Clarke Finance 440 Third Time Value of Money Test December 7, 2016 open book/open notes Draw the time line for this problem. write out the formulation for each part so I know that you know what you are supposed to be doing, in case your numbers come out wrong. Clearly identify what you have and what you need to solve for and show all of your work. Round your answers to the nearest 1. (50 points) You are 45 years old and feel a need to get your financial situation in order. You want to retire at 65 and be able to draw $38,000 per year for 30 more years on top of your social security benefits. You have a total of $71,692 in your 401K right now, and it has been earning a modest 49% annually. You don't think it will go below that return, so you are comfortable using that percentage going forward through retirement. Yourcontributions, including your employers matching, amount to $12000 per year and will continue until you retire. How much more do you have to save monthly in a separate account currently returning 3% annually to reach your retirement goals? Show all of your work. 2. (20 points) You son is a senior in college and has been offered a chance to play professional baseball. He has been given two options: a. A$50,000 signing bonus with a three year contract guaranteeing $160,000 per year. b. A $10,000 signing bonus with a two year contract guaranteeing $260,000 per year. He has access to an account earning 6% a year. Based on time value of money principles, which deal should he take? Show your work. year. She has an account set up by your parents that has a balance of $46.250 earning 5% annually. Cost increases at this college have been averaging 4% annually. You want to plan to have enough in her account to pay for four years when she starts college in 5 years. How much do you need to save monthly in the account earning 5% annually to reach the college goal