Answer the following:
Calculating Net Worth.
Shellys assets include money in checking and savings accounts, investments in stocks and mutual funds, and personal property, including furniture, appliances, an automobile, a coin collection, and jewelry. Shelly calculates that her total assets are $108,800. Her current unpaid bills, including an auto loan, credit card balances, and taxes total $16,300. Calculate Shellys net worth.
Calculating an IRA Accumulation.
When Jamal graduated from college recently, his parents gave him $1,000 and told him to use it wisely. Jamal decided to use the money to start a retirement
account. After doing some research about different options, he put the entire amount into a tax-deferred IRA that pays 11 percent interest, compounded annually. Calculate how much money Jamal will have in his IRA at the end of ten years, assuming that the interest rate remains the same and that he does not deposit any additional money.
Calculating an IRA Accumulation.
a. Janine is 25 and has a good job at a biotechnology company. She currently has $5,000 in an IRA, an important part of her retirement nest egg. She believes her IRA will grow at an annual rate of 8 percent, and she plans to leave it untouched until she retires at age 65. Janine estimates that she will need $875,000 in her total retirement nest egg by the time she is 65 in order to have retirement income of $20,000 a year. (She expects that Social Security will pay her an
additional $15,000 a year). How much will Janines IRA be worth when she needs to start withdrawing money from it when she retires? (Hint: Use Exhibit A-1 in the appendix to Chapter 1.).
b. How much money will Janine have to accumulate in her companys 401(k) plan over the next 40 years in order to reach her retirement income goal?
Dipping into Your Nest Egg.
You have $50,000 in your retirement fund that is earning 5.5 percent per year, compounded quarterly.
a. How many dollars in withdrawals per month would reduce this nest egg to zero in 20 years?
b. How many dollars per month can you withdraw for as long as you live and still leave this nest egg intact?