questions 4-8

4) Steve had $50,000 a year in projected revenues per year in retirement and $65,000 in costs both in today's dollars. He is 50 and retirement will start in 17 years and extend for 30 years. What is his real return for calculation purposes assuming he expects to receive an 8% after tax retum on investments and inflation will run 5962 a) 3.04% b) 1.9321% c) 5.01% d) 1.8868% e) 2.8571 >) Assume that his investment retum is 6% and inflation is 4% and the real return is 1.9230. What is the lump sum shortfall at the beginning of the retirement payout period? a) 674001 b) 661373 c) 478387 d) 428369 e) 339531 6) Assume that the lump sum shortfall at the beginning of the retirement savings period is $375,000 in age 67 dollars and there is no savings accumulated to age 50. Using 7% investment return, 6% inflation and 0.9434 real retum and assuming no prior assets accumulated what has to be saved per year until then. a) b) c) d) e) 46909 14512 12159 15480 14178 7) Quality of life according to PFP theory can best be described as: a) making the most money possible. b) living in the biggest house. c) devoting the greatest time to leisure. d) the optimal blending of time and money on leisure pursuits based on individual preferences. e) spending the most money as possible on fixed and variable expenses. 8) Risk management a) incorporates all household risks. b) is involved exclusively with risks that can be reimbursed directly. c) is involved exclusively with risks that can be insured against. d) has no relation to return selection. e) will include tolerance for risk only on insurable assets