Financial planning case 13-2
Victor and Maria Hernandez Try to Catch Up on Their Investments
The expenses associated with sending two children through college prevented Victor and Maria Hernandez from adding substantially to their investment program. Now that their younger son, Joseph, has completed school and is working full time. They would like to build up their investments quickly. Victor is 47 years old and wants to retire early, perhaps by age 60. In addition to the retirement program at his place of employment, Victor believes that their investment portfolio, currently valued at $123,000, will need to triple to $369,000 by his planned retirement time, in 13 years. He and Maria realize that they will have to sacrifice a lot of current spending to save and invest for retirement.
a) What rate of return is needed on the $123,000 portfolio to reach their goal of $369,000 (assuming no additional contributions)? Use Appendix A.1 or visit the Garman/Forgue companion website. Round your answer to the nearest whole number. Round Future Value of a Single Amount in intermediate calculations to four decimal places.
______%
b) Victor and Maria think they will need a total of $590,000 for a retirement financial nest egg to supplement his anticipated small pension from teaching. Therefore, they will need to create an additional sum of about $221,000 through new investments. Assuming an annual return of 8 percent, how much do the Hernandezes need to invest each year to reach their goal of $221,000? Use Appendix A.3 or visit the Garman/Forgue companion website. Round your answer to the nearest dollar. Round Future Value of a Series of Equal Amounts in intermediate calculations to four decimal places.
$ ________
c) If they assume a 5 percent annual return, how much do the Hernandezes need to invest each year to reach their goal of $221,000? Use Appendix A.3 or visit the Garman/Forgue companion website. Round your answer to the nearest dollar. Round Future Value of a Series of Equal Amounts in intermediate calculations to four decimal places.
$ ________
Appendix A-1 Future Value of a Single Amount ($1 at the End of n Periods) (Used to compute the Compounded Future Value of a Known Lump Sum) 41712 n 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 1 10100 10200 10300 10400 10500 10600 10700 10800 10900 1.1000 11100 11200 11300 1.1400 1.1500 11600 11700 1 .1800 1.19001 2000 2 10201 10404 1060910816 1.1025 11236 11449 11664 11881 1 2100 12321 12544 12769 1297613225 13456 13689 17924 14161 14400 31000310612 10927 11749 11576 1,1910 1250 12597 1.2950133101 525 14049 1409 1431515209 1560916016 16430 16852 17280 10-406 10824 1.1255 1.1699 12155 1.2625 13108 13605 1.4116 14641 15181 1573516305 1689 1790 18106 18739 19988 20053 20736 10510 1.1041 1.15931.2167 226) 13 4006 1459) 158 1.610516851 1252318424 1925420114 21001 2194 2.2878 23054 6 10615 1.1262 1.1941 1.2653 13401 14185 15007 15869 16771 1.7716 1.8704 1.9738 2070 21950 2.3131 24364 25652 26996 2.9860 10721 11687 1.2299 13159 1.4071 15036 16058 17138 18280 1 ERT 20062 22107 2.3526 2.5023 26600 2.8262 30012 33793 3.5832 8 10829 1.1717 1.7668 1.3686 1.4775 15938 17182 1850919906 2.1436 2.3045 2.4760 2.6584 28526 3.0500 3.278435115 4.00 14 4.2998 9 10937 1951 13048 1433 1 5513 16895 1895 199902 1719 2.5580 2 7731 30010 3.259 5179 41084 44355 5159 10 1.1046 12190 13419 1680 162 1.7908 19672 2.15892 3674 3.1058 32946 3.2072 40456 43068 52 5697 6 1917 11 1.1157 1204 13842 1.539517103 18983 2.1049 23316 25804 2.8531 3.1518 3.4785 3.83594 2262 4.6524 5.1173 5624061799 6.7767 74301 12 1.1258 1268214258 1.6010 17959 20122 2232225182 28127 31384 34985399604334548179 5.353 59360 6560172826 89161 13 11381 12936 1468516651 56 21329 24018 27196 30658 3453 3.8833 43535 40 5.4924 6.1528 6858 95054 106993 14 11095 1.3195 15126 17317 979 22609 52859372 33417 3. 