Project #38431 - TVM

1. Mary earns $100,000 per year.  She plans to retire in 10 years and will live for 25 years after retiring.  She desires an 80% wage replacement ratio.  If she can earn 8% on her money and inflation will average 3% per year, how much will Mary need to fund her first year of retirement?

A. $80,000

B. $100,000

C. $107,513

D. $134,392

Answer: A? - To me it is a "trick" question.

 

2. Using the capital depletion approach, how much will Mary need on the day she retires to fund her retirement if she wants her annual retirement income to increase each year to match inflation?

A. $1,537,294

B. $1,612,297

C. $1,723,295

D. $1,810,293

Answer: Please advise.

 

3. If Mary wants to leave $1,000,000 to her heirs after she dies, how much more must she have saved by the time she retires?

A. $146,018

B. $287,314

C. $413,641

D. $1,000,000

Answer: D

 

4. If Mary currently has $250,000 in her 401(k) plan earning 8%, how much will this be worth in 10 years when she retires if she continues to contribute $8,000 per year at the end of each year?

A. $539,731

B. $655,624

C. $701,319

D. $743,522

Answer: B.

 

5. Mary has been a diligent investor.  She invests $10,000 at the end of each year and earns 8% before taxes.  She is in the 25% marginal tax bracket (meaning that dividends and capital gains will be taxed at 15%).  She currently has $300,000 in the account.  How much will she have in this account when she retires in 10 years?

A. $716,073

B. $723,419

C. $787,311

D. $799,215

Answer: I get 792,543.  Please Advise.

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Due By (Pacific Time) 08/24/2014 10:00 pm
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