Term Balance Rate

Car Payment ($221.58) PMT 24 5000 5.99%College Loan Payment ($527.80) PMT 24 12000 5.25%Credit Card Payment (3% of Balance) (300.00) 3% 10,000 15.99%Rent (1200.00)Total Monthly expenses ($2,249.38)

Marty's Gross Annual Salary 50,000Laura's Gross Annual Salary 25,000Income tax rate 28%

Monthly take home pay (Marty) 3000 AnSal*(1 - T)/12Monthly take home pay (Laura) 1500 AnSal*(1 - T)/12After-tax monthly take home pay 4500

Remaining balance for all other expenses $2,250.62 Monthly

Solution to Case 101

Time Value of Money

Wake Up and Smell the Coffee!

1.    Based on the information provided in Table 1, if the Hall’s continue making minimum payments on their outstanding debts, how much money will they have left over for all other expenses?

1

Annual Yield 8%Number of years until child attends college 18Annual College Expenses (currently) $20,000 Inflation rate 4%Years in college 4College expense (Freshman Year) $ 40,516.33 PV = -20,000, I/Y= 4%, N = 18, PMT = 0, CPT FV1 = College expense (Sophomore Year) $ 42,136.98 PV = -20,000, I/Y= 4%, N = 19, PMT = 0, CPT FV2 =College expense (Junior Year) $ 43,822.46 PV = -20,000, I/Y= 4%, N = 20, PMT = 0, CPT FV3 =College expense (Senior Year) $ 45,575.36 PV = -20,000, I/Y= 4%, N = 21, PMT = 0, CPT FV4 =

$172,051.13Total Savings Accumulation Required for College Expenses once child turns 18 $153,281.95PV of FV1 (n = 0) to PV of FV4 (n = 3) at I/Y = 8%Monthly deposits required to save up for 4 year's of child's college education at age 18 ($319.28)FV = 153,281.95, I/Y= 8/12, N = 216, PV = 0, CPT PMT =

2.  How much money will Laura and Marty have to deposit each month (beginning one month after she is born and ending when she turns 18) in order to have enough saved up for their child’s education. Assume that the yield on investments is 8% per year, college expenses increase at the rate of 4% per year, and that their child will enter college when he or she turns 18 and will complete the degree in 4 years.

3.  How much money will the Hall’s have to set aside each month so as to have enough saved up for a down payment on the $140,000 house within 12 months? Assume that the closing costs amount to 2% of the loan balance and than the down payment is 10% of the price. Note: Annual rate of return on investment is 12%.

2

Purchase Price of House (assumed to be the same after 12 months)……………………………......140,00010% Down Payment …………..…………………………………………………………………......14,000Loan Amount ………………………………………………………………………..……………...126,000Closing Costs ………………………………………………………………………………………….2,520Total Money needed to be saved for Down Payment and Closing Costs………………………….…16,520Annual Rate of return on investments………………………………………………………………..…..8%Number of months until purchase of house………………………………………………………..……..12Monthly deposits required to accumulate total closing costs……………………………..……..($1,326.92)Marty's Gross Annual Salary…………………………………………………………………...…….50,000Laura's Gross Annual Salary……………………………………………………………………..…..25,000Income tax rate……………………………………………………………………………………..…..28%Monthly take home pay (Marty)……………………………………………………………………….3,000Monthly take home pay (Laura)………………………………………………………………………..1500

Note: FV = 16,520, I/Y= 8/12, N = 12, PV = 0, CPT PMT = -1,326.92

4  If the interest rate on a 30-year mortgage is at 5% per year when the Hall’s purchase their house, how much will their mortgage (monthly) payment be? Ignore insurance and taxes, as well as inflation.

5.  Construct an amortization schedule for the 5%, 30-year mortgage.

Mortgage Amount………………… 126,000Mortgage Rate…………………….. 5%Mortgage Term (years)…………….. 30Monthly Payment…………………. ($676.40)PV = -126,000, I/Y= 5/12, N = 360, FV = 0, CPT PMT =

3

MonthBeginning Principle Balance Payment Interest

Reduction of Principle Outstanding Balance

1 126,000 ($676.40) $ 525.00 ($151.40) $125,848.60 2 $125,848.60 ($676.40) $ 524.37 ($152.03) $125,696.58 3 $125,696.58 ($676.40) $ 523.74 ($152.66) $125,543.92 4 $125,543.92 ($676.40) $ 523.10 ($153.30) $125,390.62 5 $125,390.62 ($676.40) $ 522.46 ($153.93) $125,236.69 6 $125,236.69 ($676.40) $ 521.82 ($154.58) $125,082.11 7 $125,082.11 ($676.40) $ 521.18 ($155.22) $124,926.89 8 $124,926.89 ($676.40) $ 520.53 ($155.87) $124,771.03 9 $124,771.03 ($676.40) $ 519.88 ($156.52) $124,614.51

