1. Based on the information provided in Table 1, if the Halls continue making minimum payments on their outstanding debts, how much money will they have left over for all other expenses?

Annual Salary

Net Monthly Pay

(inclusive of 28% Income

Tax)Marty's Salary $50,000 $3,000Laura's Salary 25,000 1,500Total Take home pay $4,500

Monthly Expenses: Term Balance

Rate Monthly Payment

Car Loan Payment 2 years $5,000 5.99% $221.58College Loan Payment 2 years 12,000 5.25% 527.80Credit Card Payment - 10,000 15.99% 300(Minimum monthly payment required on credit card debt is 3% of balance owed.)

Rent 1,200 $2,249.38Money Left-over for other expenses $2,250.62

2.  How much money will Laura and Marty have to deposit each month (beginning one month after she is born and ending when she turns 18) in order to have enough saved up for their child’s education. Assume that the yield on investments is 8% per year, college expenses increase at the rate of 4% per year, and that their child will enter college when he or she turns 18 and will complete the degree in 4 years.

Annual Yield of Investment 8%Years until child reaches college 18 yearsCurrent Annual College Expenses $20,000Inflation Rate 4%Years in college 4

Computation

College Expense (1st Year) 20,000 x 1.0418 $40,516.33College Expense (2nd Year) 20,000 x 1.0419 42,136.98College Expense (3rd Year) 20,000 x 1.0420 43,822.46College Expense (4th Year) 20,000 x 1.0421 45,575.36Accumulated Savings Required 172,051.13(PV=153,281.95

)Monthly Deposits Required PMT= PV/ [((1+I)N – 1)/I] $319.38

3.  How much money will the Hall’s have to set aside each month so as to have enough saved up for a down payment on the $140,000 house within 12 months? Assume that the closing costs amount to 2% of the loan balance and than the down payment is 10% of the price. Note: Annual rate of return on investment is 12%.

Computation

Purchase Price of House (assumed to be the same after 12 months)

$140,000

10% Down Payment 140,000 x 10% (14,000)Loan Amount after Down Payment 126,000Closing Costs 126,000 x 2% (2,520)

Total Money needed to be saved for Down Payment and Closing Costs

14,000 (Downpayment) + 2,520 (Closing Cost) 16,520

Number of months until purchase of house 12 months

Annual Rate (Interest) 8%

Future Value = 16,520 Interest = 8%/12 months Number of payments = 12Monthly deposits required to accumulate total closing costs $1,326.92

The Hall’s needs $1326.92 each month so as to have saved up for a down payment on the $140,000 house within 12 months.

Solution:

PMT=FVO a

¿¿

PMT=16,520¿¿

4. If the interest rate on a 30-year mortgage is at 5% per year when the Hall’s purchase their house, how much will their mortgage payment be? Ignore insurance and taxes.

Present Value = 126,000

Mortgage Rate = 5%

Mortgage Term (years) = 30

Monthly Payment = $676.40

Solution:

PMT=PVOa

[1−(1+ I )−N

I]

PMT= 126,000

[1−(1+0.05/12 )−360

( 0.0512

)]

