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The Family Ryan Pierce (age 47) is an executive with Crush Quota, a closely-held corporation focused on sales training. His salary is $100,000, and he
The Family Ryan Pierce (age 47) is an executive with Crush Quota, a closely-held corporation focused on sales training. His salary is $100,000, and he expects raises of 5% per year. Tiffany Pierce (age 50 ) is an administrative assistant and has a salary of $36,000. She expects raises of 5% per year. They have three children: Dylan (age 16), Colin (age 12), and Madison (age 2). During the day, the children are cared for by their paternal grandmother who lives across the street. Ryan and Tiffany have been married for twenty years. They do not reside in a community property state. Financial Goals \& Concerns Their primary goal, for this example, is to examine their short-term goals of emergency fund, housing ratio, and debt management. Their other goals and concerns are as follows: 1. They want to provide for their children's college education (5 years each), which is expected to cost $25,000 per year in today's dollars. 2. They want to retire debt free when he is age 65 . 3. They initially define adequate retirement income as 80% of preretirement income. 4. They expect the retirement period to be 30 years. 5. They want to review life insurance needs and have wills drafted for both of them. 6. They want to minimize any estate tax liability. 7. They plan to travel extensively during retirement. - General inflation has averaged 3.0% annually for the last 20 years. Economic Information - General inflation is expected to be 2.5% in the future. - Education inflation is expected to be 6% annually. - 15-year conforming annual rate mortgages are 3.50%. Bank Lending Rates - 30-year conforming rate mortgages are 3.80%. - Any closing costs associated with mortgage refinance are an additional 3% of the amount mortgaged will be included in the mortgage or paid directly. - Bank unsecured loan is 7.5%. - Credit card rates are 20%. - Auto loan rates range from 05%. Investment Information They expect to have an 8% rate of return on investment assets. Pe eest incunned in ethenary becouse jab lass is the greatest risk to the emergencyre 1. Assets are stated at fair market value. 2. Liabilities are stated at principal only as of January 1, 2020 before January payments. 3. ML Brokerage Account is stated at gross value, which does not include margin loan of $17,522. 4. IRA is currently invested in CDs at a local bank. 5. Margin loan is for ML. Brokerage Account. Interest rate is currently 8% and deducted from account balance. 6. The checking account is a non-interest bearing account 7. The savings account earns 4% per year. Title Designations: H= Husband (Sole Owner) W= Wife (Sole Owner) IT = joint Tenancy with Survivorship Rights 1. Calculate the emergency fund ratio. 2. Calculate the current ratio. 3. Calculate housing ratio 1. 4. Calculate housing ratio 2. 5. Analyze their debt. 6. Make recommendations
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