10 $124,614.51 ($676.40) $ 519.23 ($157.17) $124,457.34 11 $124,457.34 ($676.40) $ 518.57 ($157.82) $124,299.52 12 $124,299.52 ($676.40) $ 517.91 ($158.48) $124,141.04 13 $124,141.04 ($676.40) $ 517.25 ($159.14) $123,981.90 14 $123,981.90 ($676.40) $ 516.59 ($159.80) $123,822.09 15 $123,822.09 ($676.40) $ 515.93 ($160.47) $123,661.62 16 $123,661.62 ($676.40) $ 515.26 ($161.14) $123,500.49 17 $123,500.49 ($676.40) $ 514.59 ($161.81) $123,338.68 18 $123,338.68 ($676.40) $ 513.91 ($162.48) $123,176.19 19 $123,176.19 ($676.40) $ 513.23 ($163.16) $123,013.03 20 $123,013.03 ($676.40) $ 512.55 ($163.84) $122,849.19 21 $122,849.19 ($676.40) $ 511.87 ($164.52) $122,684.67 22 $122,684.67 ($676.40) $ 511.19 ($165.21) $122,519.46 23 $122,519.46 ($676.40) $ 510.50 ($165.90) $122,353.56 24 $122,353.56 ($676.40) $ 509.81 ($166.59) $122,186.97 25 $122,186.97 ($676.40) $ 509.11 ($167.28) $122,019.69 26 $122,019.69 ($676.40) $ 508.42 ($167.98) $121,851.71 27 $121,851.71 ($676.40) $ 507.72 ($168.68) $121,683.03 28 $121,683.03 ($676.40) $ 507.01 ($169.38) $121,513.65 29 $121,513.65 ($676.40) $ 506.31 ($170.09) $121,343.56 30 $121,343.56 ($676.40) $ 505.60 ($170.80) $121,172.76 31 $121,172.76 ($676.40) $ 504.89 ($171.51) $121,001.25 32 $121,001.25 ($676.40) $ 504.17 ($172.22) $120,829.03 33 $120,829.03 ($676.40) $ 503.45 ($172.94) $120,656.09 34 $120,656.09 ($676.40) $ 502.73 ($173.66) $120,482.43 35 $120,482.43 ($676.40) $ 502.01 ($174.39) $120,308.04 36 $120,308.04 ($676.40) $ 501.28 ($175.11) $120,132.93 37 $120,132.93 ($676.40) $ 500.55 ($175.84) $119,957.09 38 $119,957.09 ($676.40) $ 499.82 ($176.57) $119,780.51 39 $119,780.51 ($676.40) $ 499.09 ($177.31) $119,603.20 40 $119,603.20 ($676.40) $ 498.35 ($178.05) $119,425.16 41 $119,425.16 ($676.40) $ 497.60 ($178.79) $119,246.37 42 $119,246.37 ($676.40) $ 496.86 ($179.54) $119,066.83 43 $119,066.83 ($676.40) $ 496.11 ($180.28) $118,886.55 44 $118,886.55 ($676.40) $ 495.36 ($181.03) $118,705.51 45 $118,705.51 ($676.40) $ 494.61 ($181.79) $118,523.72 46 $118,523.72 ($676.40) $ 493.85 ($182.55) $118,341.18 47 $118,341.18 ($676.40) $ 493.09 ($183.31) $118,157.87 48 $118,157.87 ($676.40) $ 492.32 ($184.07) $117,973.80 49 $117,973.80 ($676.40) $ 491.56 ($184.84) $117,788.96 50 $117,788.96 ($676.40) $ 490.79 ($185.61) $117,603.35 51 $117,603.35 ($676.40) $ 490.01 ($186.38) $117,416.97 52 $117,416.97 ($676.40) $ 489.24 ($187.16) $117,229.81

