Question
Use Worksheet 11.1. Alison Conroy is early in her career and is now employed as the managing editor of a well-known business journal. Although she
Use Worksheet 11.1. Alison Conroy is early in her career and is now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the people she works with, she would really like to be a literary agent. She would like to go on her own in about five years and figures she'll need about $ 75,000 in capital to do so. Given that she thinks she can make about 12 percent on her money, use Worksheet 11.1 to answer the following questions. How much would Alison have to invest today, in one lump sum, to end up with $ 75,000 in five years? Round the answer to two decimal places. $ If she's starting from scratch, how much would she have to put away annually to accumulate the needed capital in five years? Round the answer to two decimal places. $ How about if she already has $ 5,000 socked away; how much would she have to put away annually to accumulate the required capital in five years? Round the answer to two decimal places.
DETERMINING AMOUNT OF INVESTMENT CAPITAL | |||||||||||
Financial goal: | |||||||||||
1. | Targeted Financial Goal (see Note 1) | $ | |||||||||
2. | Projected Average Return on Investments | % | |||||||||
A. | Finding a Lump Sum Investment: | ||||||||||
3. | Future Value Factor, from Appendix A | ||||||||||
based on | years to target date and a projected average | ||||||||||
return on investment of | % | 1.000 | |||||||||
4. | Required Lump Sum Investment | ||||||||||
line 1 line 3 | $ - | ||||||||||
B. | Making a Series of Investments over Time: | ||||||||||
5. | Amount of Initial Investment, if any (see Note 2) | $ | |||||||||
6. | Future Value Factor, from Appendix A | ||||||||||
based on | years of target date and a projected average | ||||||||||
return on investment of | % | 1.000 | |||||||||
7. | Terminal Value of Initial Investment | ||||||||||
line 5 line 6 | $ - | ||||||||||
8. | Balance to Come from Savings Plan | ||||||||||
line 1 - line 7 | $ - | ||||||||||
9. | Future Value Annuity Factor, from Appendix B | ||||||||||
based on | years to target date and a projected average | ||||||||||
return on investment of | % | 0.00 | |||||||||
10. | Series of Annual Investments Required over Time | ||||||||||
line 8 line 9 | $ - | ||||||||||
Note 1: | The targeted financial goal is the amount of money you want to accumulate by some target date in the future. | ||||||||||
Note 2: | If youre starting from scratchi.e., there is no initial investmententer zero on line 5, skip lines 6 and 7, and then use the total targeted financial goal (from line 1) as the amount to be funded from a savings plan; now proceed with the rest of the worksheet. | ||||||||||
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