1. An annuity promises that, if you deposit $400 a month for 10 years, it will pay out $100,000 at the end of the 10th year. What is the rate of return per month and per year?

2.

Ryan is a 22-year-old man, graduated this year from Shepherd with a B.Sci. degree in Computer Science. He works for a tech company as a design engineer. He earns $50,000 for the first year and will receive a moderate 4% increase per year for the next four years. By then, his job is due for a review for promotion. His supervisor told him that if he would be promoted to team leader, he would lead a team of 10 and the salary would be 50% more. Besides his career, Ryan has several goals in the near and distant future: 1. He wants to study an MBA program in 3 years so he can develop his leadership and management skills for the future. The program requires a one-year-long study and costs $30,000. 2. He likes to buy an entry-level jet ski next year. To reduce the cost, he is considering buying a used one for $3,000. 3. He is in a stable relationship with Judy and wants to set aside $10,000 for marriage and the start of a new family in 6 years. 4. His parents had helped pay for his collegiate education and he feels he must do something to show his love to them. He plans to buy a $6,000-worth vacation package to Italy for them when they retire in 10 years. 5. Although he just started his career, he wants to accumulate $100,000 by retirement at 67. As Ryan's financial planner, you give him the following economic information: 1. Inflation rate is expected to be 3% per annum(0.25% per month). Prices of goods and services will increase accordingly to reflect the inflation. 2. The return to a reasonably safe investment portfolio stands at 6% per annum (0.5% per month). We assume that Ryan's savings will continue to earn interest until expended. Please find out Ryan's monthly savings and savings schedule. Goals Year of Purchase Current cost 1 3,000 Inflation-adjusted amount 3,091.25 Required monthly savings for the item 250.60 Jet Ski MBA Marriage 11,969.48 Vacation 49.40 Retirement Year Necessary monthly total savings 1,412.64 1 2 3 4 327 5 327.65 6 327.65 7 8 9 10 11-45