4

53 $117,229.81 ($676.40) $ 488.46 ($187.94) $117,041.88 54 $117,041.88 ($676.40) $ 487.67 ($188.72) $116,853.16 55 $116,853.16 ($676.40) $ 486.89 ($189.51) $116,663.65 56 $116,663.65 ($676.40) $ 486.10 ($190.30) $116,473.35 57 $116,473.35 ($676.40) $ 485.31 ($191.09) $116,282.26 58 $116,282.26 ($676.40) $ 484.51 ($191.89) $116,090.38 59 $116,090.38 ($676.40) $ 483.71 ($192.69) $115,897.69 60 $115,897.69 ($676.40) $ 482.91 ($193.49) $115,704.20 61 $115,704.20 ($676.40) $ 482.10 ($194.29) $115,509.91 62 $115,509.91 ($676.40) $ 481.29 ($195.10) $115,314.80 63 $115,314.80 ($676.40) $ 480.48 ($195.92) $115,118.89 64 $115,118.89 ($676.40) $ 479.66 ($196.73) $114,922.15 65 $114,922.15 ($676.40) $ 478.84 ($197.55) $114,724.60 66 $114,724.60 ($676.40) $ 478.02 ($198.38) $114,526.22 67 $114,526.22 ($676.40) $ 477.19 ($199.20) $114,327.02 68 $114,327.02 ($676.40) $ 476.36 ($200.03) $114,126.99 69 $114,126.99 ($676.40) $ 475.53 ($200.87) $113,926.12 70 $113,926.12 ($676.40) $ 474.69 ($201.70) $113,724.42 71 $113,724.42 ($676.40) $ 473.85 ($202.54) $113,521.88 72 $113,521.88 ($676.40) $ 473.01 ($203.39) $113,318.49 73 $113,318.49 ($676.40) $ 472.16 ($204.23) $113,114.25 74 $113,114.25 ($676.40) $ 471.31 ($205.09) $112,909.17 75 $112,909.17 ($676.40) $ 470.45 ($205.94) $112,703.23 76 $112,703.23 ($676.40) $ 469.60 ($206.80) $112,496.43 77 $112,496.43 ($676.40) $ 468.74 ($207.66) $112,288.77 78 $112,288.77 ($676.40) $ 467.87 ($208.53) $112,080.24 79 $112,080.24 ($676.40) $ 467.00 ($209.39) $111,870.85 80 $111,870.85 ($676.40) $ 466.13 ($210.27) $111,660.58 81 $111,660.58 ($676.40) $ 465.25 ($211.14) $111,449.44 82 $111,449.44 ($676.40) $ 464.37 ($212.02) $111,237.42 83 $111,237.42 ($676.40) $ 463.49 ($212.91) $111,024.51 84 $111,024.51 ($676.40) $ 462.60 ($213.79) $110,810.72 85 $110,810.72 ($676.40) $ 461.71 ($214.68) $110,596.04 86 $110,596.04 ($676.40) $ 460.82 ($215.58) $110,380.46 87 $110,380.46 ($676.40) $ 459.92 ($216.48) $110,163.98 88 $110,163.98 ($676.40) $ 459.02 ($217.38) $109,946.60 89 $109,946.60 ($676.40) $ 458.11 ($218.28) $109,728.32 90 $109,728.32 ($676.40) $ 457.20 ($219.19) $109,509.12 91 $109,509.12 ($676.40) $ 456.29 ($220.11) $109,289.02 92 $109,289.02 ($676.40) $ 455.37 ($221.02) $109,067.99 93 $109,067.99 ($676.40) $ 454.45 ($221.95) $108,846.05 94 $108,846.05 ($676.40) $ 453.53 ($222.87) $108,623.18 95 $108,623.18 ($676.40) $ 452.60 ($223.80) $108,399.38 96 $108,399.38 ($676.40) $ 451.66 ($224.73) $108,174.65 97 $108,174.65 ($676.40) $ 450.73 ($225.67) $107,948.98 98 $107,948.98 ($676.40) $ 449.79 ($226.61) $107,722.37 99 $107,722.37 ($676.40) $ 448.84 ($227.55) $107,494.82

100 $107,494.82 ($676.40) $ 447.90 ($228.50) $107,266.32 101 $107,266.32 ($676.40) $ 446.94 ($229.45) $107,036.87 102 $107,036.87 ($676.40) $ 445.99 ($230.41) $106,806.46 103 $106,806.46 ($676.40) $ 445.03 ($231.37) $106,575.09 104 $106,575.09 ($676.40) $ 444.06 ($232.33) $106,342.76 105 $106,342.76 ($676.40) $ 443.09 ($233.30) $106,109.46 106 $106,109.46 ($676.40) $ 442.12 ($234.27) $105,875.18 107 $105,875.18 ($676.40) $ 441.15 ($235.25) $105,639.94

