7.Suppose you planned on retiring in 40 years. Although youd like to be extremely rich, you estimate that if you retired today youd be comfortable living on $90,000 per year. You also estimate that the annual rate of inflation over that period of time will be 4%. What must be your nominal income in the year of your retirement to produce the desired standard of living?

Note: the correct answers to questions 7 - 11 were computed using the Time Value of Money tables that were made available for download in Module II. If you're using a financial calculator, or another set of tables with the coefficients carried out to 4 decimal places, you might find your answers are marginally different. That difference may magnify as you progress through the questions. So, to be sure that your answers are correct, you may want to download that set of TVM coefficients that were used to compute these answers.

$925,740

$516,870

$291,870

$432,090

8.Refer to question 7. Assume that a retired person today, with the same qualifications that you will have when you retire, would get $26,000 annually from Social Security, and that S.S. payments would increase at the same rate as inflation. What would be the nominal income in the year of your retirement needed to produce your desired standard of living that youd have to provide for yourself? (i.e., net of Social Security)

$307,264

658,304

$207,552

$367,552

9.Refer to questions 7 & 8. Suppose that you expect to live 30 years after your retirement and estimate that you could receive a net average annual rate of return on your investments of 6%. What sort of nest egg must you have in order to produce that (after Social Security) income? (Remember, youll be drawing down the income to zero while also earning interest.)

$4,229,489

$5,313,210

$4,623,094

$6,081,676

10.Refer to the above questions. If your home could presently sell for $200,000, what could you sell it for in the year of your retirement. (Assume that it will appreciate at exactly the rate of inflation).

$960,200

$1,148,600

$2,057,200

$648,600

11.If you sold your home on the day that you retired and used the proceeds from the sale of your home as a part of your nest egg, how much must you save annually (starting today) to acquire the necessary principal that would allow you to retire with an income whose purchasing power is the equivalent of $90,000 of purchasing power in 2017? Assume that your average annual rate of return on investment is the same as that stated in question 9.

$22,650

$21,125

$16,555

$18,710 19.The Junk Bond/Aggressive Growth Stock Blend fund of the Knight Investment Company of America has $100 million in assets, $20 million in liabilities and has 2,000,000 shares outstanding. What is the NAV of a single share this fund?