43104 48871 5.5348 6261) 70757 705 9001 101472 11419 128192 15 11610 159 1550 1.000 2.079 2. 36 2.75903.1722 36425 4706 5.47% 7.079 8.1371 92655 10.5287 13.5895 154070 16 11726 13728 16047170 2182925404 2.9522 3425939703 6.1304 706738 1372 9.3576 107480 12.330) 141290 16 1715 18.6884 17 1.1843 1.4002 16528 19479 2.2920 26928 3.1588 3.7000 43276 50545 58951 69660 7 9851 92765 10.7613 12 4677144065 1667 19 2441 22 1861 18 11951 1482 17034 2009 20066 28513 337993996047171 5.5999 654 76900 900 105752 12.375514405 1690 1969 22.000 266233 19 1208114568 17535 2.1068 25270 30256 3616543157 51417 61159 7633 8612810194 12 0557 142318 167765 197484 232144 272516 31940 2012202 14859 18061 2.1911 2653 2071 097 44610 5604 80523 966) 11531 11 245 16.3665 196608 23.1056 27.3930 32.421 6 21 12324 15157 18603 2.2788 27860 3.3996 4.1406 5.0338 6.1058 7.4002 8.9492 100 130211 15 66 2 215 225745 270336 2010 460051 22 1247 1595019151 2.699 29250 3.6035 4430454355 6.6586 81401 991 1 2100914713 17 519 21.6047 26 186131629) 31421 45.9233 55 2061 23 12522 1529197164647 07153197 4740558715 7.2579 89543 110063 13552316624 2016 0915 303762370062 45.0026 54 6674 24 12697 16034 20328 2.63) 32251 4049 50724 6341279111 9. 122392 15 1786 1871 23.21222652352364 43273 53.1090 65.000 79.0968 25 12824 16406 2.0938 2.6658 3386442919 54274 6805 862311010 11 1 7000121.2105 2 19 .90 40 78 067 62 771 95 2962 261205) 16734 2166 2.725 39574509458074 7.394 9.3992 11.91 150799 190401 23.9905 3066378568 474141 9.2007 7 9 209181144795 27 13082 1.7069 22213 2.88343.733548223 6213979881 102451 13.1100 16.7386 21.3249 27.1093 3438990.5353 55.0004 93455 87.2598 109.589337.3706 28 1321) 17410 22879 2.99R7 392015.1117 6603 6271 111011 144210 18 599 239 0633539 2045 500656 63.004 3114210266130 4112 1648447 29 135 1738 2 6 1187 4116154184 711) 93173 12.1722 15.8631 206237 26.7499 4.6158 44693157.5755 74.0085 949271 121.500S 155189) 197.81 30 13478 18114 24273 3.2434 43219570576123 100627 132677174494 228923 29.9599 39.1159 50.9502 66.2118 85.8499111067 143.3706 1846753 237.3763 40 1489 2.208032630 48010 70400 10.2857 149245 21.745 314094 45.2593 65.0000 93.0510 132.7816 188.8835 267.36353787212 5333687 750.3789 105158 16.772 50 16416 2.6016 43809 7.1067 11.45 18.4202 29.4570 46.9016 743575 117.9900 184.5648 289.0022 450.7359700.2330 1060 657 1670701 2566.215387.357 998.914 9100438 2006 32323 Appendix A-3 Future Value of a Series of Equal Amounts (an Annuity of $1 Paid at the End of Each Period) (Used to Compute the Compounded Future Value of a Stream of Income Payments) n 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 1 10000 10000 10000 10000 1.000 1.000 1.0000 10000 10000 10000 10000 10000 1.0000 10000 10000 10000 10000 10000 10000 10000 2 2010 20200 20300 20400 2.0500 2.0600 2.0700 2 0800 2.0900 2.000 2.1900 2.1200 2.1300 2 1400 2.1500 2.1600 21700 2.100 2.7900 2.2000 3 3.0.301 3.0504 3.09093 .1215 3.15253 .18363 .21493 .2464 3.2781 3.3100 3.3421 33744 3.4069 3.4396 3.4725 3.5056 3.5389 35724 3.6061 3.6400 4.1216 4.1836 42465 43101 4.3745 4.4399 4 5061 4.5731 4.5410 47097 4.7793 489 4921149934 50655 53680 5.1010 