5

108 $105,639.94 ($676.40) $ 440.17 ($236.23) $105,403.71 109 $105,403.71 ($676.40) $ 439.18 ($237.21) $105,166.49 110 $105,166.49 ($676.40) $ 438.19 ($238.20) $104,928.29 111 $104,928.29 ($676.40) $ 437.20 ($239.19) $104,689.10 112 $104,689.10 ($676.40) $ 436.20 ($240.19) $104,448.91 113 $104,448.91 ($676.40) $ 435.20 ($241.19) $104,207.72 114 $104,207.72 ($676.40) $ 434.20 ($242.20) $103,965.52 115 $103,965.52 ($676.40) $ 433.19 ($243.21) $103,722.31 116 $103,722.31 ($676.40) $ 432.18 ($244.22) $103,478.10 117 $103,478.10 ($676.40) $ 431.16 ($245.24) $103,232.86 118 $103,232.86 ($676.40) $ 430.14 ($246.26) $102,986.60 119 $102,986.60 ($676.40) $ 429.11 ($247.28) $102,739.32 120 $102,739.32 ($676.40) $ 428.08 ($248.31) $102,491.00 121 $102,491.00 ($676.40) $ 427.05 ($249.35) $102,241.65 122 $102,241.65 ($676.40) $ 426.01 ($250.39) $101,991.26 123 $101,991.26 ($676.40) $ 424.96 ($251.43) $101,739.83 124 $101,739.83 ($676.40) $ 423.92 ($252.48) $101,487.35 125 $101,487.35 ($676.40) $ 422.86 ($253.53) $101,233.82 126 $101,233.82 ($676.40) $ 421.81 ($254.59) $100,979.23 127 $100,979.23 ($676.40) $ 420.75 ($255.65) $100,723.59 128 $100,723.59 ($676.40) $ 419.68 ($256.71) $100,466.87 129 $100,466.87 ($676.40) $ 418.61 ($257.78) $100,209.09 130 $100,209.09 ($676.40) $ 417.54 ($258.86) $99,950.23 131 $99,950.23 ($676.40) $ 416.46 ($259.94) $99,690.29 132 $99,690.29 ($676.40) $ 415.38 ($261.02) $99,429.28 133 $99,429.28 ($676.40) $ 414.29 ($262.11) $99,167.17 134 $99,167.17 ($676.40) $ 413.20 ($263.20) $98,903.97 135 $98,903.97 ($676.40) $ 412.10 ($264.30) $98,639.68 136 $98,639.68 ($676.40) $ 411.00 ($265.40) $98,374.28 137 $98,374.28 ($676.40) $ 409.89 ($266.50) $98,107.78 138 $98,107.78 ($676.40) $ 408.78 ($267.61) $97,840.16 139 $97,840.16 ($676.40) $ 407.67 ($268.73) $97,571.44 140 $97,571.44 ($676.40) $ 406.55 ($269.85) $97,301.59 141 $97,301.59 ($676.40) $ 405.42 ($270.97) $97,030.62 142 $97,030.62 ($676.40) $ 404.29 ($272.10) $96,758.51 143 $96,758.51 ($676.40) $ 403.16 ($273.23) $96,485.28 144 $96,485.28 ($676.40) $ 402.02 ($274.37) $96,210.91 145 $96,210.91 ($676.40) $ 400.88 ($275.52) $95,935.39 146 $95,935.39 ($676.40) $ 399.73 ($276.66) $95,658.73 147 $95,658.73 ($676.40) $ 398.58 ($277.82) $95,380.91 148 $95,380.91 ($676.40) $ 397.42 ($278.97) $95,101.93 149 $95,101.93 ($676.40) $ 396.26 ($280.14) $94,821.80 150 $94,821.80 ($676.40) $ 395.09 ($281.30) $94,540.49 151 $94,540.49 ($676.40) $ 393.92 ($282.48) $94,258.02 152 $94,258.02 ($676.40) $ 392.74 ($283.65) $93,974.36 153 $93,974.36 ($676.40) $ 391.56 ($284.84) $93,689.53 154 $93,689.53 ($676.40) $ 390.37 ($286.02) $93,403.50 155 $93,403.50 ($676.40) $ 389.18 ($287.21) $93,116.29 156 $93,116.29 ($676.40) $ 387.98 ($288.41) $92,827.88 157 $92,827.88 ($676.40) $ 386.78 ($289.61) $92,538.27 158 $92,538.27 ($676.40) $ 385.58 ($290.82) $92,247.45 159 $92,247.45 ($676.40) $ 384.36 ($292.03) $91,955.42 160 $91,955.42 ($676.40) $ 383.15 ($293.25) $91,662.17 161 $91,662.17 ($676.40) $ 381.93 ($294.47) $91,367.70 162 $91,367.70 ($676.40) $ 380.70 ($295.70) $91,072.00