PMT=$676.40

5. Construct an amortization schedule for the 5%, 30-year mortgage.

MonthBeginning

Principal Balance Payment InterestPayment to Principal

Outstanding Balance

1 126,000 ($676.40) $ 525.00 ($151.40) $125,848.602 $125,848.60 ($676.40) $ 524.37 ($152.03) $125,696.583 $125,696.58 ($676.40) $ 523.74 ($152.66) $125,543.924 $125,543.92 ($676.40) $ 523.10 ($153.30) $125,390.625 $125,390.62 ($676.40) $ 522.46 ($153.93) $125,236.696 $125,236.69 ($676.40) $ 521.82 ($154.58) $125,082.117 $125,082.11 ($676.40) $ 521.18 ($155.22) $124,926.898 $124,926.89 ($676.40) $ 520.53 ($155.87) $124,771.039 $124,771.03 ($676.40) $ 519.88 ($156.52) $124,614.5110 $124,614.51 ($676.40) $ 519.23 ($157.17) $124,457.3411 $124,457.34 ($676.40) $ 518.57 ($157.82) $124,299.5212 $124,299.52 ($676.40) $ 517.91 ($158.48) $124,141.0413 $124,141.04 ($676.40) $ 517.25 ($159.14) $123,981.9014 $123,981.90 ($676.40) $ 516.59 ($159.80) $123,822.0915 $123,822.09 ($676.40) $ 515.93 ($160.47) $123,661.6216 $123,661.62 ($676.40) $ 515.26 ($161.14) $123,500.4917 $123,500.49 ($676.40) $ 514.59 ($161.81) $123,338.6818 $123,338.68 ($676.40) $ 513.91 ($162.48) $123,176.1919 $123,176.19 ($676.40) $ 513.23 ($163.16) $123,013.0320 $123,013.03 ($676.40) $ 512.55 ($163.84) $122,849.1921 $122,849.19 ($676.40) $ 511.87 ($164.52) $122,684.6722 $122,684.67 ($676.40) $ 511.19 ($165.21) $122,519.4623 $122,519.46 ($676.40) $ 510.50 ($165.90) $122,353.5624 $122,353.56 ($676.40) $ 509.81 ($166.59) $122,186.9725 $122,186.97 ($676.40) $ 509.11 ($167.28) $122,019.6926 $122,019.69 ($676.40) $ 508.42 ($167.98) $121,851.7127 $121,851.71 ($676.40) $ 507.72 ($168.68) $121,683.0328 $121,683.03 ($676.40) $ 507.01 ($169.38) $121,513.6529 $121,513.65 ($676.40) $ 506.31 ($170.09) $121,343.5630 $121,343.56 ($676.40) $ 505.60 ($170.80) $121,172.7631 $121,172.76 ($676.40) $ 504.89 ($171.51) $121,001.2532 $121,001.25 ($676.40) $ 504.17 ($172.22) $120,829.0333 $120,829.03 ($676.40) $ 503.45 ($172.94) $120,656.0934 $120,656.09 ($676.40) $ 502.73 ($173.66) $120,482.4335 $120,482.43 ($676.40) $ 502.01 ($174.39) $120,308.0436 $120,308.04 ($676.40) $ 501.28 ($175.11) $120,132.9337 $120,132.93 ($676.40) $ 500.55 ($175.84) $119,957.0938 $119,957.09 ($676.40) $ 499.82 ($176.57) $119,780.5139 $119,780.51 ($676.40) $ 499.09 ($177.31) $119,603.2040 $119,603.20 ($676.40) $ 498.35 ($178.05) $119,425.1641 $119,425.16 ($676.40) $ 497.60 ($178.79) $119,246.3742 $119,246.37 ($676.40) $ 496.86 ($179.54) $119,066.8343 $119,066.83 ($676.40) $ 496.11 ($180.28) $118,886.55

44 $118,886.55 ($676.40) $ 495.36 ($181.03) $118,705.5145 $118,705.51 ($676.40) $ 494.61 ($181.79) $118,523.7246 $118,523.72 ($676.40) $ 493.85 ($182.55) $118,341.1847 $118,341.18 ($676.40) $ 493.09 ($183.31) $118,157.8748 $118,157.87 ($676.40) $ 492.32 ($184.07) $117,973.8049 $117,973.80 ($676.40) $ 491.56 ($184.84) $117,788.9650 $117,788.96 ($676.40) $ 490.79 ($185.61) $117,603.3551 $117,603.35 ($676.40) $ 490.01 ($186.38) $117,416.9752 $117,416.97 ($676.40) $ 489.24 ($187.16) $117,229.8153 $117,229.81 ($676.40) $ 488.46 ($187.94) $117,041.8854 $117,041.88 ($676.40) $ 487.67 ($188.72) $116,853.1655 $116,853.16 ($676.40) $ 486.89 ($189.51) $116,663.6556 $116,663.65 ($676.40) $ 486.10 ($190.30) $116,473.3557 $116,473.35 ($676.40) $ 485.31 ($191.09) $116,282.2658 $116,282.26 ($676.40) $ 484.51 ($191.89) $116,090.3859 $116,090.38 ($676.40) $ 483.71 ($192.69) $115,897.6960 $115,897.69 ($676.40) $ 482.91 ($193.49) $115,704.2061 $115,704.20 ($676.40) $ 482.10 ($194.29) $115,509.9162 $115,509.91 ($676.40) $ 481.29 ($195.10) $115,314.8063 $115,314.80 ($676.40) $ 480.48 ($195.92) $115,118.8964 $115,118.89 ($676.40) $ 479.66 ($196.73) $114,922.1565 $114,922.15 ($676.40) $ 478.84 ($197.55) $114,724.6066 $114,724.60 ($676.40) $ 478.02 ($198.38) $114,526.2267 $114,526.22 ($676.40) $ 477.19 ($199.20) $114,327.0268 $114,327.02 ($676.40) $ 476.36 ($200.03) $114,126.9969 $114,126.99 ($676.40) $ 475.53 ($200.87) $113,926.1270 $113,926.12 ($676.40) $ 474.69 ($201.70) $113,724.4271 $113,724.42 ($676.40) $ 473.85 ($202.54) $113,521.8872 $113,521.88 ($676.40) $ 473.01 ($203.39) $113,318.4973 $113,318.49 ($676.40) $ 472.16 ($204.23) $113,114.2574 $113,114.25 ($676.40) $ 471.31 ($205.09) $112,909.1775 $112,909.17 ($676.40) $ 470.45 ($205.94) $112,703.2376 $112,703.23 ($676.40) $ 469.60 ($206.80) $112,496.4377 $112,496.43 ($676.40) $ 468.74 ($207.66) $112,288.7778 $112,288.77 ($676.40) $ 467.87 ($208.53) $112,080.2479 $112,080.24 ($676.40) $ 467.00 ($209.39) $111,870.8580 $111,870.85 ($676.40) $ 466.13 ($210.27) $111,660.5881 $111,660.58 ($676.40) $ 465.25 ($211.14) $111,449.4482 $111,449.44 ($676.40) $ 464.37 ($212.02) $111,237.4283 $111,237.42 ($676.40) $ 463.49 ($212.91) $111,024.5184 $111,024.51 ($676.40) $ 462.60 ($213.79) $110,810.7285 $110,810.72 ($676.40) $ 461.71 ($214.68) $110,596.0486 $110,596.04 ($676.40) $ 460.82 ($215.58) $110,380.4687 $110,380.46 ($676.40) $ 459.92 ($216.48) $110,163.9888 $110,163.98 ($676.40) $ 459.02 ($217.38) $109,946.6089 $109,946.60 ($676.40) $ 458.11 ($218.28) $109,728.32

