YU 3541B Fall 2008, Chapter #4, #12 and Ch. #5 (Sept 18, 2008)

# YU 3541B Fall 2008, Chapter #4, #12 and Ch. #5 (Sept 18, 2008)

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Lecture #3 -Personal Financial Planning Today’s Agenda 1. Current topics/articles 2. Review of Lecture #2- Time Value of Money Practice Questions. 3. Chapter #4-Measuring and Controlling Personal Finances 4. Chapter #12-Credit and Debt Management. 5. Chapter #5-Family Law

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Chapter #2-Problems Problem#5 – a) Stated rate EAR 1 10% 10% 2 9.75 9.99 3 9.50 9.84 4 9.25 9.65 5 9.00 9.41 5.b) APR is another term for stated rate.
Chapter #2-Problems Continued 5.c) Calculate the compound value at the end of 1, 3 & 5 year, for each type of account. So, for Type 1, the value of the investment would be \$55,000 at the end of Yr.1, \$66,550 at the end of Yr.3 and \$80,526 at the end of Yr.5. Now try to calculate the investment value for the remaining 4 account types. 5.d) Think of fees and minimum balance required.

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Chapter #2-Problems Continued Problem #11 a. I/Y=6.66%, therefore he must save more. b. PMT=\$4,537 c. PMT=\$4,280 d. PMT=\$-35,933 (therefore, he could actually withdraw this amount each yr. and still achieve his objective of \$1 million by retirement.
Chapter #2-Problems Continued Problem #20 a) PMT=\$2,525 b) PV=26,530 c) PMT=2,983 d) Allocate \$2,525 to Randy for 5 years and \$475 to Susan. Calculate the rest of the savings in the last 3 years.

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Chapter #2-Problems Continued #8. Share 1 Arithmetic Mean-17.7% Geometric Mean-16.22% Share 2 Arithmetic Mean-9.0% Geometric Mean-7.59% Share 3 Arithmetic Mean-15.50% Geometric Mean-15.22%
Chapter #2-Problems Continued #9. a. Mr.Haroun will have \$3,206,934. Hint: Calculate the FV separately for each of the first 5 years, and then calculate the FV for the next 25 together. b. Each contribution earns one more year of interest. FV now is \$3,591,766.

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Chapter #2-Problems Continued #17. a) Time (Yr.) 1 2 3 4 5 Stock A Dividend 0 0 0 0 0 R. of R. .091 -.017 .30 .154 .067 Stock B Dividend 1 1 1 1.15 1.15 R. of R. -.111 .133 -.063 .0107 .473
Chapter #2-Problems Continued #17-Continued: b). Arithmetic Mean Stock A: .119 Stock B: .089 c). Geometric Mean Stock A: .1141 or 11.41% Stock B: .0704 or 7.04%

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Chapter #4-Measuring & Controlling Personal Finances Learning Objectives: 1. To prepare a family balance sheet that shows the resources and debts and how much the family is worth in financial terms. 2. To prepare an income statement for the family that shows revenue/income and expenses. 3. To prepare a family budget that takes into account the family objectives. 4. To develop control mechanisms for staying within the family budget. 5. Understand the concept of Human Capital.
How Much Is the Family Worth Balance Sheet or Statement of Net Worth Net Worth Statements are designed to provide a picture of the financial situation at a specific point in time. Assets minus Liabilities equals Net Worth

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YU 3541B Fall 2008, Chapter #4, #12 and Ch. #5 (Sept 18, 2008)

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