| NAME |
| FIN504 - Financial Management |
| DATE |
| Chapter 5 - Integrated Case Problem |
| Time Value of Money |
| Background Information |
| Present Value Fixed Income |
| Average Expected Inflation Rate |
| Average Return on Common Stocks |
| Average Return on Corporate Bonds |
| Equally Weighted Portfolio |
| Years of retirement from age 65 to age 80 |
| Assets remaining at age 80 |
| Years to retirement from age 30 |
| Years to retirement from age 40 |
| Years to retirement from age 50 |
| 1. Determine your required inflation-adjusted annual (pre-tax) income at age 65: |
| Answer | Desired Income at age 65 |
| Inflation-adjusted annual pre-tax income at age 65 |
| INTERPRETATION: |
| 2. Determine the amount you must accumulate by age 65 to meet your retirement goal, assuming you invest in: |
| Answer | Total Accumulated |
| a) Common Stocks |
| b) Corporate Bonds |
| c) Equally weighted portfolio |
| INTERPRETATION: |
| 3. Determine the annual investment in COMMON STOCKS required to accumulate the funds determined in question 2, assuming that the first payment is made at age: |
| Answer | Required Annual Payment |
| a) 30 |
| b) 40 |
| c) 50 |
| INTERPRETATION: |
| 4. Determine the annual investment in CORPORATE BONDS required to accumulate the funds determined in question 2, assuming the first payment is made at age: |
| Answer | Required Annual Payment |
| a) 30 |
| b) 40 |
| c) 50 |
| INTERPRETATION: |
| 5. Determine the annual investment in an EQUALLY WEIGHTED PORTFOLIO required to accumulate the funds determined in question 2, assuming the first payment is made at age: |
| Answer | Required Annual Payment |
| a) 30 |
| b) 40 |
| c) 50 |
| INTERPRETATION: |
| 6. What conclusions can be drawn from the answers to questions 3, 4, and 5? |
NGDxon
chapter_5_icp_student_go-by.xlsx