90 $109,728.32 ($676.40) $ 457.20 ($219.19) $109,509.1291 $109,509.12 ($676.40) $ 456.29 ($220.11) $109,289.0292 $109,289.02 ($676.40) $ 455.37 ($221.02) $109,067.9993 $109,067.99 ($676.40) $ 454.45 ($221.95) $108,846.0594 $108,846.05 ($676.40) $ 453.53 ($222.87) $108,623.1895 $108,623.18 ($676.40) $ 452.60 ($223.80) $108,399.3896 $108,399.38 ($676.40) $ 451.66 ($224.73) $108,174.6597 $108,174.65 ($676.40) $ 450.73 ($225.67) $107,948.9898 $107,948.98 ($676.40) $ 449.79 ($226.61) $107,722.3799 $107,722.37 ($676.40) $ 448.84 ($227.55) $107,494.82100 $107,494.82 ($676.40) $ 447.90 ($228.50) $107,266.32101 $107,266.32 ($676.40) $ 446.94 ($229.45) $107,036.87102 $107,036.87 ($676.40) $ 445.99 ($230.41) $106,806.46103 $106,806.46 ($676.40) $ 445.03 ($231.37) $106,575.09104 $106,575.09 ($676.40) $ 444.06 ($232.33) $106,342.76105 $106,342.76 ($676.40) $ 443.09 ($233.30) $106,109.46106 $106,109.46 ($676.40) $ 442.12 ($234.27) $105,875.18107 $105,875.18 ($676.40) $ 441.15 ($235.25) $105,639.94108 $105,639.94 ($676.40) $ 440.17 ($236.23) $105,403.71109 $105,403.71 ($676.40) $ 439.18 ($237.21) $105,166.49110 $105,166.49 ($676.40) $ 438.19 ($238.20) $104,928.29111 $104,928.29 ($676.40) $ 437.20 ($239.19) $104,689.10112 $104,689.10 ($676.40) $ 436.20 ($240.19) $104,448.91113 $104,448.91 ($676.40) $ 435.20 ($241.19) $104,207.72114 $104,207.72 ($676.40) $ 434.20 ($242.20) $103,965.52115 $103,965.52 ($676.40) $ 433.19 ($243.21) $103,722.31116 $103,722.31 ($676.40) $ 432.18 ($244.22) $103,478.10117 $103,478.10 ($676.40) $ 431.16 ($245.24) $103,232.86118 $103,232.86 ($676.40) $ 430.14 ($246.26) $102,986.60119 $102,986.60 ($676.40) $ 429.11 ($247.28) $102,739.32120 $102,739.32 ($676.40) $ 428.08 ($248.31) $102,491.00121 $102,491.00 ($676.40) $ 427.05 ($249.35) $102,241.65122 $102,241.65 ($676.40) $ 426.01 ($250.39) $101,991.26123 $101,991.26 ($676.40) $ 424.96 ($251.43) $101,739.83124 $101,739.83 ($676.40) $ 423.92 ($252.48) $101,487.35125 $101,487.35 ($676.40) $ 422.86 ($253.53) $101,233.82126 $101,233.82 ($676.40) $ 421.81 ($254.59) $100,979.23127 $100,979.23 ($676.40) $ 420.75 ($255.65) $100,723.59128 $100,723.59 ($676.40) $ 419.68 ($256.71) $100,466.87129 $100,466.87 ($676.40) $ 418.61 ($257.78) $100,209.09130 $100,209.09 ($676.40) $ 417.54 ($258.86) $99,950.23131 $99,950.23 ($676.40) $ 416.46 ($259.94) $99,690.29132 $99,690.29 ($676.40) $ 415.38 ($261.02) $99,429.28133 $99,429.28 ($676.40) $ 414.29 ($262.11) $99,167.17134 $99,167.17 ($676.40) $ 413.20 ($263.20) $98,903.97135 $98,903.97 ($676.40) $ 412.10 ($264.30) $98,639.68

