midterm-mba810-wi2000

midterm-mba810-wi2000 - _ First Name _ _ Last Name Social...

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__________ __________ ____________________ _______________ _____________ First Name Last Name Social Security Number Class: 8:30/10:30 Score out of 60 OSU, FISHER COLLEGE OF BUSINESS, MID-TERM EXAM FOR MBA 810 Anil K. Makhija, Winter 2000 You have 1 hour 30 minutes to complete this exam. There is substantial credit for method. Show all work neatly. Make assumptions if necessary, but clearly state them. Good luck, and Happy Valentine!!!!!! 1. As a financial planner, you have been asked to advice Jane on how to save for her retirement needs. She plans to retire in ten years (t=10), and expects a retirement period of 30 years (t=11 to t=40). Based on the life-style she is accustomed to, she would like a real annual income of $75,000 during her retirement years. Jane has already saved up $50,000. In addition, she expects to receive a single real dollars payment of $100,000 from her employer from the pension plan at the time of retirement (t=10). (That is, the company policy is to adjust pension payments for inflation, and the nominal dollar payment will be an appropriate larger amount). Till her retirement, Jane plans to invest in the Risky Fund with a real discount rate of 12%. Thereafter, she will use during her retirement the Low Risk Fund with a real discount rate of 8%. [A 2% annual inflation rate is expected to prevail for the foreseeable future]. What real annual amount (annuity) should Jane save during the next working ten years (t=1 to t=10) in order meet she retirement needs? (12 points) 2. The XYZ Company’s shares are selling at $75/share.
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midterm-mba810-wi2000 - _ First Name _ _ Last Name Social...

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