Solution to Case 101

Time Value of Money

Wake Up and Smell the Coffee!

1. Based on the information provided in Table 1, if the Halls continue making
minimum payments on their outstanding debts, how much money will they have left
over for all other expenses?

Car Payment
College Loan Payment
Credit Card Payment (3% of Balance)
Rent
Total Monthly expenses

($221.58) PMT
($527.80) PMT
(300.00)
(1200.00)
($2,249.38)

Marty's Gross Annual Salary

Laura's Gross Annual Salary
Income tax rate

Balanc
Terme
Rate
24
5000 5.99%
24
12000 5.25%
3% 10,000 15.99%

50,000
25,000
28%

Monthly take home pay (Marty)

Monthly take home pay (Laura)
After-tax monthly take home pay

3000 AnSal*(1 - T)/12

1500 AnSal*(1 - T)/12
4500

Remaining balance for all other expenses

$2,250.62 Monthly

2. How much money will Laura and Marty have to deposit each month (beginning one
month after she is born and ending when she turns 18) in order to have enough
saved up for their childs education. Assume that the yield on investments is 8%
per year, college expenses increase at the rate of 4% per year, and that their child
will enter college when he or she turns 18 and will complete the degree in 4 years.

Annual Yield
Number of years until child attends college
Annual College Expenses (currently)
Inflation rate
Years in college
College expense (Freshman Year)
PV = -20,000, I/Y= 4%, N = 18, PMT = 0, CPT FV1 =
College expense (Sophomore Year)
PV = -20,000, I/Y= 4%, N = 19, PMT = 0, CPT FV2 =
College expense (Junior Year)
PV = -20,000, I/Y= 4%, N = 20, PMT = 0, CPT FV3 =
College expense (Senior Year)
PV = -20,000, I/Y= 4%, N = 21, PMT = 0, CPT FV4 =

8%
18
$20,000
4%
4
$ 40,516.33
$ 42,136.98
$ 43,822.46
$ 45,575.36
$172,051.13

Total Savings Accumulation Required for College Expenses once child

turns 18
PV of FV1 (n = 0) to PV of FV4 (n = 3) at I/Y = 8%
Monthly deposits required to save up for 4 year's of child's college
education at age 18
FV = 153,281.95, I/Y= 8/12, N = 216, PV = 0, CPT PMT =

$153,281.95
($319.28)

3. How much money will the Halls have to set aside each month so as to have enough
saved up for a down payment on the $140,000 house within 12 months? Assume
that the closing costs amount to 2% of the loan balance and than the down payment
is 10% of the price. Note: Annual rate of return on investment is 12%.

Purchase Price of House (assumed to be the same after 12 months)......140,000

10% Down Payment ........14,000
Loan Amount .....126,000
Closing Costs .2,520
Total Money needed to be saved for Down Payment and Closing Costs.16,520
Annual Rate of return on investments....8%
Number of months until purchase of house....12
Monthly deposits required to accumulate total closing costs....($1,326.92)
Marty's Gross Annual Salary....50,000
Laura's Gross Annual Salary....25,000
Income tax rate....28%
Monthly take home pay (Marty).3,000
Monthly take home pay (Laura)..1500

Note: FV = 16,520, I/Y= 8/12, N = 12, PV = 0, CPT PMT = -1,326.92

4 If the interest rate on a 30-year mortgage is at 5% per year when the Halls purchase
their house, how much will their mortgage (monthly) payment be? Ignore
insurance and taxes, as well as inflation.

Mortgage Amount 126,000

Mortgage Rate.. 5%
Mortgage Term (years).. 30
Monthly Payment. ($676.40)
PV = -126,000, I/Y= 5/12, N = 360, FV = 0, CPT PMT =

