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)
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