6

163 $91,072.00 ($676.40) $ 379.47 ($296.93) $90,775.08 164 $90,775.08 ($676.40) $ 378.23 ($298.17) $90,476.91 165 $90,476.91 ($676.40) $ 376.99 ($299.41) $90,177.50 166 $90,177.50 ($676.40) $ 375.74 ($300.66) $89,876.85 167 $89,876.85 ($676.40) $ 374.49 ($301.91) $89,574.94 168 $89,574.94 ($676.40) $ 373.23 ($303.17) $89,271.77 169 $89,271.77 ($676.40) $ 371.97 ($304.43) $88,967.34 170 $88,967.34 ($676.40) $ 370.70 ($305.70) $88,661.64 171 $88,661.64 ($676.40) $ 369.42 ($306.97) $88,354.67 172 $88,354.67 ($676.40) $ 368.14 ($308.25) $88,046.42 173 $88,046.42 ($676.40) $ 366.86 ($309.54) $87,736.89 174 $87,736.89 ($676.40) $ 365.57 ($310.82) $87,426.06 175 $87,426.06 ($676.40) $ 364.28 ($312.12) $87,113.94 176 $87,113.94 ($676.40) $ 362.97 ($313.42) $86,800.52 177 $86,800.52 ($676.40) $ 361.67 ($314.73) $86,485.79 178 $86,485.79 ($676.40) $ 360.36 ($316.04) $86,169.76 179 $86,169.76 ($676.40) $ 359.04 ($317.35) $85,852.40 180 $85,852.40 ($676.40) $ 357.72 ($318.68) $85,533.72 181 $85,533.72 ($676.40) $ 356.39 ($320.00) $85,213.72 182 $85,213.72 ($676.40) $ 355.06 ($321.34) $84,892.38 183 $84,892.38 ($676.40) $ 353.72 ($322.68) $84,569.71 184 $84,569.71 ($676.40) $ 352.37 ($324.02) $84,245.68 185 $84,245.68 ($676.40) $ 351.02 ($325.37) $83,920.31 186 $83,920.31 ($676.40) $ 349.67 ($326.73) $83,593.58 187 $83,593.58 ($676.40) $ 348.31 ($328.09) $83,265.50 188 $83,265.50 ($676.40) $ 346.94 ($329.46) $82,936.04 189 $82,936.04 ($676.40) $ 345.57 ($330.83) $82,605.21 190 $82,605.21 ($676.40) $ 344.19 ($332.21) $82,273.01 191 $82,273.01 ($676.40) $ 342.80 ($333.59) $81,939.41 192 $81,939.41 ($676.40) $ 341.41 ($334.98) $81,604.43 193 $81,604.43 ($676.40) $ 340.02 ($336.38) $81,268.06 194 $81,268.06 ($676.40) $ 338.62 ($337.78) $80,930.28 195 $80,930.28 ($676.40) $ 337.21 ($339.19) $80,591.09 196 $80,591.09 ($676.40) $ 335.80 ($340.60) $80,250.49 197 $80,250.49 ($676.40) $ 334.38 ($342.02) $79,908.48 198 $79,908.48 ($676.40) $ 332.95 ($343.44) $79,565.03 199 $79,565.03 ($676.40) $ 331.52 ($344.87) $79,220.16 200 $79,220.16 ($676.40) $ 330.08 ($346.31) $78,873.85 201 $78,873.85 ($676.40) $ 328.64 ($347.75) $78,526.09 202 $78,526.09 ($676.40) $ 327.19 ($349.20) $78,176.89 203 $78,176.89 ($676.40) $ 325.74 ($350.66) $77,826.23 204 $77,826.23 ($676.40) $ 324.28 ($352.12) $77,474.11 205 $77,474.11 ($676.40) $ 322.81 ($353.59) $77,120.52 206 $77,120.52 ($676.40) $ 321.34 ($355.06) $76,765.47 207 $76,765.47 ($676.40) $ 319.86 ($356.54) $76,408.93 208 $76,408.93 ($676.40) $ 318.37 ($358.02) $76,050.90 209 $76,050.90 ($676.40) $ 316.88 ($359.52) $75,691.38 210 $75,691.38 ($676.40) $ 315.38 ($361.01) $75,330.37 211 $75,330.37 ($676.40) $ 313.88 ($362.52) $74,967.85 212 $74,967.85 ($676.40) $ 312.37 ($364.03) $74,603.82 213 $74,603.82 ($676.40) $ 310.85 ($365.55) $74,238.28 214 $74,238.28 ($676.40) $ 309.33 ($367.07) $73,871.21 215 $73,871.21 ($676.40) $ 307.80 ($368.60) $73,502.61 216 $73,502.61 ($676.40) $ 306.26 ($370.13) $73,132.47 217 $73,132.47 ($676.40) $ 304.72 ($371.68) $72,760.80