5.2040 53001 54153 5556 56371 5.7507 58666 580 6.1051 6 2228 63528 6.4803 66101 6134 6721 70144 7.1542 7.4416 6 6.1520 63081 6.4584 66330 6.80196.9753 7.153373399 7.5233 2.7156 291298.115283227 8.5355 8.7537 89775 9.2068 9.4420 9 6830 9.9299 7 7213574343 76625 782838.100 8.13 8.65408.9228 2004 672 97833 ORO 14047 10.7305 11000 1141 11770 12.1015 175227 13.919 8 8.2857 8.5830 8 89239214295091 9.8975 10.2938 10.6366 11.0285 11.435 118994 122997 12.7573132338 13.7258 14.2401 14.7733 15.370 15.9020 16.4991 9 93685 9.7516 191591 105828 110766 11.491) 11.780 12.4876130210135795 141540 14.7757 15.4157 16 0853 167358 175185 18 2817 79059 199234 2018 10 10.4632 1947 19463912006112577913.1808 13.815414856 15.1929 15.9374 167220 175087 184197 19.3373 20.3037 213215 22.3931 235213 24.7089 5.9587 11115668 12.1687 1 078 134564 14.2068 9716 15.7836 16 5455 17.5603185312 115614206546 218143 230415 243493 2573 27.199 287551 304035 2.1504 12126825 13.4121 1.1920 150258 159171168699 17.8985 48.977120.5407 21.3843 227132 24.1331 2565022 7.2707 290017 30 8502 32.8239 349311 37.1802 5 805 1) 13.09) 160) 156178 166268 17.71308 21 20.106 21.405) 2254 24.5227 262116 2017 3451 2 39.4010 432187 45245 30 14 14.9474 15.9739 170563 18.3919 19186 210151 22.550524.2149 26.0190 27.3750 30.094932396 34827 37.5811405047 436720 47.1027 508180 543409 15 NOX9172834 9200236 151362320 120 2121 200 17735 40054172297 494175 4 4 47 516 56 1101 09653662607 72 0151 16 17.257916393 20.1569 218245236575 236725 278391 30.320 33.0034 35.990 39.1899427533466717 50.9804 55.7175 609250 66.6488 729390 79.8502 87421 1111404 200121 217616 23697550042321293 2 37502 ,737 016 5008 53711 9.1126 650251 7167807991 00 60217 105 105 1967 2141232344256454 28.1324209057 33999037450241.301345.999 503959557097 617251 8391 75.8364 841407 93.40% 109.7003115.2659 128.1167 19208199 228006 25.1159 276712 590 33.500 .3790 41.4463 460185 51.1991 995 9 497 29.70947 9 882118 916012110 286 1234115 116 15400 20 2201902029742870429.781 56 457205101 577790 2008 2094 80 968 91029 102.44% 115 3297 1200119106620 165 410186 21 2022 20 216255 125.719) 9927 44 50.422962545 640025 722651 1657 29 104251110101 1140 15151240210 197.74 225.02% 22 204716 27299030538 4200 33.552 4339239.0057 55.4568628733 71.0027 1213 99026 105.4910 0410037616 157 4150 180 1721 206.348 235.4394 2) 251 21.5450124529 6179414305 5.258 59.406160.891) 69.591972.5430 91.147 1016029120.2048 82970 59.764 181001 211.801) 24.488 282.618 376.7168 24 269735304219 BAS 90826 445020 50.8156 157 668 169 0 001141 11.1921 MISSN 2197202453170995 32 25 23.202 120303X4503416459 47.7271 51645 3.200 73.05084.700998711144137 123.339155676 13708 212.7170 2492140 292.1018 36601540224 471.9811 26 235256 16709 8553013117 511035 99.1964 29.9544 91 120 121 127991503119 128901 2001 2457120 200 32.706 4052721 47145 7377 27303209534) 407006 4708216401 63.7058 433887.350892721 121.009943071003140 2003-406 238.40 231.5 337.504 4020303 47.2211 571522368127 1.129112051229309 426 4026 85231 0.00775 1126 134099 1998 1999 237 9019 272 27.1041 92027 471 1778 566.408 61.1116 819 2733 1494 792 45232) 3327 76730539 040 630017 255075834 11.037 121 45412 55,500 644 811 5228 0510679 9 40 475754 966490 0 8112136 075 5404019102413127 12 8 44151 1021127410 70909 11812 4043354 60402075401) 50255 120798 1947620 19.6951 291.095 374 412.525 581.260 170 1011.74 12.005 1778090 20.757345246.212 TH154 06446825741129 11 200 4059327801 1861. 16. 000 92 2 7217714055 10.5 10.0 1515,3345097.17 2