136 $98,639.68 ($676.40) $ 411.00 ($265.40) $98,374.28137 $98,374.28 ($676.40) $ 409.89 ($266.50) $98,107.78138 $98,107.78 ($676.40) $ 408.78 ($267.61) $97,840.16139 $97,840.16 ($676.40) $ 407.67 ($268.73) $97,571.44140 $97,571.44 ($676.40) $ 406.55 ($269.85) $97,301.59141 $97,301.59 ($676.40) $ 405.42 ($270.97) $97,030.62142 $97,030.62 ($676.40) $ 404.29 ($272.10) $96,758.51143 $96,758.51 ($676.40) $ 403.16 ($273.23) $96,485.28144 $96,485.28 ($676.40) $ 402.02 ($274.37) $96,210.91145 $96,210.91 ($676.40) $ 400.88 ($275.52) $95,935.39146 $95,935.39 ($676.40) $ 399.73 ($276.66) $95,658.73147 $95,658.73 ($676.40) $ 398.58 ($277.82) $95,380.91148 $95,380.91 ($676.40) $ 397.42 ($278.97) $95,101.93149 $95,101.93 ($676.40) $ 396.26 ($280.14) $94,821.80150 $94,821.80 ($676.40) $ 395.09 ($281.30) $94,540.49151 $94,540.49 ($676.40) $ 393.92 ($282.48) $94,258.02152 $94,258.02 ($676.40) $ 392.74 ($283.65) $93,974.36153 $93,974.36 ($676.40) $ 391.56 ($284.84) $93,689.53154 $93,689.53 ($676.40) $ 390.37 ($286.02) $93,403.50155 $93,403.50 ($676.40) $ 389.18 ($287.21) $93,116.29156 $93,116.29 ($676.40) $ 387.98 ($288.41) $92,827.88157 $92,827.88 ($676.40) $ 386.78 ($289.61) $92,538.27158 $92,538.27 ($676.40) $ 385.58 ($290.82) $92,247.45159 $92,247.45 ($676.40) $ 384.36 ($292.03) $91,955.42160 $91,955.42 ($676.40) $ 383.15 ($293.25) $91,662.17161 $91,662.17 ($676.40) $ 381.93 ($294.47) $91,367.70162 $91,367.70 ($676.40) $ 380.70 ($295.70) $91,072.00163 $91,072.00 ($676.40) $ 379.47 ($296.93) $90,775.08164 $90,775.08 ($676.40) $ 378.23 ($298.17) $90,476.91165 $90,476.91 ($676.40) $ 376.99 ($299.41) $90,177.50166 $90,177.50 ($676.40) $ 375.74 ($300.66) $89,876.85167 $89,876.85 ($676.40) $ 374.49 ($301.91) $89,574.94168 $89,574.94 ($676.40) $ 373.23 ($303.17) $89,271.77169 $89,271.77 ($676.40) $ 371.97 ($304.43) $88,967.34170 $88,967.34 ($676.40) $ 370.70 ($305.70) $88,661.64171 $88,661.64 ($676.40) $ 369.42 ($306.97) $88,354.67172 $88,354.67 ($676.40) $ 368.14 ($308.25) $88,046.42173 $88,046.42 ($676.40) $ 366.86 ($309.54) $87,736.89174 $87,736.89 ($676.40) $ 365.57 ($310.82) $87,426.06175 $87,426.06 ($676.40) $ 364.28 ($312.12) $87,113.94176 $87,113.94 ($676.40) $ 362.97 ($313.42) $86,800.52177 $86,800.52 ($676.40) $ 361.67 ($314.73) $86,485.79178 $86,485.79 ($676.40) $ 360.36 ($316.04) $86,169.76179 $86,169.76 ($676.40) $ 359.04 ($317.35) $85,852.40180 $85,852.40 ($676.40) $ 357.72 ($318.68) $85,533.72181 $85,533.72 ($676.40) $ 356.39 ($320.00) $85,213.72