7

218 $72,760.80 ($676.40) $ 303.17 ($373.23) $72,387.57 219 $72,387.57 ($676.40) $ 301.61 ($374.78) $72,012.79 220 $72,012.79 ($676.40) $ 300.05 ($376.34) $71,636.45 221 $71,636.45 ($676.40) $ 298.49 ($377.91) $71,258.54 222 $71,258.54 ($676.40) $ 296.91 ($379.48) $70,879.06 223 $70,879.06 ($676.40) $ 295.33 ($381.07) $70,497.99 224 $70,497.99 ($676.40) $ 293.74 ($382.65) $70,115.34 225 $70,115.34 ($676.40) $ 292.15 ($384.25) $69,731.09 226 $69,731.09 ($676.40) $ 290.55 ($385.85) $69,345.24 227 $69,345.24 ($676.40) $ 288.94 ($387.46) $68,957.78 228 $68,957.78 ($676.40) $ 287.32 ($389.07) $68,568.71 229 $68,568.71 ($676.40) $ 285.70 ($390.69) $68,178.02 230 $68,178.02 ($676.40) $ 284.08 ($392.32) $67,785.70 231 $67,785.70 ($676.40) $ 282.44 ($393.95) $67,391.74 232 $67,391.74 ($676.40) $ 280.80 ($395.60) $66,996.15 233 $66,996.15 ($676.40) $ 279.15 ($397.24) $66,598.90 234 $66,598.90 ($676.40) $ 277.50 ($398.90) $66,200.00 235 $66,200.00 ($676.40) $ 275.83 ($400.56) $65,799.44 236 $65,799.44 ($676.40) $ 274.16 ($402.23) $65,397.21 237 $65,397.21 ($676.40) $ 272.49 ($403.91) $64,993.30 238 $64,993.30 ($676.40) $ 270.81 ($405.59) $64,587.71 239 $64,587.71 ($676.40) $ 269.12 ($407.28) $64,180.43 240 $64,180.43 ($676.40) $ 267.42 ($408.98) $63,771.46 241 $63,771.46 ($676.40) $ 265.71 ($410.68) $63,360.78 242 $63,360.78 ($676.40) $ 264.00 ($412.39) $62,948.38 243 $62,948.38 ($676.40) $ 262.28 ($414.11) $62,534.27 244 $62,534.27 ($676.40) $ 260.56 ($415.84) $62,118.44 245 $62,118.44 ($676.40) $ 258.83 ($417.57) $61,700.87 246 $61,700.87 ($676.40) $ 257.09 ($419.31) $61,281.56 247 $61,281.56 ($676.40) $ 255.34 ($421.06) $60,860.51 248 $60,860.51 ($676.40) $ 253.59 ($422.81) $60,437.70 249 $60,437.70 ($676.40) $ 251.82 ($424.57) $60,013.12 250 $60,013.12 ($676.40) $ 250.05 ($426.34) $59,586.78 251 $59,586.78 ($676.40) $ 248.28 ($428.12) $59,158.67 252 $59,158.67 ($676.40) $ 246.49 ($429.90) $58,728.77 253 $58,728.77 ($676.40) $ 244.70 ($431.69) $58,297.07 254 $58,297.07 ($676.40) $ 242.90 ($433.49) $57,863.58 255 $57,863.58 ($676.40) $ 241.10 ($435.30) $57,428.29 256 $57,428.29 ($676.40) $ 239.28 ($437.11) $56,991.18 257 $56,991.18 ($676.40) $ 237.46 ($438.93) $56,552.24 258 $56,552.24 ($676.40) $ 235.63 ($440.76) $56,111.48 259 $56,111.48 ($676.40) $ 233.80 ($442.60) $55,668.89 260 $55,668.89 ($676.40) $ 231.95 ($444.44) $55,224.44 261 $55,224.44 ($676.40) $ 230.10 ($446.29) $54,778.15 262 $54,778.15 ($676.40) $ 228.24 ($448.15) $54,330.00 263 $54,330.00 ($676.40) $ 226.37 ($450.02) $53,879.98 264 $53,879.98 ($676.40) $ 224.50 ($451.90) $53,428.08 265 $53,428.08 ($676.40) $ 222.62 ($453.78) $52,974.30 266 $52,974.30 ($676.40) $ 220.73 ($455.67) $52,518.63 267 $52,518.63 ($676.40) $ 218.83 ($457.57) $52,061.07 268 $52,061.07 ($676.40) $ 216.92 ($459.47) $51,601.59 269 $51,601.59 ($676.40) $ 215.01 ($461.39) $51,140.20 270 $51,140.20 ($676.40) $ 213.08 ($463.31) $50,676.89 271 $50,676.89 ($676.40) $ 211.15 ($465.24) $50,211.65 272 $50,211.65 ($676.40) $ 209.22 ($467.18) $49,744.47

