Juan Pablo Alonso, age 40, is the manager of a national, publicly-funded soccer team located in...

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Juan Pablo Alonso, age 40, is the manager of a national, publicly-funded soccer team located in a country that uses the U.S. dollar (USD) as its currency. This country's debt is rated AAA. Alonso has a one-year employment contract that has been renewed for several years. He is confident that he can maintain this job, or a similar managing position, until his planned retirement at age 55. Alonso is divorced and the father of teenage children. He wants to fund a dedicated trust to provide for his children's needs until they reach age 25. He will need USD 250,000 within the next few months to fund the trust. Alonso's income tax rate is 30%. Other than a small cash reserve, he holds all of his investment assets in a tax-exempt account with a current value of USD 900,000. Contributions to this account are made after tax. Withdrawals are entirely tax-free, without penalty. Alonso saves USD 25,000 of his after-tax income every year, and plans to continue doing so until retirement. His next contribution will be made in one year. As part of his normal expenses, Alonso annually provides approximately USD 30,000 of support to local youth sporting leagues. When Alonso retires in 15 years, he plans to purchase a 25-year annuity that pays USD 100,000 after tax annually. He will need USD 1,600,000 at retirement to fund the annuity. Alonso expects the annual payout to be sufficient to meet all his needs on an inflation-adjusted basis. He does not plan to leave any estate at his death. A. B. Calculate the required annual return that would enable Alonso to purchase the retirement annuity at age 55. Show your calculations. Note: Assume all cash flows occur at the end of each period. (5 minutes) Discuss two reasons why Alonso's ability to take risk could be considered above average. Juan Pablo Alonso, age 40, is the manager of a national, publicly-funded soccer team located in a country that uses the U.S. dollar (USD) as its currency. This country's debt is rated AAA. Alonso has a one-year employment contract that has been renewed for several years. He is confident that he can maintain this job, or a similar managing position, until his planned retirement at age 55. Alonso is divorced and the father of teenage children. He wants to fund a dedicated trust to provide for his children's needs until they reach age 25. He will need USD 250,000 within the next few months to fund the trust. Alonso's income tax rate is 30%. Other than a small cash reserve, he holds all of his investment assets in a tax-exempt account with a current value of USD 900,000. Contributions to this account are made after tax. Withdrawals are entirely tax-free, without penalty. Alonso saves USD 25,000 of his after-tax income every year, and plans to continue doing so until retirement. His next contribution will be made in one year. As part of his normal expenses, Alonso annually provides approximately USD 30,000 of support to local youth sporting leagues. When Alonso retires in 15 years, he plans to purchase a 25-year annuity that pays USD 100,000 after tax annually. He will need USD 1,600,000 at retirement to fund the annuity. Alonso expects the annual payout to be sufficient to meet all his needs on an inflation-adjusted basis. He does not plan to leave any estate at his death. A. B. Calculate the required annual return that would enable Alonso to purchase the retirement annuity at age 55. Show your calculations. Note: Assume all cash flows occur at the end of each period. (5 minutes) Discuss two reasons why Alonso's ability to take risk could be considered above average.

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A To calculate the required annual return that would enable Alonso to purchase the retirement annuit... View the full answer