182 $85,213.72 ($676.40) $ 355.06 ($321.34) $84,892.38183 $84,892.38 ($676.40) $ 353.72 ($322.68) $84,569.71184 $84,569.71 ($676.40) $ 352.37 ($324.02) $84,245.68185 $84,245.68 ($676.40) $ 351.02 ($325.37) $83,920.31186 $83,920.31 ($676.40) $ 349.67 ($326.73) $83,593.58187 $83,593.58 ($676.40) $ 348.31 ($328.09) $83,265.50188 $83,265.50 ($676.40) $ 346.94 ($329.46) $82,936.04189 $82,936.04 ($676.40) $ 345.57 ($330.83) $82,605.21190 $82,605.21 ($676.40) $ 344.19 ($332.21) $82,273.01191 $82,273.01 ($676.40) $ 342.80 ($333.59) $81,939.41192 $81,939.41 ($676.40) $ 341.41 ($334.98) $81,604.43193 $81,604.43 ($676.40) $ 340.02 ($336.38) $81,268.06194 $81,268.06 ($676.40) $ 338.62 ($337.78) $80,930.28195 $80,930.28 ($676.40) $ 337.21 ($339.19) $80,591.09196 $80,591.09 ($676.40) $ 335.80 ($340.60) $80,250.49197 $80,250.49 ($676.40) $ 334.38 ($342.02) $79,908.48198 $79,908.48 ($676.40) $ 332.95 ($343.44) $79,565.03199 $79,565.03 ($676.40) $ 331.52 ($344.87) $79,220.16200 $79,220.16 ($676.40) $ 330.08 ($346.31) $78,873.85201 $78,873.85 ($676.40) $ 328.64 ($347.75) $78,526.09202 $78,526.09 ($676.40) $ 327.19 ($349.20) $78,176.89203 $78,176.89 ($676.40) $ 325.74 ($350.66) $77,826.23204 $77,826.23 ($676.40) $ 324.28 ($352.12) $77,474.11205 $77,474.11 ($676.40) $ 322.81 ($353.59) $77,120.52206 $77,120.52 ($676.40) $ 321.34 ($355.06) $76,765.47207 $76,765.47 ($676.40) $ 319.86 ($356.54) $76,408.93208 $76,408.93 ($676.40) $ 318.37 ($358.02) $76,050.90209 $76,050.90 ($676.40) $ 316.88 ($359.52) $75,691.38210 $75,691.38 ($676.40) $ 315.38 ($361.01) $75,330.37211 $75,330.37 ($676.40) $ 313.88 ($362.52) $74,967.85212 $74,967.85 ($676.40) $ 312.37 ($364.03) $74,603.82213 $74,603.82 ($676.40) $ 310.85 ($365.55) $74,238.28214 $74,238.28 ($676.40) $ 309.33 ($367.07) $73,871.21215 $73,871.21 ($676.40) $ 307.80 ($368.60) $73,502.61216 $73,502.61 ($676.40) $ 306.26 ($370.13) $73,132.47217 $73,132.47 ($676.40) $ 304.72 ($371.68) $72,760.80218 $72,760.80 ($676.40) $ 303.17 ($373.23) $72,387.57219 $72,387.57 ($676.40) $ 301.61 ($374.78) $72,012.79220 $72,012.79 ($676.40) $ 300.05 ($376.34) $71,636.45221 $71,636.45 ($676.40) $ 298.49 ($377.91) $71,258.54222 $71,258.54 ($676.40) $ 296.91 ($379.48) $70,879.06223 $70,879.06 ($676.40) $ 295.33 ($381.07) $70,497.99224 $70,497.99 ($676.40) $ 293.74 ($382.65) $70,115.34225 $70,115.34 ($676.40) $ 292.15 ($384.25) $69,731.09226 $69,731.09 ($676.40) $ 290.55 ($385.85) $69,345.24227 $69,345.24 ($676.40) $ 288.94 ($387.46) $68,957.78