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273 $49,744.47 ($676.40) $ 207.27 ($469.13) $49,275.35 274 $49,275.35 ($676.40) $ 205.31 ($471.08) $48,804.26 275 $48,804.26 ($676.40) $ 203.35 ($473.04) $48,331.22 276 $48,331.22 ($676.40) $ 201.38 ($475.02) $47,856.20 277 $47,856.20 ($676.40) $ 199.40 ($476.99) $47,379.21 278 $47,379.21 ($676.40) $ 197.41 ($478.98) $46,900.23 279 $46,900.23 ($676.40) $ 195.42 ($480.98) $46,419.25 280 $46,419.25 ($676.40) $ 193.41 ($482.98) $45,936.27 281 $45,936.27 ($676.40) $ 191.40 ($484.99) $45,451.27 282 $45,451.27 ($676.40) $ 189.38 ($487.01) $44,964.26 283 $44,964.26 ($676.40) $ 187.35 ($489.04) $44,475.22 284 $44,475.22 ($676.40) $ 185.31 ($491.08) $43,984.13 285 $43,984.13 ($676.40) $ 183.27 ($493.13) $43,491.01 286 $43,491.01 ($676.40) $ 181.21 ($495.18) $42,995.82 287 $42,995.82 ($676.40) $ 179.15 ($497.25) $42,498.58 288 $42,498.58 ($676.40) $ 177.08 ($499.32) $41,999.26 289 $41,999.26 ($676.40) $ 175.00 ($501.40) $41,497.86 290 $41,497.86 ($676.40) $ 172.91 ($503.49) $40,994.37 291 $40,994.37 ($676.40) $ 170.81 ($505.59) $40,488.79 292 $40,488.79 ($676.40) $ 168.70 ($507.69) $39,981.10 293 $39,981.10 ($676.40) $ 166.59 ($509.81) $39,471.29 294 $39,471.29 ($676.40) $ 164.46 ($511.93) $38,959.36 295 $38,959.36 ($676.40) $ 162.33 ($514.06) $38,445.29 296 $38,445.29 ($676.40) $ 160.19 ($516.21) $37,929.09 297 $37,929.09 ($676.40) $ 158.04 ($518.36) $37,410.73 298 $37,410.73 ($676.40) $ 155.88 ($520.52) $36,890.21 299 $36,890.21 ($676.40) $ 153.71 ($522.69) $36,367.53 300 $36,367.53 ($676.40) $ 151.53 ($524.86) $35,842.66 301 $35,842.66 ($676.40) $ 149.34 ($527.05) $35,315.61 302 $35,315.61 ($676.40) $ 147.15 ($529.25) $34,786.36 303 $34,786.36 ($676.40) $ 144.94 ($531.45) $34,254.91 304 $34,254.91 ($676.40) $ 142.73 ($533.67) $33,721.25 305 $33,721.25 ($676.40) $ 140.51 ($535.89) $33,185.36 306 $33,185.36 ($676.40) $ 138.27 ($538.12) $32,647.23 307 $32,647.23 ($676.40) $ 136.03 ($540.37) $32,106.87 308 $32,106.87 ($676.40) $ 133.78 ($542.62) $31,564.25 309 $31,564.25 ($676.40) $ 131.52 ($544.88) $31,019.37 310 $31,019.37 ($676.40) $ 129.25 ($547.15) $30,472.23 311 $30,472.23 ($676.40) $ 126.97 ($549.43) $29,922.80 312 $29,922.80 ($676.40) $ 124.68 ($551.72) $29,371.08 313 $29,371.08 ($676.40) $ 122.38 ($554.02) $28,817.07 314 $28,817.07 ($676.40) $ 120.07 ($556.32) $28,260.74 315 $28,260.74 ($676.40) $ 117.75 ($558.64) $27,702.10 316 $27,702.10 ($676.40) $ 115.43 ($560.97) $27,141.13 317 $27,141.13 ($676.40) $ 113.09 ($563.31) $26,577.82 318 $26,577.82 ($676.40) $ 110.74 ($565.65) $26,012.17 319 $26,012.17 ($676.40) $ 108.38 ($568.01) $25,444.16 320 $25,444.16 ($676.40) $ 106.02 ($570.38) $24,873.78 321 $24,873.78 ($676.40) $ 103.64 ($572.75) $24,301.02 322 $24,301.02 ($676.40) $ 101.25 ($575.14) $23,725.88 323 $23,725.88 ($676.40) $ 98.86 ($577.54) $23,148.35 324 $23,148.35 ($676.40) $ 96.45 ($579.94) $22,568.40 325 $22,568.40 ($676.40) $ 94.04 ($582.36) $21,986.04 326 $21,986.04 ($676.40) $ 91.61 ($584.79) $21,401.25 327 $21,401.25 ($676.40) $ 89.17 ($587.22) $20,814.03

