You are saving $10,000 a year at the beginning of each year from 2 through 12,...
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You are saving $10,000 a year at the beginning of each year from 2 through 12, inclusive, that can be used to meet your obligations. One of the first obligations you will have is to pay off the expenses of sending your children to a university. Your payment for your child's university education will be $15,762 at the beginning of each year for years 15 through year 26, inclusive. In addition, you and your spouse plan to retire in 50 years. You want to have $75,000 available at the beginning of each year from year 50 through year 74, inclusive. All of your funds earn a 4% before-tax rate of return from years 1 through 18, inclusive, and then changes to a before-tax rate of 6% thereafter. You are trying to calculate what you will need on an after-tax basis when your average tax rate is 30% and your marginal tax rate is 35%. How much must you invest on an after-tax basis at the end of each of the years 14 through year 45, inclusive, to meet your financial objectives? 0 2 Your timeline: 4% 12 +$10,000/year At the Raminnin 14 15 18 19 26 Pymt/year-? 45 50 -$75,000/year 74 You are saving $10,000 a year at the beginning of each year from 2 through 12, inclusive, that can be used to meet your obligations. One of the first obligations you will have is to pay off the expenses of sending your children to a university. Your payment for your child's university education will be $15,762 at the beginning of each year for years 15 through year 26, inclusive. In addition, you and your spouse plan to retire in 50 years. You want to have $75,000 available at the beginning of each year from year 50 through year 74, inclusive. All of your funds earn a 4% before-tax rate of return from years 1 through 18, inclusive, and then changes to a before-tax rate of 6% thereafter. You are trying to calculate what you will need on an after-tax basis when your average tax rate is 30% and your marginal tax rate is 35%. How much must you invest on an after-tax basis at the end of each of the years 14 through year 45, inclusive, to meet your financial objectives? 0 2 Your timeline: 4% 12 +$10,000/year At the Raminnin 14 15 18 19 26 Pymt/year-? 45 50 -$75,000/year 74
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ANSWER To calculate the required aftertax investment we need to first determine the aftertax rate of ... View the full answer
Related Book For
Value at Risk The New Benchmark for Managing Financial Risk
ISBN: 978-0071464956
3rd edition
Authors: Philippe Jorion
Posted Date:
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