRAND NEW FOR ONLY $

$2$

$0$

K

$!$

JUST $

$4$

$0$

$0$

$0$

$$DOWN PAYMENT!

LOW

$7$

$\%$

$$INTEREST RATE!

$5$

$$YEARS TO REPAY YOUR LOAN!

YOU CAN

$$

T AFFORD NOT TO

$!$

:

Answer this:

$2$

$.$

$$In order to afford the down payment, how much will Jocelyn need to save for each of the next three years? Does this seem like a reasonable amount, given her salary?

Year

$1$

:

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

Year

$2$

:

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

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$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

Year

$3$

:

$\_$

$\_$

$\_$

$\_$

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$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

TOTAL

$3$

$.$

$$Where should Jocelyn stash her money for the down payment?

$4$

$.$

$$What will be her car payment for each of the following five years

$($

years

$4$

$-$

$8$

$)$

$?$

$$Use this auto loan calculator with the assumptions listed above and remember to convert monthly figures to annual ones

$($

note that sales tax where she lives is

$5$

$\%$

$,$

$$and because this is her first car she won

$$

t benefit from trade in allowance

$)$

$.$

Year

$4$

:

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

Year

$5$

:

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

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$\_$

Year

$6$

:

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Year

$7$

:

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

Year

$8$

:

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

$\_$

So far, so good. Now, it was on to her

$$

dream house,

$$

$$which Jocelyn thought would cost about $

$1$

$9$

$0$

$,$

$0$

$0$

$0$

$($

the median price of homes in the United States at that time

$)$

$.$

$$Her goal was to buy the house in

$1$

$0$

$$years to give her enough time to save. She also been told that she would NOT need to pay the full cost of the house upfront, but that most home purchases required a down payment of

$2$

$0$

$\%$

$$of the cost of the house. The remaining

$8$

$0$

$\%$

$$she could borrow with a

$3$

$0$

$-$

year mortgage that currently had an interest rate of

$5$

$\%$

$.$

$$These rates would likely change when she was ready to borrow, but she needed an estimate.

Answer this:

$5$

$.$

$$What is the amount of the down payment that she will need to save for the home? How much will she need to borrow?

$6$

$.$

$$How much would she need to save for each of the first ten years to cover the down payment you calculated in #

$5$

$?$

$$Does this seem reasonable given her salary? To be conservative, assume that she saves this money in a checking account not earning any interest.

$7$

$.$

$$Using this mortgage payment calculator, determine what her annual mortgage payment would be over the

$3$

$0$

$$year term assuming a

$5$

$\%$

$$interest rate and using the amount she needs to borrow from Question #

$5$

$.$

$$Be sure to co

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