Fin580 Midterm

1612 Words Sep 10th, 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

Student Answer:

Instructor Explanation:

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

Points Received: Comments:

10 of 10

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
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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?

Student Answer:

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

Points Received: Comments:

20 of 20

Question 4. Question :

(TCO B) From the information given below, determine Marcie's gross income for tax purposes. Salary $40,000 Interest (checking account) $50 Cash received as birthday gift $900 Dividends (mutual funds) $500 Inheritance received on father's death $22,000 Cash received from insurance for accident

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