1. How much in annual income will the Jordans require at retirement in three years when inflation averages 4 percent per year? Round off to the nearest $100.
2. Assume that John will retire July 31, 1998. The Jordans will require the annual income computed in question 1 over their life expectancy. Assume the income stream will remain constant over years (i.e., there will be no inflation.) The payments will be received at the beginning of each year. How much capital would the Jordans require at Johns retirement to generate their desired income stream? Assume an 8 percent discount rate for the whole retirement period.
3. The Jordans are worried about the 8% rate of return on their investment(s) may not be sustainable over a long period. They wish to be prepared. Assume 8% interest rate for the first 8 years of retirement and 6% of the remaining period. How much capital do the Jordans require?
4. What will the value of the Jordans investment portfolio at ABC Securities grow to on July 31, 1998, if the expected rate of return is 8 percent?
5. What will be the value of the Individual Retirement Accounts on July 31, 1998, if they grow 8 percent annually?
6. What will the 401(k) grow to on July 31, 1998, assuming an 8 percent annual return? Remember to take into account the annual additions made at the end of each year.
7. What is the lump-sum equivalent of the social security benefits the Jordans will receive? Ignore cost-of-living increases. Assume benefits will be paid annually; the first payment will occur on August 1, 1998. Use the same life span given in the case. Compute the present value using an 8 percent discount rate.
8. According to your calculations, will the Jordans be able to achieve their retirement income objective?

Time Value of Money Analysis Retirement Planning, Inc. Mike Abbott, president of Retirement Planning, Inc., was delighted to receive a call from John Jordan John had been referred by Joe Jones, a local CPA. John was interested in planning for retirement. He had saved consistently over the years and participated in a company-sponsored retirement plan, John was not sure how comfortable he would be during his retirement years. Mike and John agreed to meet the following Monday to review John's finances. It was agreed that John's wife, Mary, would also attend the meeting. Mike's firm specializes in personal financial planning. The firm has developed a great deal of expertise in helping individuals develop comprebensive strategies for retirement. This area has proven to be very lucrative with the growing public awareness of the need to begin planning and saving for retirement as soon as possible. The objective of the initial client meeting was to obtain background information, explain the services offered by the firm, and discuss the fees for those services. During this meeting, Mike learned that John and Mary were both 62 years old. John is currently the vice president of marketing for EFC, Inc., a midsized manufacturing company. He has been with the company for 22 years. Mary is a homemaker. Mike asked John and Mary to describe their retirement objective. John said, "I'd like to retire in three years at age 65 and be comfortable. We want to be able to travel and spend time with our grandchildren. We also want to be able to spend a great deal of time on the golf course." It was obvious to Mike that John and Mary had not fully formulated their retirement goals. This was a common occurence; most clients Mike met with did not have a clear retirement objective established. To plan effectively for retirement, the following factors must be quantified: Target retirement age. Desired retirement income. Estimated life expectancy, Expected rate of inflation over the planning period. John and Mary had established their target retirement age but did not have a specific income. goal in mind. Moreover, they were unsure how to address this question. Mike suggested that they review their current spending patterns. By reviewing their checkbook register for the prior 12 months, John and Mary were able to document how much they spent for food, clothing, travel, entertainment, and other Time Value of Money Analysis Retirement Planning, Inc. Mike Abbott, president of Retirement Planning, Inc., was delighted to receive a call from John Jordan John had been referred by Joe Jones, a local CPA. John was interested in planning for retirement. He had saved consistently over the years and participated in a company-sponsored retirement plan, John was not sure how comfortable he would be during his retirement years. Mike and John agreed to meet the following Monday to review John's finances. It was agreed that John's wife, Mary, would also attend the meeting. Mike's firm specializes in personal financial planning. The firm has developed a great deal of expertise in helping individuals develop comprebensive strategies for retirement. This area has proven to be very lucrative with the growing public awareness of the need to begin planning and saving for retirement as soon as possible. The objective of the initial client meeting was to obtain background information, explain the services offered by the firm, and discuss the fees for those services. During this meeting, Mike learned that John and Mary were both 62 years old. John is currently the vice president of marketing for EFC, Inc., a midsized manufacturing company. He has been with the company for 22 years. Mary is a homemaker. Mike asked John and Mary to describe their retirement objective. John said, "I'd like to retire in three years at age 65 and be comfortable. We want to be able to travel and spend time with our grandchildren. We also want to be able to spend a great deal of time on the golf course." It was obvious to Mike that John and Mary had not fully formulated their retirement goals. This was a common occurence; most clients Mike met with did not have a clear retirement objective established. To plan effectively for retirement, the following factors must be quantified: Target retirement age. Desired retirement income. Estimated life expectancy, Expected rate of inflation over the planning period. John and Mary had established their target retirement age but did not have a specific income. goal in mind. Moreover, they were unsure how to address this question. Mike suggested that they review their current spending patterns. By reviewing their checkbook register for the prior 12 months, John and Mary were able to document how much they spent for food, clothing, travel, entertainment, and other