228 $68,957.78 ($676.40) $ 287.32 ($389.07) $68,568.71229 $68,568.71 ($676.40) $ 285.70 ($390.69) $68,178.02230 $68,178.02 ($676.40) $ 284.08 ($392.32) $67,785.70231 $67,785.70 ($676.40) $ 282.44 ($393.95) $67,391.74232 $67,391.74 ($676.40) $ 280.80 ($395.60) $66,996.15233 $66,996.15 ($676.40) $ 279.15 ($397.24) $66,598.90234 $66,598.90 ($676.40) $ 277.50 ($398.90) $66,200.00235 $66,200.00 ($676.40) $ 275.83 ($400.56) $65,799.44236 $65,799.44 ($676.40) $ 274.16 ($402.23) $65,397.21237 $65,397.21 ($676.40) $ 272.49 ($403.91) $64,993.30238 $64,993.30 ($676.40) $ 270.81 ($405.59) $64,587.71239 $64,587.71 ($676.40) $ 269.12 ($407.28) $64,180.43240 $64,180.43 ($676.40) $ 267.42 ($408.98) $63,771.46241 $63,771.46 ($676.40) $ 265.71 ($410.68) $63,360.78242 $63,360.78 ($676.40) $ 264.00 ($412.39) $62,948.38243 $62,948.38 ($676.40) $ 262.28 ($414.11) $62,534.27244 $62,534.27 ($676.40) $ 260.56 ($415.84) $62,118.44245 $62,118.44 ($676.40) $ 258.83 ($417.57) $61,700.87246 $61,700.87 ($676.40) $ 257.09 ($419.31) $61,281.56247 $61,281.56 ($676.40) $ 255.34 ($421.06) $60,860.51248 $60,860.51 ($676.40) $ 253.59 ($422.81) $60,437.70249 $60,437.70 ($676.40) $ 251.82 ($424.57) $60,013.12250 $60,013.12 ($676.40) $ 250.05 ($426.34) $59,586.78251 $59,586.78 ($676.40) $ 248.28 ($428.12) $59,158.67252 $59,158.67 ($676.40) $ 246.49 ($429.90) $58,728.77253 $58,728.77 ($676.40) $ 244.70 ($431.69) $58,297.07254 $58,297.07 ($676.40) $ 242.90 ($433.49) $57,863.58255 $57,863.58 ($676.40) $ 241.10 ($435.30) $57,428.29256 $57,428.29 ($676.40) $ 239.28 ($437.11) $56,991.18257 $56,991.18 ($676.40) $ 237.46 ($438.93) $56,552.24258 $56,552.24 ($676.40) $ 235.63 ($440.76) $56,111.48259 $56,111.48 ($676.40) $ 233.80 ($442.60) $55,668.89260 $55,668.89 ($676.40) $ 231.95 ($444.44) $55,224.44261 $55,224.44 ($676.40) $ 230.10 ($446.29) $54,778.15262 $54,778.15 ($676.40) $ 228.24 ($448.15) $54,330.00263 $54,330.00 ($676.40) $ 226.37 ($450.02) $53,879.98264 $53,879.98 ($676.40) $ 224.50 ($451.90) $53,428.08265 $53,428.08 ($676.40) $ 222.62 ($453.78) $52,974.30266 $52,974.30 ($676.40) $ 220.73 ($455.67) $52,518.63267 $52,518.63 ($676.40) $ 218.83 ($457.57) $52,061.07268 $52,061.07 ($676.40) $ 216.92 ($459.47) $51,601.59269 $51,601.59 ($676.40) $ 215.01 ($461.39) $51,140.20270 $51,140.20 ($676.40) $ 213.08 ($463.31) $50,676.89271 $50,676.89 ($676.40) $ 211.15 ($465.24) $50,211.65272 $50,211.65 ($676.40) $ 209.22 ($467.18) $49,744.47273 $49,744.47 ($676.40) $ 207.27 ($469.13) $49,275.35

