Please rework all problems.

Review Problems.docx Problem 1. To prepare for your retirement 30 years from now, you plan to save the following amounts each month over the next 30 years: The interest rate is 6% APR FVFA: Years FV at the end of the decade Amount 1-10 $450 11-20 $420 21-30 $315 (1) Fill in the FVFA and the FV at the end of each decade in the table above. (2) After 30 years, you are ready to retire. You move your savings to safer investments, which means you expect to earn only 3% APR per year during your retirement. You expect to live for 20 more years. How much could you withdraw every month and not run out of money for your expected lifetime? The correct PVFA for this calculation is: Withdraw per month in retirement (3) Suppose it is the end of year 20 and you are considering your financial plan as shown above. You still expect to retire 10 years from now, but you think that you will need a retirement income of $3,000 per month for your expected lifetime after you retire. To meet that goal, you will have to adjust your savings in the last ten years. How much do you have to save per month over the last ten years before you retire to be able to withdraw the desired amount every month in retirement? Question 1 (2.5 points). One month ago you purchased ABC stock for $105 per share. Today you sell the stock at a price of $107. Fill in the table below. Your one month return on this investment is The APR is The EAR is Bonus question 2 (2.5 points). You take out a 15-year $450,000 mortgage loan with a rate of 12% APR and monthly payments. In 5 years you decide to pay off the mortgage. What is the principal balance on the loan after 5 years? The monthly payment is How many payments are left when you decide to pay off the loan? The PVFA needed to solve this problem is Principal balance on the loan after 5 years isFVFA = PV/ CITY)" - I Review Problems.docx Problem 1. To save for retirement, you plan to save the following amounts: Years from now Amount saved per year The FVFA for the period Amount you will have at the end of each 1-9 $2,00 (1+0.0 ) - period 10-18 0.09 = 13 02 ... 2000 ( 13 0 %4? ? ? )= (260 412. 07 $7,000 1+0.09)9-1 - = 13.02 19-30 12 10.091 100 0 ( 13 . 02 10 3 64 4 ) + 24042 .07 $6,000 1+0 09 ) 12 - 1 ( 1 10 09 ) 0. 09 Part (a). If you can earn 9% per year on your savings, fill in the amount you will have in your savings at the end of each region. Paryourfarlowers in the yby above 85 - = 20.14. 6000 ( 20 . 14 0719 8 ) + 147707.8 = 147707 Part (b). If you expect to live for 25 years after you retire, (you will retire 30 years from now), what is the most you could withdraw each year for 25 years in a row? You will continue to earn the same rate of return per year on your savings. Put your answer here $54,598.39 Part (c). You decide that the answer from part (b) is not enough. How much would you have to save each year in the last period to be able to withdraw $60,000 per year for 25 years after you retire? Put your answer here 58,634.35 Part (d) You do not think you can save as much as your answer in part (c). So you decide to save the planned amount ($6,000) per year in the last time period, but move your savings to riskier investments to try to earn a higher rate of return. What rate would you have to earn each year in the last period to have enough to withdraw $60,000 per year when you retire? You will move your savings back to an account earning 9% when you retire. 9.96% Q2. Find the expected return and standard deviation for the three assets shown below: stocks, bonds and a portfolio that has 25% in stocks and 75% in bonds. Scenario 257. (0.25 ) (0.24 ) +0.75) (0. 09) Probability Boom Return Stocks Return Bonds Return Portfolio 15% 24% 9% Very Good 12. 75 % 20% 16% 11% Normal 12.25% 25% ( x X X X 12% 4% Poor 25% 1% 6% Bust 4. 25.7 . 15% -8% 4. 00.7. Expected Return 8. 35%) 7.25%) 7.53.% Standard Deviation 10.66% 2.539% 3.70% (0. 24 - 0. 0835) 2 0. 15 + (0. 16 - 0.08 35) - 0.2 + (0.12 - 0.0835)20.25 + (- 0.01- 0.0835)-0. 25 +1-0.08-6 0835 How much would you have to invest in Stock ( to have a portfolio with a Beta of 2.00? = . 0)/1 3 1275 = V.0 113 7275 =10 667 2(0. 15) BP = Wa Pa + WB PB + Wc BC. A Amount invested $1,500 $2,200 $3,393.67 Beta 0.55 1.60 2.90 1) find BAB = 1500 0.55 + 2200 .16 = BAB =$1.174 1500+2260 1500 + 22 00 2 ) find pp BP = 2.00 - 3700 X . BAB + . 2.90 solve For x 3700+ * 370 0 + x 3700 + x . 37 00 + x