Answer 1:
This are the form of the calculation of Net Present Value (NPV), including the annuity, which will be enjoyed from the portfolio. The key data of the given study is-
- Social Security is indexed and would render the real annual return of $9,000, no matter what the inflation rate would be.
- Roads real concern is what happens to income & expenses with the other 1,250 $ per month (15,000 $ per year).
- Raj has a portfolio (9%) and a savings account (5%) to produce the other 15,000 dollars each year.
Year 1: Raj has portfolio and saving to try to attain needed 1250$ that is not rendered by social security
| Income | expenses | savings |
| 16800 | 15000 | 1800 |
Year 2: saving increases but expenses increases faster
| Income | expenses | savings |
| 16890 | 15600 | 1290 |
In this way, the savings builds throughout year four. Also, that we stay above 12,000 dollars balance there throughout seven years, then the portfolio withdrawal have to begin. The 180,000 $ paid as the annuity will be 18,090 $. With the social security as well as cash from the saving held have approximately 27,690 $ yearly. It is required to consider that Raj can really spend the bit more because his 18,090 dollars tucked in the savings account will earn another 452.25 dollars in saving. Adding this brings per annum spending to 28,142 $.
| Answer 2: | |||
| future value of rent- | |||
| FV = PV * [ 1 + (i/n)]^(n*t) | |||
| 33696.22 |
Answer 3:
- The first withdrawal amount for the son will be-
FV = PV * [ 1 + (i/n)]^(n*t)
=104.3361
- FV = PV * [ 1 + (i/n)]^(n*t)
= 4430695
It is not required to add money.
- Monthly saving in RRSP-
| FV = PV * [ 1 + (i/n)]^(n*t) | ||
| 50911.69 |
Answer 4:
- The non-quantifiable elements of Raj affects the choice to become MBA in that the lengthier he would consider to complete the Master’s program. There are various non-quantifiable elements, which put impact on the decision of Raj to attain MBA degree. The main non-quantifiable factor is the motivation to become the investment banker. The quantifiable factors such as per annum salary, health cover, incremental in salary, are the advantages after getting degree of MBA. Presently, Raj has attained sufficient funds to cover the whole program of MBA. The non-quantifiable factor such as ambition is important for Raj to become the investment banker in the future. Although, Raj is fully pleased with his current work as well as its advantages. The main objective is to take additional step in his career as well as thus become the investment banker and follow dream. Raj has attained UG degree in the Finance. However, the degree of masters would include more topics extravagantly and help him to know the role of the investment banker. It would broaden the knowledge as well as become capable by advancing the professional talent along with knowledge.
- Raj is twenty-eight years old. Raj has thirty-eight years to work as well as to earn. It can say that the time invested by Raj in doing his MBA would put impact on both total amount of earning he will earn for remaining years and retirement scheme since he may make investment of his income in various portfolios at the time of functioning. In case when Raj does the MBA program to the old age, this would not benefit him emotionally, substantially or cautiously. It is provided to a fact that the ROI is really very lower as the outcome of shorter period that would for him to do functions. In addition, the studying at old age would not be easy to learn at his middle age. Furthermore, this may be more burdensome for Raj to secure employment at the old age. For example, the age of Raj is pertinent in taking the decisions of attaining MBA degree. In this way, the best option is to stay in the current job.
- After some week, when the girlfriend of Raj informed him that she is pregnant. Raj takes decision to postpone the masters course by five years. After five years, raj should not continue his MBA course. Raj should take job somewhere.
