Set$-$up: raft Skills for Modeling

Due Date: Check syllabus $($Canvas by $10$:$00$ am and printout at the start of class$)$

Note: I am NOT asking for an actual number as the answer. Instead, we are focusing on crafting the skill to set up financial models. If you want to venture a number, do so; however, such number will not be graded.

Situation $1.$ Retirement Planning

The client currently is $45$ years old, with an income of about $$100,000$ per year. His goal is to retire between ages $63$ and $68$ and to have enough savings to live comfortably in about the same fashion he does now $($with some money available for expanded travel$).$ The client's accumulated savings for retirement total $$120,000.$ His employer contributes $$9,500$ per year into the retirement fund, while he has been contributing $$7,000.$ QS$1-$ How much should he be saving?

Situation $2.$ Icebergs to Kuwait.

Drinking water is in short supply in Kuwait and is therefore very expensive. One suggested remedy is to tow icebergs from Antarctica to Kuwait $($a distance of about $9,600$ kilometers$)$ and melt them for freshwater. The volume of an iceberg ranges from about $500,000$ cubic meters to more than $10,000$ million cubic meters. Theoretical analysis suggests that an idealized spherical iceberg would lose about $0\mathrm{.}2$ meter of radius per day during transport, although this amount increases with the speed of towing and the distance from the pole. Fuel costs for towboats depend on the size of the boat, the speed, and the volume of the iceberg being towed.

QS$2-$ Would it be cost$-$effective to tow icebergs to Kuwait for freshwater, and, if so$,$ how should this be done? Guidelines: Submit a one$-$ page answer for each situation $($not including the requested diagrams. The whole deliverable for each Situation can take at the most $2$ pages, including these graphs of diagrams$).$ Aim for conciseness. You have to address the following questions.

Q$1.$ Answer concisely the following questions:

A$-$ What do we know?

B$-$ What can we assume?

C$-$ What could the results look like? $($Check consistency with your problem statement in Q$2)$

D$-$ What can we ask the client?

E$-$ Are there any similar situations or problems? $[$Be creative and specific$]$

Q$2.$ Formulate one or more problem statements $($aim to link key decisions to the main outcome$)$

Q$3.$ What are the decisions, outcomes, and relationships in the problem? $\{$Make sure what you mention here is consistent with your diagram in Q$4.$ In Q$7$ you will mention only the key variables out of the ones mentioned here$)$