274 $49,275.35 ($676.40) $ 205.31 ($471.08) $48,804.26275 $48,804.26 ($676.40) $ 203.35 ($473.04) $48,331.22276 $48,331.22 ($676.40) $ 201.38 ($475.02) $47,856.20277 $47,856.20 ($676.40) $ 199.40 ($476.99) $47,379.21278 $47,379.21 ($676.40) $ 197.41 ($478.98) $46,900.23279 $46,900.23 ($676.40) $ 195.42 ($480.98) $46,419.25280 $46,419.25 ($676.40) $ 193.41 ($482.98) $45,936.27281 $45,936.27 ($676.40) $ 191.40 ($484.99) $45,451.27282 $45,451.27 ($676.40) $ 189.38 ($487.01) $44,964.26283 $44,964.26 ($676.40) $ 187.35 ($489.04) $44,475.22284 $44,475.22 ($676.40) $ 185.31 ($491.08) $43,984.13285 $43,984.13 ($676.40) $ 183.27 ($493.13) $43,491.01286 $43,491.01 ($676.40) $ 181.21 ($495.18) $42,995.82287 $42,995.82 ($676.40) $ 179.15 ($497.25) $42,498.58288 $42,498.58 ($676.40) $ 177.08 ($499.32) $41,999.26289 $41,999.26 ($676.40) $ 175.00 ($501.40) $41,497.86290 $41,497.86 ($676.40) $ 172.91 ($503.49) $40,994.37291 $40,994.37 ($676.40) $ 170.81 ($505.59) $40,488.79292 $40,488.79 ($676.40) $ 168.70 ($507.69) $39,981.10293 $39,981.10 ($676.40) $ 166.59 ($509.81) $39,471.29294 $39,471.29 ($676.40) $ 164.46 ($511.93) $38,959.36295 $38,959.36 ($676.40) $ 162.33 ($514.06) $38,445.29296 $38,445.29 ($676.40) $ 160.19 ($516.21) $37,929.09297 $37,929.09 ($676.40) $ 158.04 ($518.36) $37,410.73298 $37,410.73 ($676.40) $ 155.88 ($520.52) $36,890.21299 $36,890.21 ($676.40) $ 153.71 ($522.69) $36,367.53300 $36,367.53 ($676.40) $ 151.53 ($524.86) $35,842.66301 $35,842.66 ($676.40) $ 149.34 ($527.05) $35,315.61302 $35,315.61 ($676.40) $ 147.15 ($529.25) $34,786.36303 $34,786.36 ($676.40) $ 144.94 ($531.45) $34,254.91304 $34,254.91 ($676.40) $ 142.73 ($533.67) $33,721.25305 $33,721.25 ($676.40) $ 140.51 ($535.89) $33,185.36306 $33,185.36 ($676.40) $ 138.27 ($538.12) $32,647.23307 $32,647.23 ($676.40) $ 136.03 ($540.37) $32,106.87308 $32,106.87 ($676.40) $ 133.78 ($542.62) $31,564.25309 $31,564.25 ($676.40) $ 131.52 ($544.88) $31,019.37310 $31,019.37 ($676.40) $ 129.25 ($547.15) $30,472.23311 $30,472.23 ($676.40) $ 126.97 ($549.43) $29,922.80312 $29,922.80 ($676.40) $ 124.68 ($551.72) $29,371.08313 $29,371.08 ($676.40) $ 122.38 ($554.02) $28,817.07314 $28,817.07 ($676.40) $ 120.07 ($556.32) $28,260.74315 $28,260.74 ($676.40) $ 117.75 ($558.64) $27,702.10316 $27,702.10 ($676.40) $ 115.43 ($560.97) $27,141.13317 $27,141.13 ($676.40) $ 113.09 ($563.31) $26,577.82318 $26,577.82 ($676.40) $ 110.74 ($565.65) $26,012.17319 $26,012.17 ($676.40) $ 108.38 ($568.01) $25,444.16

320 $25,444.16 ($676.40) $ 106.02 ($570.38) $24,873.78321 $24,873.78 ($676.40) $ 103.64 ($572.75) $24,301.02322 $24,301.02 ($676.40) $ 101.25 ($575.14) $23,725.88323 $23,725.88 ($676.40) $ 98.86 ($577.54) $23,148.35324 $23,148.35 ($676.40) $ 96.45 ($579.94) $22,568.40325 $22,568.40 ($676.40) $ 94.04 ($582.36) $21,986.04326 $21,986.04 ($676.40) $ 91.61 ($584.79) $21,401.25327 $21,401.25 ($676.40) $ 89.17 ($587.22) $20,814.03328 $20,814.03 ($676.40) $ 86.73 ($589.67) $20,224.36329 $20,224.36 ($676.40) $ 84.27 ($592.13) $19,632.23330 $19,632.23 ($676.40) $ 81.80 ($594.59) $19,037.64331 $19,037.64 ($676.40) $ 79.32 ($597.07) $18,440.57332 $18,440.57 ($676.40) $ 76.84 ($599.56) $17,841.01333 $17,841.01 ($676.40) $ 74.34 ($602.06) $17,238.95334 $17,238.95 ($676.40) $ 71.83 ($604.57) $16,634.38335 $16,634.38 ($676.40) $ 69.31 ($607.09) $16,027.30336 $16,027.30 ($676.40) $ 66.78 ($609.61) $15,417.68337 $15,417.68 ($676.40) $ 64.24 ($612.15) $14,805.53338 $14,805.53 ($676.40) $ 61.69 ($614.71) $14,190.82339 $14,190.82 ($676.40) $ 59.13 ($617.27) $13,573.56340 $13,573.56 ($676.40) $ 56.56 ($619.84) $12,953.72341 $12,953.72 ($676.40) $ 53.97 ($622.42) $12,331.30342 $12,331.30 ($676.40) $ 51.38 ($625.01) $11,706.28343 $11,706.28 ($676.40) $ 48.78 ($627.62) $11,078.66344 $11,078.66 ($676.40) $ 46.16 ($630.23) $10,448.43345 $10,448.43 ($676.40) $ 43.54 ($632.86) $9,815.57346 $9,815.57 ($676.40) $ 40.90 ($635.50) $9,180.07347 $9,180.07 ($676.40) $ 38.25 ($638.14) $8,541.93348 $8,541.93 ($676.40) $ 35.59 ($640.80) $7,901.12349 $7,901.12 ($676.40) $ 32.92 ($643.47) $7,257.65350 $7,257.65 ($676.40) $ 30.24 ($646.16) $6,611.49351 $6,611.49 ($676.40) $ 27.55 ($648.85) $5,962.65352 $5,962.65 ($676.40) $ 24.84 ($651.55) $5,311.10353 $5,311.10 ($676.40) $ 22.13 ($654.27) $4,656.83354 $4,656.83 ($676.40) $ 19.40 ($656.99) $3,999.84355 $3,999.84 ($676.40) $ 16.67 ($659.73) $3,340.11356 $3,340.11 ($676.40) $ 13.92 ($662.48) $2,677.63357 $2,677.63 ($676.40) $ 11.16 ($665.24) $2,012.39358 $2,012.39 ($676.40) $ 8.38 ($668.01) $1,344.38359 $1,344.38 ($676.40) $ 5.60 ($670.79) $673.59360 $673.59 ($676.40) $ 2.81 ($673.59) $0.00

