Personal Financial Planning (C) (32 points) a. After obtaining your first job you decide to make contributions to your personal retirement plan. You determine that you will need $4,000,000 when you retire in exactly forty-two years and your first contribution will be made in one month. If you believe that you can earn an APR of 7.8 percent, compounded monthly, and can increase your contributions by .1 percent (.001) per month, what should be the amount of your first monthly payment? (Ignore income tax considerations) (8 points) b. Fast forward to the date of your retirement when you have accumulated $4,000,000 in your personal retirement plan. You conservatively estimate that you will live another forty-three years and would like to leave $1,400,000 to your favorite charity at that time. What is the maximum monthly amount that you could withdraw from the plan and leave the desired amount to the charity if your plan is expected to earn an APR of 7.5 percent, compounded monthly? (Ignore income tax considerations) (8 points) c. A few years into your career you decide to purchase a townhouse with help from your family and a $300,000 mortgage. The mortgage has an APR of 2.76% and a term of twenty-five years. (8 points) i. What is the amount of your monthly payment? (Interest is compounded monthly) (2 points) ii. If you obtained the mortgage on October 31st, how much interest would you pay in the first calendar year of the mortgage? (2 points) iii. How much interest would you pay in the fourth full calendar year of the mortgage? (4 points) d. Since your townhouse will be in the suburbs you'll need a car. You will consider either a Hyundai Elantra that costs $20,655 or a Honda Insight that costs $24,125. Taxes and dealer preparation charges add $2,070 to the Hyundai's cost and $2,410 to the Honda's cost. Maintenance and operating costs will be $700 less each year for the Honda during your six-year holding period. At the end of your holding period you believe that you can sell the Hyundai for $7,000 and the Honda for $8,700. Using a required rate of return of 10 percent and incremental rate of return analysis, which car is the better choice? Walking, biking or public transportation is not an option! (8 points) Page 9