C70mt_Fall2008_Questions+%26+Solutions.doc - UNIVERSITY OF...

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UNIVERSITY OF TORONTO at Scarborough MANAGEMENT MGTC70H3F (Personal Financial Management) L01 & L02 Midterm Exam Date: October 29, 2008 Location: MW160 & MW170 Time: 5:05 – 6:55 p.m. Prof. Syed W. Ahmed TA: Sean Zhang Number of Pages including title page: 7 Items Allowed: Calculator and one 8.5”*11” double sided crib sheet. Only handwritten (no photocopies) crib sheet is allowed. Please do all the problems with pen or at least write the final answer with pen. You can write on both sides of a page to answer the questions. STUDENT’S NAME:________________________________________________ Last First Middle STUDENT’S I.D. NO.:_______________________________________________ SECTION: L01 L02 Wed 9-11 a.m. Wed 3-5 p.m. Please circle your section QUESTION NO. MAX. MARKS MARKS OBTAINED 1 30 __________________ 2 20 __________________ 3 20 __________________ 4 20 __________________ 5 10 __________________ TOTAL MARKS 100 __________________ GOOD LUCK
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-2- QUESTION 1: John Norisk is 25 years old. His Salary at FinancialSecurity Limited is $90,000. He expects his salary to increase at 5% p.a. for the next 3 years (yrs 26-28 inclusive). After that he will be promoted to the position of the Department Head and his salary will jump by 50% (yr 29). Thereafter he expects pay raises of 4% p.a. until he retires. He will save 10% of his salary for 20 years until his mortgage loan is paid off. After that he will save 15% per year until he retires. All his savings will be inside RRSP. His after tax rate of return is 4.8% p.a. His marginal tax rate is 40%. All savings are at the end of the year. a. How much will he have saved by age 50. b. If he retires at age 60, he will need to have saved $5,500,000 for a comfortable retirement. How much more does he need to save each year from age 51 to 60 inclusive, in addition to the 15% of the salary he is already saving, to retire at age 60. Assume additional saving is an ordinary annuity. -3- -4- QUESTION 2: Jessica Sensible is planning to retire in 40 years. Her current liquid savings are $200,000. Her goal is to have $3,000,000 at retirement. a.
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This note was uploaded on 07/20/2011 for the course MGMT 70 taught by Professor Ahmed during the Spring '11 term at University of Toronto.

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C70mt_Fall2008_Questions+%26+Solutions.doc - UNIVERSITY OF...

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