Conceptual Homework 4C
Show work to receive credit.
Suppose you just had your first child and you want to begin immediately putting away for
his/her college tuition. Assume that college will cost a total of $160,000 for all 4 year
combined and that your child will begin college at age 18.
1. How much will you need to put away each month at a rate of 4% in order to achieve
2. How much money will you have actually put into the account over the course of the 18
3. How much did your investment actually earn you?
4. Do you think it was worthwhile to put the money into an investment account? Explain
Pre-Class Assignment 4C
Read through section 4C in your book and answer the following questions.
1) Write down the Savings Plan Formula and what each of the variables in the formula
2) What is the purpose of the savings plan formula?
3) Let’s say that you invest $10,000 for 5 years and I tell you that over that time, the
percentage change in your investment was 40%, while on a yearly basis, your
investment grew by 7.5%.
Which number is the total return and which the annual return?
Give a brief definition of each.
Conceptual Homework 4B
1. Which is the better choice: $1000 deposited for a year: You must show your work below.
a. at a rate of 5.5% compounded monthly?
b. at a rate of 5.4% compounded daily?
c. At a rate 4.5% compounded continuously?
2. Decide whether the statement makes sense. Explain your reasoning.
Raul is planning to invest his money for one year only. He chose an account paying simple
interest at 6% per year which was clearly a better deal than an account paying a 5.6% APR
with interest compounded annually.
Conceptual Homework 4A
1. You have an annual salary of $62,000 from which they deduct 3% for medical insurance
and 18% for taxes. Your rent is $1200 a month. Your water bill comes every 3 months
for $123, and your light bill is $138 a month. You have a child that goes to a 30-minute
piano class twice a week for $18 per session and you receive child support for that child
every month in the amount of $125. Every week you put 130 miles on your car that
gives you 20 miles per gallon and gas cost $2.27 per gallon. You pay a premium of
$1,019 every six months for car insurance. You spend $120 a week on food. You also
have a student loan that you are paying $150 on every month. and you spend $100
every 2 weeks just to treat yourself.
Create a monthly budget and find your monthly cash flow. You must show work
(Assume, that there are 52 weeks in a year)
MGF 1107 PROJECT #3 - BUDGET
Objective: This project is intended to give you practice with calculating income from
investments and predicting monetary needs based on future and current expenditures.
You will identify professions and locations that appeal to you so that you may begin
thinking about what may affect future decisions.
Make the following assumption: You will graduate this Spring and get your preferred job
immediately upon graduation. Be sure to show all calculations when asked.
1. State the profession that you intend or would like to pursue and where you would
like to live. Explain something about why you selected your chosen profession and
2. Research potential starting salaries and possible house prices for your choices in your
desired location and provide them. Include your citations for the values and any
assumptions that you are making about your choices.
3. Research what the state and federal income taxes are for the state in which you
want to live. Keep in mind that not all states have a state income tax. Based on your
research, what will your salary be after taxes? Show calculations.
4. Let’s assume that housing prices will remain relatively stable. You will need 20% for a
down payment for your chosen house from Step 2. You plan on moving and
purchasing the house in 5 years from now. How much would you need to save every
month in order to have the down payment? Assume an APR of 5%. Show
5. If you put away $100 a month from after graduation until retirement (age 65) in an
investment account with an APR of 3.5% how much will you have to retire on? Show
calculations. Show calculations on a separate sheet.
6. Recreate the table on page 2 (showing monthly amounts) and calculate your monthly
budget and cash flow based on the salary you found in Step 2. You can add or
eliminate as needed.
Salary (after tax)
Part time work
Cable and Internet
7. What is your net cash flow each month? Show your calculations.
8. If your monthly cash flow is negative, explain what adjustments would make sense
for you to make in your lifestyle in order to meet your monthly goals. Make sure your
response is realistic.
9. What are your thoughts on your chosen profession and chosen location? Do you feel
that your goals are reasonable and possible?
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