Review Problems Winter 06

Review Problems Winter 06 - ADMS 3541 Winter 2006 Review...

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ADMS 3541 Winter 2006 Review Problems I will solve these problems in a special session: Saturday, April 1, Curtis Lecture Hall J 1. Oscar and Alice – a short case study Oscar and Alice noticed their own parents struggling through retirement. They made a conscious decision to plan well ahead for their own retirement. They both want to retire at age 60, and both are currently age 35. The problem is that neither of them are members of a company sponsored pension plan since both of them are professionals and work independently. Oscar is a contract software developer, and Alice freelances as a corporate brochure writer. They have one daughter, Rachel, 10 years old, and have their own house, which they hope to have paid off in the next 7 years. They both work out of their house, and enjoy their lifestyle. Neither Oscar’s nor Alice’s annual incomes are consistent from year to year. In some years, Oscar will have a gross income of $100,000 and in other years it may fall as low as $40,000. Alice has a steady clientele of corporate clients where she manages to earn between $40,000 and $50,000 a year. Both Oscar and Alice contribute the maximum into the CPP and have been doing so since they began working after university. To date, they have been putting all their money towards paying off their house and have only managed to save $5,000 in Elizabeth’s RRSP, which is invested in a GIC and $10,000 in Simon’s RRSP invested in a Asia Pacific Mutual Fund with a Beta of 3.5. They also keep some cash in a chequing account, and an emergency fund in a money market mutual fund that they can withdraw easily. Both agree that when they could retire on $40,000 dollars and maintain a similar lifestyle providing that all their debts and obligations are paid off. 1.
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Review Problems Winter 06 - ADMS 3541 Winter 2006 Review...

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