Jenny Smith, 28, just received a promotion at work. Her salary has increased to $40 000 annually and she is now eligible to participate in her employers pension plan. The employer matches an annual employee contribution up to 6 percent of their salary.

Jenny wants to buy a new car in two years. The model car she wants to buy currently costs $24 000. She wants to save enough to make an $8000 down payment and plans to finance the balance.

At age 30, Jenny will be eligible to receive a $50 0000 inheritance left by her late grandfather. Her trust fund is invested in bonds that pay 7 percent interest, compounded quarterly.

Jenny and her boyfriend, Paul, have also set a wedding date for two years in the future, after he finishes school. Paul will have $40 000 of student loans to repay after graduation. Both Jenny and Paul want to buy a home of their own as soon as possible.

1. Justify Jennys participation in her employers pension plan using time value of money concepts, assuming Jenny retires at age 60, her employer makes monthly contributions with an interest rate of 6 percent compounded annually, and no further increases in her annual salary.
2. Calculate the amount that Jenny needs to save each year for the down payment on a new car, assuming she can earn 6 percent, compounded annually, on her savings.
3. What will be the value of Jennys trust fund at age 60, assuming she takes possession of the money at age 30, uses half for a house down payment, and leaves half of the money untouched where it is currently invested?
4. If Paul wants to repay his student loans in full within five years and pays a 7.75 percent interest rate, compounded annually, what will be his annual end of year payment?