3 Alter completing his Certified Financial Planner desionati d i a to work with small business owners and their employees regarding retirement planning He decided to devel r eadsheet to show the way that annum could grow using various rates of retum. Answer parts 1 through to help provide data for Andre's spreadsheet Click the icon to view the Future Value of $1.00 Ordinary Annuity table Click the icon to view the $1.00 Sinking Fund Payments table 1. If an individual put the equivalent of $50 per month or $800 annually into an ordinary annuity, how much money accumulate in 30 years at 4% compounded annually? How much at 7%? Ater 30 years at the account would accumulate $ (Round to the nearest dollar as needed.) Aber 30 years at 7%. the account would accumulates (Round to the nearest dollar as needed) 2. Assuming a 25% tax bracket what would be the netfect of investing 5800 per year at 8% for 30 years of taxes on the camnings were paid from the investment fund each year? How would this compare no taxes had to be paid, such as in a tax-deferred annuity at 8% for 30 years? The accumulation when taxes are paid from the investment is $ (Round to the nearest dollar as needed.) The accumulation when the investment is tax-deferred is 5 (Round to the nearest dollar as needed.) Paying taxes on the comings reduces the fund by $ (Simplify your answer.) 3. Jessica is a 30-year-old client who wants to retire by age 65 with $1,000,000. How much would she have to invest annually assuming a 6% rate of return? She would have to invest $ (Round to the nearest cent as needed.) each year. 4. Jessica decides that 35 years is just too long to work, and she thinks she can do better than 6% She decides she wants to accumulate $1,000,000 by age 55 using a variable annuity caming 12%. How much will she have to invest annually to achieve this goal? each year She would have to invest $ (Round to the nearest cent as needed.) 5. Andre suggests that Jessica consider a more balanced approach to spread out her risk by investing $1.000 per year in each of five different subaccounts for 25 years. He shows her a spreadsheet detailing the following rates of return for each of the five subaccounts: 0% 3% 6% 8% and 12% Calculate the total value for investing $1.000 annually in each of the five subaccounts The total value of the more balanced investing strategy is 5 (Round to the nearest dollar as needed) Andreassures Jessica that investing in the five different subaccounts is a more sensible approach and will yield a composite rate of return of approximately 7 25%. Check this math by solving for the rate at 7% and at 8%, then comparing to the total valve found from the balanced strategy The total value of investing a 5,000 per year for 25 years at a rate of 7% is $ (Round to the nearest dollar as needed.) The total value of investing al 55.000 per year for 25 years at a rate of 8% is 5 Round to the nearest doar as needed.) Is Andre's approximation correct? O A. No, the balanced strategy is approximately the same as a composite at 7.75% OB. No, the balanced strategy is approximately the same as a composite at 7% OC. No the balanced strategy is approximately the same as a composite at 7.5% OD. Yes, the balanced strategy is approximately the same as a composite at 7.25% 1 Date Table TABLE 20-1 Portion of Income Tax Tablo-Continued 2011 Tex Table-Continued in home is And you are - And you are -- And you are Besvare , Your taxis- 50,000 56,000 31 Your taxis 53,000 99 993 52100 5150 0.406 71100405040 59,160 53.2006,410 7,126 0,419 8,061 3.200 53.250 81 7,134 .491 8074 51.350 53.300 2.414 7.141 0.444 .00 100 5100 4 7149 0495 8.000 We a , 6,480 2111 1.00 51.450 0.481 7,164 481 124 also 50.100 50.150 G 600 8656 50,160 50.200 .000 6,60 8660 50.200 50.250 0.681 6.804 8,681 50 250 50 300 i 604 100 S 80,46 50,400 ezon 208 710 & 8,710 50.400 50450 8731 6714 8,791 0,450 50.500 2.744 721 874 S 75867292756 70 50,500 673 1 7411 ca 50.699 781 6744 8,781 7424 SOY 50 700 2704251 8.704 29 $0,706 50,760 OS 60 8806 72140 50 750 57100 810 786 8,8107461 190 o 774 8.831 7474 50 50 50.000 8 844 6,78181844 7485 18 404 136 5610056.150 10,156 7500 56 160 56,200 10,169 7.976 0159 21 56.200 56.250 10,181 75 !! 56 250 56.300 19106 56.300 56 350 10 205 58350 6,500 10,210 56.400 56,450 10,281 7,614 10,231 87411 56.450 500 10244 7521 10244 686 ! 50 500 550 10256 76.20 10 250 .000 56.550 56.600 10.250 7.65 10.250 2011 56 600 56,650 10,201 7.644 10.2013,824 559432110 90 10506 8040 19.204 7851 10204036 56.750 56.000 10,310 7.666 10,310 8,061 56.850 10.391 704 10.891 8974 10:34 7.631 10,344 0.006 C G . 00 0,531 7.104 0531 8174 0 560 1700 1750 52,750 53,800 53.000 53.850 So good 54,000 57.000 51,000 51.08 11.100 IS 0 5.50 24 06 11 2856 7284 9.691 1994 9.604 7291 0604236 0.705 M 07108861 0731 8,374 67.14 57,200 1 10 7,726 10/10 061 7200 7.250 10.431 7,734 10.431 0.074 5720 7300 10.414 741 10444 0.006 300 350 1065 7.740 10.456 0099 57,550 $7.400 10,400 7,756 10460 0111 57.400 57,450 10,401 7764 10481 10047721 10 404 124 275 57.800 10 510 77 10 5100161 67,800 57,650 10.531 7,704 10.581 0.174 5750 57,700 10 514 7801 10 544 0106 1856 BBBBBR333333333 2769 6,411 0781 8.44 0704 8.436 3810 420P 0.001 2.004 106 0,110 AN 231 30 6,046 04 7056 7.300 57.50 10.501 7894 10.581 0224 BASO 97.000 10.504 7881 10.504 57.000 70001 606 150 57.00 58,000 10,619 7,946 10,610 0,261 58,000 0.01 704 8,474 BLOG 6 7 400 5000 7300 01007511 55,000 TE O TIN 1 OKO 56100 4 1411000043 56 100 56 160 006 T410 0,005 27340 55,150 55,200 2,010 TA26 0,010 561 5200 55 250 0.0 7434 0.091 574 250 5000 044 74410044 56 56 240 16 5.6 55.000 0.000 746 0. 0,611 10.64 10.656 55.400 55.45P 200 $5.500 blaad steal blade bl. 121 4200 588 55.000 55.650 10.081 7404 10,091 55.60 56 TOO 10.047001 1004 55,700 66.750 10.066 7. COD 10.056 56.750 56,800 10,080 7,516 10,080 55.000 55.00 10.081 7524 10.01 PC 10,110 7346 10,110 8.761 Rate per period Periods 4% 6% T 8% 9% 10% 11% 12% 1 1.0000000 1.0000000 1.0000000 1.00000001.0000000 1.0000000 1.0000000 2 10.490196 10.48543690.48076920.47846890.47619050.47393360.4716981 3 0.32034850.3141098|0.30803350.30505480.30211480.2992131 0.2963490 4 0.23549000.22859150.2219208|0.21866870.21547080.21232640.2092344 5 0.1846271/0.17739640.17045650.16709250.16279750.16057030.1574097 6 0.15076190.1433626|0.13631540.13291980.12960740. 12637660.1232257 7 0.12660960.1191350|0.11207240.10869050.1054055|0. 