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328 $20,814.03 ($676.40) $ 86.73 ($589.67) $20,224.36 329 $20,224.36 ($676.40) $ 84.27 ($592.13) $19,632.23 330 $19,632.23 ($676.40) $ 81.80 ($594.59) $19,037.64 331 $19,037.64 ($676.40) $ 79.32 ($597.07) $18,440.57 332 $18,440.57 ($676.40) $ 76.84 ($599.56) $17,841.01 333 $17,841.01 ($676.40) $ 74.34 ($602.06) $17,238.95 334 $17,238.95 ($676.40) $ 71.83 ($604.57) $16,634.38 335 $16,634.38 ($676.40) $ 69.31 ($607.09) $16,027.30 336 $16,027.30 ($676.40) $ 66.78 ($609.61) $15,417.68 337 $15,417.68 ($676.40) $ 64.24 ($612.15) $14,805.53 338 $14,805.53 ($676.40) $ 61.69 ($614.71) $14,190.82 339 $14,190.82 ($676.40) $ 59.13 ($617.27) $13,573.56 340 $13,573.56 ($676.40) $ 56.56 ($619.84) $12,953.72 341 $12,953.72 ($676.40) $ 53.97 ($622.42) $12,331.30 342 $12,331.30 ($676.40) $ 51.38 ($625.01) $11,706.28 343 $11,706.28 ($676.40) $ 48.78 ($627.62) $11,078.66 344 $11,078.66 ($676.40) $ 46.16 ($630.23) $10,448.43 345 $10,448.43 ($676.40) $ 43.54 ($632.86) $9,815.57 346 $9,815.57 ($676.40) $ 40.90 ($635.50) $9,180.07 347 $9,180.07 ($676.40) $ 38.25 ($638.14) $8,541.93 348 $8,541.93 ($676.40) $ 35.59 ($640.80) $7,901.12 349 $7,901.12 ($676.40) $ 32.92 ($643.47) $7,257.65 350 $7,257.65 ($676.40) $ 30.24 ($646.16) $6,611.49 351 $6,611.49 ($676.40) $ 27.55 ($648.85) $5,962.65 352 $5,962.65 ($676.40) $ 24.84 ($651.55) $5,311.10 353 $5,311.10 ($676.40) $ 22.13 ($654.27) $4,656.83 354 $4,656.83 ($676.40) $ 19.40 ($656.99) $3,999.84 355 $3,999.84 ($676.40) $ 16.67 ($659.73) $3,340.11 356 $3,340.11 ($676.40) $ 13.92 ($662.48) $2,677.63 357 $2,677.63 ($676.40) $ 11.16 ($665.24) $2,012.39 358 $2,012.39 ($676.40) $ 8.38 ($668.01) $1,344.38 359 $1,344.38 ($676.40) $ 5.60 ($670.79) $673.59 360 $673.59 ($676.40) $ 2.81 ($673.59) $0.00

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6.  If the Hall’s want to have as much of an after-tax income when they retire as they currently have, and assuming they live until they are 80 years old, how much money should they set aside each month so as to have enough money accumulated in their retirement nest egg? Assume that annual inflation rate is 4% per year for the whole term, the investment return is 8% per year before and after retirement, and that their tax rate is 28% throughout their life.

The Hall's Current Combined Income 75,000Tax rate 28%Current After-tax income 54,000Current Age 30Retirement Age 65Expected age at death 80Number of Years until retirement 35Number of Years in Retirement Phase 15Annual Inflation Rate 4%

Equivalent Annual Income Desired at age 65 $213,088.81 PV = -54,000, I/Y= 4, N = 35, CPT = 0, CPT FV =Annual Investment Yield 8%

Future Value of annual withdrawals needed during retirement phase

AgeIncome Needed

FV = $213,088.81*( 1+ i)^n66 221,612.357967 230,476.852268 239,695.926369 249,283.763470 259,255.113971 269,625.318572 280,410.331273 291,626.744574 303,291.814275 315,423.486876 328,040.426377 341,162.043378 354,808.525179 369,000.866180 383,760.9007

Total: 4,437,474.47Present Value at age 65 (Retirement Nest Egg that must be accumulated) $2,394,895.49PV of FV 1 (n = 1) to PV of FV15 (n = 15) at I/Y = 8%Monthly deposit needed to reach retirement goal ($1,044.04)FV = -2,394,895, I/Y= 8/12, N = 420, PV = 0, CPT PMT =

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7.  If the Hall’s continue paying the minimum 3% on their credit card debt each month, how long will it take them to pay it off and how much total interest will they have paid? If you were Dan, what would you advice them to do?

Credit Card Balance 10,000Interest Rate 15.99%

3% Minimum Payment -300Number of months required to pay off debt 44.367051

Total Interest Paid 3310.1153

Dan's Advice1. Continue paying minimum on:

Car ($221.58)College Loans ($527.80)

2. Live cheap for the next few months and pay maximum available on credit card debt

Available income after rent, car payment, and college loan payments = $2,550.62 They should be able to clear the debt within 6 months.

3. Then start putting money away towards the house down payment, child's education, and retirement

Down payment ($1,326.92)Child's education ($319.28)Retirement plan ($1,044.04)

Note...They may have to save a little less than the calculated amount each month…($2,690.23)

4. Within 24 months, their college loans will be paid off, the deposit towards the down payment will have ended, and they could work towards paying off their mortgage as quickly as possible.

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