Question
1. Martys investments earned a before tax rate of return of 9% in a year when inflation was 2%. He and his financial planner had
1. Martys investments earned a before tax rate of return of 9% in a year when inflation was 2%. He and his financial planner had decided he needed to earn 6.5% real annually to reach his retirement goals.
a. Marty can relax he has met his goal for the year.
b. Marty can relax he has exceeded his goal for the year.
c. Marty had better start reviewing his options he has failed to meet his goal for the
year.
d. Marty should panic he has failed miserably to meet his goal for the year.
2. The real rate of return in Venezuela was expected to be 4% and inflation there was 27.1% in 2009. What was the nominal rate in that nation?
a. 31.100%
b. 27.100%
c. 28.650%
d. 32.184%
3. Jacob, a university student in finance, has an unpaid credit card balance of $1,500. His credit card company charges 18% compounded daily on unpaid balances. Assuming he chooses not to pay his credit card balance for one year, how much will he owe in one years time.
a. $1,770
b. $1,796
c. $2,100
d. None of the above.
4.Ashton and Mila decide that they will need to have $1,000,000 a year when Mila retire from her job as a movie star. They approach you, their financial planner, and ask how much they will need to have saved in real dollars by retirement. Mila estimates that she will live about 40 years after she retires. She plans to retire in 10 years. She estimates that she will earn a 5% real rate of return on her investments savings during retirement. How much will she need by retirement?
a. $18,017,041
b. $17,159,086
c. $40,000,000
d. $11,060,900
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