6-13 Soln to H2

# 6-13 Soln to H2 - Yearly Income Percentage Saved Yearly...

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Homework 3, Part (i): No Growth Without MBA With MBA Yearly Income \$117,000.00 Yearly Income \$144,000.00 Percentage Saved 15% Percentage Saved 15% \$17,550.00 \$21,600.00 Years in Working Life 35.00 Years in Working Life 33.00 Average yearly Return on Savings 5% Average yearly Return on Savings 5% 16.37 16.00 287,367.11 345,655.06 1,585,121.39 1,729,377.45 Cash Out Flows With MBA Loan at t=0 \$(54,000.00) Loan at t=1 \$(54,000.00) (581,545.62) 1,147,831.83 Homework 2, Part (ii): Growth at Different Rates Without MBA With MBA Yearly Income \$117,000.00 Yearly Income \$144,000.00 Growth Rate for Income 4.50% Growth Rate for Income 6.75% Percentage Saved 15% Percentage Saved 15% \$17,550.00 \$21,600.00 \$16,794.26 \$20,234.19 Years in Working Life 35.00 Years in Working Life 33.00 Average yearly Return on Savings 5% Average yearly Return on Savings 5% 0.4785% -1.6393% 32.16 44.25 540,031.69 895,368.02 2,978,823.13 4,479,694.99 Fees Loan at t=0 \$(54,000.00) Loan at t=1 \$(54,000.00) (581,545.62) 3,898,149.37 Yearly Savings, S Yearly Savings, S AF (5%, 35) AF (5%, 33) PV 0 (Savings) = S*AF (5%, 35) PV 2 (Savings) = S*AF (5%, 33) PV 35 (Savings) = [ PV 0 (Savings) ]*(1.05 35 ) PV 35 (Savings) = [ PV 2 (Savings) ]*(1.05 33 ) PV 35 (Cash Out Flows) PV 35 (Savings Net of Cash Out Flows) Yearly Savings at t=1, S 1 Yearly Savings, S Artifical Construct for Computation, S 0 = S 1 / (1+g) Artifical Construct for Computation, S 0 = S 1 / (1+g) Artifical Construct for Computation, q = (r-g) / (1+g) Artifical Construct for Computation, q = (r-g) / (1+g) AF (0.4785%, 35) AF (-1.6393%, 33) PV 0 (Savings) = S 0 *AF (.4785%, 36) PV 2 (Savings) = S*AF (5%, 33) PV 35 (Savings) = [ PV 0 (Savings) ]*(1.05 35 ) PV 35 (Savings) = [ PV 2 (Savings) ]*(1.05 33 ) PV 35 (Fees) PV 35 (Savings Net of Other Cash Flows)

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Beginning Balance Amount Saved during year Ending Balance Check [1] [2] [3] = [6] from last year [4] [6] = [3] + [4] + [5] 0 8/31/2008 \$- \$- \$- \$- 1 8/31/2009 \$- \$17,550.00 \$- \$17,550.00 2 8/31/2010 \$17,550.00 \$17,550.00 \$877.50 \$35,977.50 3 8/31/2011 \$35,977.50 \$17,550.00 \$1,798.88 \$55,326.38 4 8/31/2012 \$55,326.38 \$17,550.00 \$2,766.32 \$75,642.69 5 8/31/2013 \$75,642.69 \$17,550.00 \$3,782.13 \$96,974.83 6 8/31/2014 \$96,974.83 \$17,550.00 \$4,848.74 \$119,373.57 7 8/31/2015 \$119,373.57 \$17,550.00 \$5,968.68 \$142,892.25 8 8/31/2016 \$142,892.25 \$17,550.00 \$7,144.61 \$167,586.86 9 8/31/2017 \$167,586.86 \$17,550.00 \$8,379.34 \$193,516.20 10 8/31/2018 \$193,516.20 \$17,550.00 \$9,675.81 \$220,742.01 11 8/31/2019 \$220,742.01 \$17,550.00 \$11,037.10 \$249,329.11 12 8/31/2020 \$249,329.11 \$17,550.00 \$12,466.46 \$279,345.57 13 8/31/2021 \$279,345.57 \$17,550.00 \$13,967.28 \$310,862.85 14 8/31/2022 \$310,862.85 \$17,550.00 \$15,543.14 \$343,955.99
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## This note was uploaded on 02/12/2012 for the course UGBA 101A taught by Professor Mccullough during the Spring '08 term at Berkeley.

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6-13 Soln to H2 - Yearly Income Percentage Saved Yearly...

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