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Asif abdul salam
ID-222534
Home work Assignment 2 Week Two Homework Assignment Chapter 2 Financial Planning Problems- Page 56 : 1,2,3,4,5,6.
Q1) Determining the Future Value of Education. Jenny Franklin estimates that as a result of completing her master’s degree, she will earn $6,000 a year more for the next 40 years. [a] .What would be the total amount of these additional earnings? Answer . 1[a] $6,000 × 40 = $ 240,000
Therefore, The total additional earnings of jenny franklin = $ 240,000.
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[b] What would be the present value of these additional earnings based on an annual interest rate of 6% ? (Use Table A-4 in Appendix A)
Answer . 1[b] From the present value table, the present value of $1 at 6% for the next 40 years will be 0.097
Therefore the present value based on an annual rate of interest of 6% is Present Value (PV) =Future Value (FV) × Present Value Interest Factor (PVIF) PV = $ 240,000 × 0.097 = $ 23,280
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Q2) Comparing Living Costs. Brad Edwards is earning $ 42,000 a year in a city located in the Midwest. He is interviewing for a position in a city with a cost of living 12 percent higher than where he currently lives. What would be the minimum salary he would need at his job to maintain the same standard of living ?
Answer. [2] $100 is the cost of living index currently, Brad Edward earns $42,000 in a city located in the Midwest. In New city cost of living increases by 12%, the new index rate is 112
The minimum amount Mr. Edward must earn if he prefers to take up a job in the new city will be.. Buying power = The index number of the new city × salary Let X be the buying power.
X= [112 × 42,000]/ 100
x=
ID-222534
Home work Assignment 2 Week Two Homework Assignment Chapter 2 Financial Planning Problems- Page 56 : 1,2,3,4,5,6.
Q1) Determining the Future Value of Education. Jenny Franklin estimates that as a result of completing her master’s degree, she will earn $6,000 a year more for the next 40 years. [a] .What would be the total amount of these additional earnings? Answer . 1[a] $6,000 × 40 = $ 240,000
Therefore, The total additional earnings of jenny franklin = $ 240,000.
………………………………………………………………………..
[b] What would be the present value of these additional earnings based on an annual interest rate of 6% ? (Use Table A-4 in Appendix A)
Answer . 1[b] From the present value table, the present value of $1 at 6% for the next 40 years will be 0.097
Therefore the present value based on an annual rate of interest of 6% is Present Value (PV) =Future Value (FV) × Present Value Interest Factor (PVIF) PV = $ 240,000 × 0.097 = $ 23,280
…………………………………………………………………………………………
Q2) Comparing Living Costs. Brad Edwards is earning $ 42,000 a year in a city located in the Midwest. He is interviewing for a position in a city with a cost of living 12 percent higher than where he currently lives. What would be the minimum salary he would need at his job to maintain the same standard of living ?
Answer. [2] $100 is the cost of living index currently, Brad Edward earns $42,000 in a city located in the Midwest. In New city cost of living increases by 12%, the new index rate is 112
The minimum amount Mr. Edward must earn if he prefers to take up a job in the new city will be.. Buying power = The index number of the new city × salary Let X be the buying power.
X= [112 × 42,000]/ 100
x=