Use Worksheet 11.1 Ashley Olson is early in her career and is now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the people she works with, she would really like to be a literary agent. She would like to go on her own in about 8 years and figures she’ll need about $50,000 in capital to do so. Given that she thinks she can make about 10 percent on her money, use Worksheet 11.1 to answer the following questions

a. How much would Ashley have to invest today, in one lump sum, to end up with $50,000 in eight years?

b. If she’s starting from scratch, how much would she have to put away annually to accumulate the needed capital in eight years?

c. How about if she already has $10,000 socked away; how much would she have to put away annually to accumulate the required capital in 8 years?

d. Given that Ashley has an idea of how much she needs to save, briefly explain how she could use an investment plan to help reach her objective.

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Worksheet 11.1, Chapter 11, Exercise1 Part a and b Financial goal: 1. Targeted Financial Goal (see Note 1) 2. Projected Average Return on Investments A. Finding a Lump Sum Investment: 3. Future Value Factor, from Appendix A, computed here Determining Amount of Investment Capital Needed Invest lump sum to end up with $50,000 in 8 years . based on return on investment of 4. Required Lump Sum Investment . line 1 + line 3 B. Making a Series of Investments over Time: 5. Amount of Initial Investment, if any (see Note 2) Future Value Factor, from Appendix A, computed here based on 6. return on investment of 8 years to target date and a projected average 10 % 8 years of target date and a projected average 10 % 7. Terminal Value of Initial Investment line 5 x line 6 8. Balance to come from Savings Plan line 1 - line 7 Note 2: 9. Future Value Annuity Factor, from Appendix B, computed here 8 years to target date and a projected average 10 % based on return on investment of 10. Series of Annual Investments Required over Time • line 8 + line 9 Note 1: $ $ $ The "targeted financial goal" is the amount of money you want to accumulate by some target date in the future. If you're starting from scratch-i.e., there is no initial investment-enter zero on line 5, skip lines 6 and 7, and then use the total targeted financial goal (from line 1) as the amount to be funded from a savings plan; now proceed with the rest of the worksheet. 50,000.00 10 % 2.144 23,325.37 2.144 50,000.00 11.44 4,372.00