# Fin580 Midterm

1600 Words Aug 29th, 2014 7 Pages
Grade Details - All Questions Question 1. Question :

(TCO A) Jean and Jim have liquid assets of \$3,600 and other assets of \$42,800. Their total liabilities equal \$26,000. What is their net worth? (Show all work.)
Total Assets \$46,400 Less: Total Liabilities 26,000 Equal: Net Worth \$20,400 Liquidity: \$3,600 +Other Assets: \$42,800 Total Assets: \$46,400 -Total liabilities: \$26,000 Net Worth: \$20,400

Instructor Explanation:

Total Assets \$46,400 Less: Total Liabilities 26,000 Equal: Net Worth \$20,400

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Question 2. Question :

(TCO A) Construct a balance sheet from the following information. Be sure the format is correct. (Show all work.) Cash on hand 1,000 Bank credit card
How much will they need at retirement if they can earn a 4% rate of return? d. The Hamptons want to have \$3,500,000 for their retirement in 30 years. How much should they save annually if they think they can earn 7% on their investments?

a. I = 4%, PV = \$74,000, N = 20, FV = \$162,143.11 a. Using Excel enter '=-FV(4%,20,,74000) = \$162,143.11 salary needed to keep pace with inflation. b. FV = \$2 million, N = 25, I = 8%, PMT = \$27,357.26 a. Using Excel, enter '=-PMT(8%,25,0,2000000)' = \$27,357.26 as the necessary annual payment to be saved. c. PMT = \$160,000, N = 20, I = 4%, PV = \$2,174,452.22 a. Using Excel, enter '=-PV(4%,20,160000)' = \$2,174,452.22 needed for retirement. d. FV = \$3.5 million, N = 30, I = 7%, PMT = \$37,052.41 a. Using Excel, enter '=-PMT(7%,30,0,3500000)' = \$37,052.41 annual payment to be saved.

Instructor Explanation:

a. I = 4%, PV = \$74,000, N = 20, FV = \$162,143 b. FV = \$2 million, N = 25, I = 8%, PMT = \$27,357 c. PMT = \$160,000, N = 20, I = 4%, PV = \$2,174,452 d. FV = \$3.5 million, N = 30, I = 7%, PMT = \$37,052