Assume 360-day year and 30-day month in your analysis. Your clients (a married couple), both turn 38 today, have diligently run their family business for 12 years and have paid off all of their debts. Recently, their business has grown into a stable stage that generates a growing income stream for the family. From your initial consultation with your clients, you learn that they plan to retire on the day they turn 62. Their family income is $15,000*4.1333 at the end of six months from today, and they expect their family income will grow at a steady rate of 1.5% semi-annually until they retire. To prepare for retirement, your clients deposit 12% of their semi-annual income in a taxdeferred SEP IRA account that generates an annual rate of return of 9.6%, compounded monthly

In addition to their retirement savings, your clients contribute 10% of their semi-annual income into a taxable brokerage account that generates an annual after-tax return of 9%, compounded daily, to cover their financial needs before their retirement. Starting this year, your clients commit to help finance their ten-year old daughters college education by transferring $12,000 from the brokerage account to a 529 Plan account at the end of each year. Your clients will transfer fund annually to the 529 Plan account until their daughter finishes college. The 529 Plan account is expected to generate an annual rate of return of 7.2%, compounded monthly. Besides, your clients plan to celebrate their 55-year birthday anniversary with an around-theworld cruise for a total cost of $70,000. They will finance these trips with their savings in the brokerage account. Any remaining balance in their brokerage account will supplement the SEP IRA account for financing their retirement.

Part 1:

A: Determine (with precise explanation) the cash flows pattern of the semi-annual contributions to the brokerage account, i.e., single CF; uneven CFs, annuity (delayed or due), growing annuity (delayed or due), perpetuity, or growing perpetuity (Pick one and explain why)

B: calculate and precisely explain the correct choice of interest rate, i.e., EAR/EPR/PER, that you should use in the analysis.

C: Calculate the brokerage account balance upon their retirement

Part 2:

A: Determine (with precise explanation) the cash flows pattern of the annual fund transfers to the 529 Plan account;

B: Calculate and precisely explain the correct choice of interest rate, i.e., EAR/EPR/PER, that you should use in the analysis.

C: Calculate the 529 Plan account balance (right before the first withdrawal for college tuition) at the time their daughter starts college.

D: Verify the work on the 529 Plan account balance with either the formula or the financial calculator approach

Please answer all parts of this question broken out as Part 1: A,B and C and Part2: A,B,C and D