10221530.0991177| 8 0.10852780.10103590.09401480.09067440.0874440|0.0843211 0.0813028 9 0.09449300.08702220.08007970.0767988|0.07364050.07060170.0676789 10 10.08329090.07586800.06902950.06582010.0627454 0.05980140.0569842 15_1.04994110.04296280.03682950.0340589|0.0314738|0.02906520.0268242 20 0.03358180.0271846 0.02185220.0195465 0.0174596 0.01557560.0138788 25 0.02401200.01822670.01367880.01180630.01016810.00874020.0075000 30 10.0178301|0.01264890.00882740.00733640.00607920.00502460.0041437 35 0.01357730.00897390.0058033|0.00463580.0036897 0.00292750.0023166 40 0.01052350.00646150.0038602 0.00295960.00225940.00171870.0013036 45 0.008265 0.00470050.00258730.00190170.00139100.00101350.0007363 500.00655020.00344430.00174290.00122690.00085920.00059920.0004167 bata Table ure Value of $1.00 Ordinary Annuity 3 Rate per period Periods 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 12.00% 1 1 .000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2 2 .030 2.040 2.050 2.060 2.070 2.080 2.090 2.100 2.120 3.091 3.122 3.153 3.1843.215 3.246 3.278 3.310 3.374 4 4.184 4.246 4.3104.375 4.440 4.506 4.573 4.641 4.779 5 5.309 5.416 5.526 5.637 5.7515.8675.985 6.105 6.353 6.468 6.633 6.8026.975 7.1537.3367.523 7.716 8.115 7 7.662 7.8988.142 8.394 8.654 8.9239.2009.487 10.089 8 8.8929.2149.549 9.897 10.260 10.637 11.028 11.436 12.300 9 10.159 10.583 11.027 11.491 11.978 12.48813.021 13.579 14.776 10 11.464 12.006 12.578 13.181 13.816 14.487 15.193 15.937 17.549 15 18.599 20.024 21.579 23.276 25.129 27.152 29.361 31.772 37.280 20 26.870 29.778 33.066 36.786 40.995 45.762 51.160 57.275 72.052 25 36.459 41.646 47.727 54.865 63.249 73.106 84.701 98.347 133.334 30 47,575 / 56.08566.439 79.058 94.461 113.283 136.308 164.494 241.333 35 60,462 73.652 90.320 111.435 138.237172.317 215.711 271.024 431.663 40 75.401 95.026 120.800 154.762 199.635 259.057337.882 442.593757.091 | 92.720 121.029 159.700 212.744 285.749 386.506 525.859 | 718.905 1358.230 50 112.797 152.667 | 209.348 290.336 406.529 573.770815.084 1163.9092400.018 45 : Data Table $1.00 Sinking Fund Payments 3 Alter completing his Certified Financial Planner desionati d i a to work with small business owners and their employees regarding retirement planning He decided to devel r eadsheet to show the way that annum could grow using various rates of retum. Answer parts 1 through to help provide data for Andre's spreadsheet Click the icon to view the Future Value of $1.00 Ordinary Annuity table Click the icon to view the $1.00 Sinking Fund Payments table 1. If an individual put the equivalent of $50 per month or $800 annually into an ordinary annuity, how much money accumulate in 30 years at 4% compounded annually? How much at 7%? Ater 30 years at the account would accumulate $ (Round to the nearest dollar as needed.) Aber 30 years at 7%. the account would accumulates (Round to the nearest dollar as needed) 2. Assuming a 25% tax bracket what would be the netfect of investing 5800 per year at 8% for 30 years of taxes on the camnings were paid from the investment fund each year? How would this compare no taxes had to be paid, such as in a tax-deferred annuity at 8% for 30 years? The accumulation when taxes are paid from the investment is $ (Round to the nearest dollar as needed.) The accumulation when the investment is tax-deferred is 5 (Round to the nearest dollar as needed.) Paying taxes on the comings reduces the fund by $ (Simplify your answer.) 3. Jessica is a 30-year-old client who wants to retire by age 65 with $1,000,000. How much would she have to invest annually assuming a 6% rate of return? She would have to invest $ (Round to the nearest cent as needed.) each year. 4. Jessica decides that 35 years is just too long to work, and she thinks she can do better than 6% She decides she wants to accumulate $1,000,000 by age 55 using a variable annuity caming 12%. How much will she have to invest annually to achieve this goal? each year She would have to invest $ (Round to the nearest cent as needed.) 