Week 1 Ch 3 problem 1, 2

# Week 1 Ch 3 problem 1, 2 - Week 1 Ch 3 problems 1 and 2...

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Week 1, Ch. 3, problems 1 and 2 solutions 1. Financial goal is \$ 1,500,000.00 when he retires in 30 years hence . His current action plan: PMT -5,000 N 30 I/Y 10% FV \$ 822,470 (a) No, he will not achieve his goal with his current action plan. (b) He can choose any of the following actions: i) He can change his goal, W n ; ii) He can add an initial investment, W 0 ; iii) He can increase the amount of annual investment, E t - C t ; iv) He can change the investment horizon, n; v) He can choose a different investment that has a higher rate of return, k; vi) He can borrow at a lower rate and invest at a higher rate; vii) Any combination of the above. (c) Changing the various assumptions leads to the following actions: i) If he resets his goal to \$ 822,000.00, then he can continue with his current action and achieve the new goal in 30 years time. ii) Suppose he considers adding an initial investment, then how much must he add? FV

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## This note was uploaded on 10/14/2011 for the course ADMS 3541 taught by Professor Staff during the Winter '10 term at York University.

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Week 1 Ch 3 problem 1, 2 - Week 1 Ch 3 problems 1 and 2...

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