Essay about FIn 580

1070 Words Dec 18th, 2014 5 Pages
1. (TCO A) Use future or present value techniques to solve the following problems.
(Note: You can use tables or a financial calculator. If you use a calculator, please provide the inputs you used to solve the problems.) (5 points each = total 20 points)

a. Starting with $20,000, how much will you have in 20 years if you can earn 5% on your money? b. If you inherited $100,000 today and invested all of it in a security that paid an 8% rate of return, how much would you have in 15 years? c. If the average new home costs $200,000 today, what will be the value in 10 years if inflation is 4% per year? d. If you can earn 9% per year, how much will you have to save each year if you want to retire in 40 years with $3 million? (Points :
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You must show all work for full credit. (30 points total)
a. How many shares will you receive when you invest $10,000? (5 points) b. What is the percentage load? (5 points) c. What is the load charge, in dollars, for this transaction? (5 points) d. The fund in the above example is a front-end load fund. If it were a no-load fund, what three criteria must be met for a mutual fund to be considered a no-load fund? (15 points)

(Points : 30)

Question 7. 7. (TCO F) You are trying to help a friend decide on what type of IRA to use for his retirement plan. How would you outline the differences between a traditional deductible IRA, a traditional nondeductible IRA, and a Roth IRA to him? (Please explain in detail and emphasize the tax issues of each.) (40 points total) (Points : 40) Traditional IRA
Deductible: Your contributions are tax-deductible. Your funds will grow tax deferred, but you must pay taxes on your contributions when you withdraw them at retirement. IRS rules mandate that you begin taking distributions from your traditional IRA the year after you turn 70½, although this rule was waived on a one-time basis for 2009. The size of those distributions depends on your life expectancy and your spouse's life expectancy, if you are married.
Nondeductible: If your income is too high to contribute to a tax-deductible IRA, you can contribute to a nondeductible IRA. Unlike the more common IRA, your contributions to this

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