6. If the Hall’s want to have as much of an after-tax income when they retire as they currently have, and assuming they live until they are 80 years old, how much money should they set aside each month so as to have enough money accumulated in their retirement nest egg? Assume that annual inflation rate is 4% per year for the whole term, the investment return is 8% per year before and after retirement, and that their tax rate is 28% throughout their life.

The Hall's Current Combined Income 75,000Tax rate 28%Current After-tax income 54,000Current Age 30Retirement Age 65Expected age at death 80Number of Years until retirement 35Number of Years in Retirement Phase 15Annual Inflation Rate 4%Equivalent Annual Income Desired at age 65(54000* 1.0435 = $ 213088.81) $213,088.81Annual Investment Yield 8%

Ages Year (n) Annual Income Present Value

65 0 213,088.8166 1 221,612.36 205,196.6367 2 230,476.85 197,596.7568 3 239,695.93 190,278.3569 4 249,283.76 183,231.0170 5 259,255.11 176,444.6771 6 269,625.32 169,909.6972 7 280,410.33 163,616.7373 8 291,626.74 157,556.8674 9 303,291.81 151,721.4275 10 315,423.49 146,102.1176 11 328,040.43 140,690.9277 12 341,162.04 135,480.1478 13 354,808.53 130,462.3679 14 369,000.87 125,630.4280 15 383,760.90 120,977.44

Present Value at age 65 (Retirement Nest Egg that must be accumulated) $ 2,394,895.49

Monthly deposit needed to reach retirement goal $1,044.04

Solution:

Future Value (required) = 2,394,895.49

PMT=FVO a

¿¿PMT=2,394,895.49

¿¿PMT=¿$1,044.04

7.  If the Hall’s continue paying the minimum 3% on their credit card debt each month, how long will it take them to pay it off and how much total interest will they have paid? If you were Dan, what would you advise them to do?

Credit Card Balance: 10,000Interest Rate: 15.99%3% Minimum Payment: 300Number of months required to pay off debt: 44 monthsSolution:

N=−log(1−10,000

300)(0.1599 /12)

log(1+0.1599

12)

N ≈44months

Total Interest Paid: 3310.1153

Dan's Advice1. Endure paying least possible on:Car $221.58College Loans $527.80They are using it and it is in their idea and required to persist.

2. Live inexpensive for the next few months and recompense full existing on credit card debt and be able to clear the debt within 6 months.

3. Then start putting money away towards the house downpayment, child's education, and retirementDown payment $1,326.92Child's education $319.28Retirement plan $1,044.04

4. In 24 months, their university loans will be paid, the security near the down payment will have completed, and they can labour towards paying off their mortgage.

FINANCE CASE STUDY:Wake Up and Smell the Coffee!

Submitted by:

Chin, Diane ValeryDizon, Cleth

Hinolan, Jorge KingTupas, Stvenson George

Submitted to:

Dr. Felix Cena, CPA

September 10, 2012BABA2A

MWF – 2:30-3:30