5. Andre suggests that Jessica consider a more balanced approach to spread out her risk by investing $1.000 per year in each of five different subaccounts for 25 years. He shows her a spreadsheet detailing the following rates of return for each of the five subaccounts: 0% 3% 6% 8% and 12% Calculate the total value for investing $1.000 annually in each of the five subaccounts The total value of the more balanced investing strategy is 5 (Round to the nearest dollar as needed) Andreassures Jessica that investing in the five different subaccounts is a more sensible approach and will yield a composite rate of return of approximately 7 25%. Check this math by solving for the rate at 7% and at 8%, then comparing to the total valve found from the balanced strategy The total value of investing a 5,000 per year for 25 years at a rate of 7% is $ (Round to the nearest dollar as needed.) The total value of investing al 55.000 per year for 25 years at a rate of 8% is 5 Round to the nearest doar as needed.) Is Andre's approximation correct? O A. No, the balanced strategy is approximately the same as a composite at 7.75% OB. No, the balanced strategy is approximately the same as a composite at 7% OC. No the balanced strategy is approximately the same as a composite at 7.5% OD. Yes, the balanced strategy is approximately the same as a composite at 7.25% 1 Date Table TABLE 20-1 Portion of Income Tax Tablo-Continued 2011 Tex Table-Continued in home is And you are - And you are -- And you are Besvare , Your taxis- 50,000 56,000 31 Your taxis 53,000 99 993 52100 5150 0.406 71100405040 59,160 53.2006,410 7,126 0,419 8,061 3.200 53.250 81 7,134 .491 8074 51.350 53.300 2.414 7.141 0.444 .00 100 5100 4 7149 0495 8.000 We a , 6,480 2111 1.00 51.450 0.481 7,164 481 124 also 50.100 50.150 G 600 8656 50,160 50.200 .000 6,60 8660 50.200 50.250 0.681 6.804 8,681 50 250 50 300 i 604 100 S 80,46 50,400 ezon 208 710 & 8,710 50.400 50450 8731 6714 8,791 0,450 50.500 2.744 721 874 S 75867292756 70 50,500 673 1 7411 ca 50.699 781 6744 8,781 7424 SOY 50 700 2704251 8.704 29 $0,706 50,760 OS 60 8806 72140 50 750 57100 810 786 8,8107461 190 o 774 8.831 7474 50 50 50.000 8 844 6,78181844 7485 18 404 136 5610056.150 10,156 7500 56 160 56,200 10,169 7.976 0159 21 56.200 56.250 10,181 75 !! 56 250 56.300 19106 56.300 56 350 10 205 58350 6,500 10,210 56.400 56,450 10,281 7,614 10,231 87411 56.450 500 10244 7521 10244 686 ! 50 500 550 10256 76.20 10 250 .000 56.550 56.600 10.250 7.65 10.250 2011 56 600 56,650 10,201 7.644 10.2013,824 559432110 90 10506 8040 19.204 7851 10204036 56.750 56.000 10,310 7.666 10,310 8,061 56.850 10.391 704 10.891 8974 10:34 7.631 10,344 0.006 C G . 00 0,531 7.104 0531 8174 0 560 1700 1750 52,750 53,800 53.000 53.850 So good 54,000 57.000 51,000 51.08 11.100 IS 0 5.50 24 06 11 2856 7284 9.691 1994 9.604 7291 0604236 0.705 M 07108861 0731 8,374 67.14 57,200 1 10 7,726 10/10 061 7200 7.250 10.431 7,734 10.431 0.074 5720 7300 10.414 741 10444 0.006 300 350 1065 7.740 10.456 0099 57,550 $7.400 10,400 7,756 10460 0111 57.400 57,450 10,401 7764 10481 10047721 10 404 124 275 57.800 10 510 77 10 5100161 67,800 57,650 10.531 7,704 10.581 0.174 5750 57,700 10 514 7801 10 544 0106 1856 BBBBBR333333333 2769 6,411 0781 8.44 0704 8.436 3810 420P 0.001 2.004 106 0,110 AN 231 30 6,046 04 7056 7.300 57.50 10.501 7894 10.581 0224 BASO 97.000 10.504 7881 10.504 57.000 70001 606 150 57.00 58,000 10,619 7,946 10,610 0,261 58,000 0.01 704 8,474 BLOG 6 7 400 5000 7300 01007511 55,000 TE O TIN 1 OKO 56100 4 1411000043 56 100 56 160 006 T410 0,005 27340 55,150 55,200 2,010 TA26 0,010 561 5200 55 250 0.0 7434 0.091 574 250 5000 044 74410044 56 56 240 16 5.6 55.000 0.000 746 0. 0,611 10.64 10.656 55.400 55.45P 200 $5.500 blaad steal blade bl. 121 4200 588 55.000 55.650 10.081 7404 10,091 55.60 56 TOO 10.047001 1004 55,700 66.750 10.066 7. COD 10.056 56.750 56,800 10,080 7,516 10,080 55.000 55.00 10.081 7524 10.01 PC 10,110 7346 10,110 8.761 Rate per period Periods 4% 6% T 8% 9% 10% 11% 12% 1 1.0000000 1.0000000 1.0000000 1.00000001.0000000 1.0000000 1.0000000 2 10.490196 10.48543690.48076920.47846890.47619050.47393360.4716981 3 0.32034850.3141098|0.30803350.30505480.30211480.2992131 0.2963490 4 0.23549000.22859150.2219208|0.21866870.21547080.21232640.2092344 5 0.1846271/0.17739640.17045650.16709250.16279750.16057030.1574097 6 0.15076190.1433626|0.13631540.13291980.12960740. 12637660.1232257 7 0.12660960.1191350|0.11207240.10869050.1054055|0. 10221530.0991177| 8 0.10852780.10103590.09401480.09067440.0874440|0.0843211 0.0813028 9 0.09449300.08702220.08007970.0767988|0.07364050.07060170.0676789 10 10.08329090.07586800.06902950.06582010.0627454 0.05980140.0569842 15_1.04994110.04296280.03682950.0340589|0.0314738|0.02906520.0268242 20 0.03358180.0271846 0.02185220.0195465 0.0174596 0.01557560.0138788 25 0.02401200.01822670.01367880.01180630.01016810.00874020.0075000 30 10.0178301|0.01264890.00882740.00733640.00607920.00502460.0041437 35 0.01357730.00897390.0058033|0.00463580.0036897 0.00292750.0023166 40 0.01052350.00646150.0038602 0.00295960.00225940.00171870.0013036 45 0.008265 0.00470050.00258730.00190170.00139100.00101350.0007363 500.00655020.00344430.00174290.00122690.00085920.00059920.0004167 bata Table ure Value of $1.00 Ordinary Annuity 3 Rate per period Periods 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 12.00% 1 1 .000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2 2 .030 2.040 2.050 2.060 2.070 2.080 2.090 2.100 2.120 3.091 3.122 3.153 3.1843.215 3.246 3.278 3.310 3.374 4 4.184 4.246 4.3104.375 4.440 4.506 4.573 4.641 4.779 5 5.309 5.416 5.526 5.637 5.7515.8675.985 6.105 6.353 6.468 6.633 6.8026.975 7.1537.3367.523 7.716 8.115 7 7.662 7.8988.142 8.394 8.654 8.9239.2009.487 10.089 8 8.8929.2149.549 9.897 10.260 10.637 11.028 11.436 12.300 9 10.159 10.583 11.027 11.491 11.978 12.48813.021 13.579 14.776 10 11.464 12.006 12.578 13.181 13.816 14.487 15.193 15.937 17.549 15 18.599 20.024 21.579 23.276 25.129 27.152 29.361 31.772 37.280 20 26.870 29.778 33.066 36.786 40.995 45.762 51.160 57.275 72.052 25 36.459 41.646 47.727 54.865 63.249 73.106 84.701 98.347 133.334 30 47,575 / 56.08566.439 79.058 94.461 113.283 136.308 164.494 241.333 35 60,462 73.652 90.320 111.435 138.237172.317 215.711 271.024 431.663 40 75.401 95.026 120.800 154.762 199.635 259.057337.882 442.593757.091 | 92.720 121.029 159.700 212.744 285.749 386.506 525.859 | 718.905 1358.230 50 112.797 152.667 | 209.348 290.336 406.529 573.770815.084 1163.9092400.018 45 : Data Table $1.00 Sinking Fund Payments