5. Construct an amortization schedule for the 5%, 30-year mortgage.

Beginning
Reduction of
Month
Principle Balance Payment Interest Principle
Outstanding Balance
1
126,000 ($676.40) $ 525.00
($151.40)
$125,848.60
2
$125,848.60 ($676.40) $ 524.37
($152.03)
$125,696.58
3
$125,696.58 ($676.40) $ 523.74
($152.66)
$125,543.92
4
$125,543.92 ($676.40) $ 523.10
($153.30)
$125,390.62
5
$125,390.62 ($676.40) $ 522.46
($153.93)
$125,236.69
6
$125,236.69 ($676.40) $ 521.82
($154.58)
$125,082.11
7
$125,082.11 ($676.40) $ 521.18
($155.22)
$124,926.89
8
$124,926.89 ($676.40) $ 520.53
($155.87)
$124,771.03
9
$124,771.03 ($676.40) $ 519.88
($156.52)
$124,614.51
10
$124,614.51 ($676.40) $ 519.23
($157.17)
$124,457.34
11
$124,457.34 ($676.40) $ 518.57
($157.82)
$124,299.52
12
$124,299.52 ($676.40) $ 517.91
($158.48)
$124,141.04
13
$124,141.04 ($676.40) $ 517.25
($159.14)
$123,981.90
14
$123,981.90 ($676.40) $ 516.59
($159.80)
$123,822.09
15
$123,822.09 ($676.40) $ 515.93
($160.47)
$123,661.62
16
$123,661.62 ($676.40) $ 515.26
($161.14)
$123,500.49
17
$123,500.49 ($676.40) $ 514.59
($161.81)
$123,338.68
18
$123,338.68 ($676.40) $ 513.91
($162.48)
$123,176.19
19
$123,176.19 ($676.40) $ 513.23
($163.16)
$123,013.03
20
$123,013.03 ($676.40) $ 512.55
($163.84)
$122,849.19
21
$122,849.19 ($676.40) $ 511.87
($164.52)
$122,684.67
22
$122,684.67 ($676.40) $ 511.19
($165.21)
$122,519.46
23
$122,519.46 ($676.40) $ 510.50
($165.90)
$122,353.56
24
$122,353.56 ($676.40) $ 509.81
($166.59)
$122,186.97
25
$122,186.97 ($676.40) $ 509.11
($167.28)
$122,019.69
26
$122,019.69 ($676.40) $ 508.42
($167.98)
$121,851.71
27
$121,851.71 ($676.40) $ 507.72
($168.68)
$121,683.03
28
$121,683.03 ($676.40) $ 507.01
($169.38)
$121,513.65
29
$121,513.65 ($676.40) $ 506.31
($170.09)
$121,343.56
30
$121,343.56 ($676.40) $ 505.60
($170.80)
$121,172.76
31
$121,172.76 ($676.40) $ 504.89
($171.51)
$121,001.25
32
$121,001.25 ($676.40) $ 504.17
($172.22)
$120,829.03
33
$120,829.03 ($676.40) $ 503.45
($172.94)
$120,656.09
34
$120,656.09 ($676.40) $ 502.73
($173.66)
$120,482.43
35
$120,482.43 ($676.40) $ 502.01
($174.39)
$120,308.04
36
$120,308.04 ($676.40) $ 501.28
($175.11)
$120,132.93
37
$120,132.93 ($676.40) $ 500.55
($175.84)
$119,957.09
38
$119,957.09 ($676.40) $ 499.82
($176.57)
$119,780.51
39
$119,780.51 ($676.40) $ 499.09
($177.31)
$119,603.20
40
$119,603.20 ($676.40) $ 498.35
($178.05)
$119,425.16
41
$119,425.16 ($676.40) $ 497.60
($178.79)
$119,246.37
42
$119,246.37 ($676.40) $ 496.86
($179.54)
$119,066.83
43
$119,066.83 ($676.40) $ 496.11
($180.28)
$118,886.55
44
$118,886.55 ($676.40) $ 495.36
($181.03)
$118,705.51
45
$118,705.51 ($676.40) $ 494.61
($181.79)
$118,523.72
46
$118,523.72 ($676.40) $ 493.85
($182.55)
$118,341.18
47
$118,341.18 ($676.40) $ 493.09
($183.31)
$118,157.87
48
$118,157.87 ($676.40) $ 492.32
($184.07)
$117,973.80
49
$117,973.80 ($676.40) $ 491.56
($184.84)
$117,788.96
50
$117,788.96 ($676.40) $ 490.79
($185.61)
$117,603.35
51
$117,603.35 ($676.40) $ 490.01
($186.38)
$117,416.97
52
$117,416.97 ($676.40) $ 489.24
($187.16)
$117,229.81

53
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87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107

$117,229.81
$117,041.88
$116,853.16
$116,663.65
$116,473.35
$116,282.26
$116,090.38
$115,897.69
$115,704.20
$115,509.91
$115,314.80
$115,118.89
$114,922.15
$114,724.60
$114,526.22
$114,327.02
$114,126.99
$113,926.12
$113,724.42
$113,521.88
$113,318.49
$113,114.25
$112,909.17
$112,703.23
$112,496.43
$112,288.77
$112,080.24
$111,870.85
$111,660.58
$111,449.44
$111,237.42
$111,024.51
$110,810.72
$110,596.04
$110,380.46
$110,163.98
$109,946.60
$109,728.32
$109,509.12
$109,289.02
$109,067.99
$108,846.05
$108,623.18
$108,399.38
$108,174.65
$107,948.98
$107,722.37
$107,494.82
$107,266.32
$107,036.87
$106,806.46
$106,575.09
$106,342.76
$106,109.46
$105,875.18

($676.40) $ 488.46
($676.40) $ 487.67
($676.40) $ 486.89
($676.40) $ 486.10
($676.40) $ 485.31
($676.40) $ 484.51
($676.40) $ 483.71
($676.40) $ 482.91
($676.40) $ 482.10
($676.40) $ 481.29
($676.40) $ 480.48
($676.40) $ 479.66
($676.40) $ 478.84
($676.40) $ 478.02
($676.40) $ 477.19
($676.40) $ 476.36
($676.40) $ 475.53
($676.40) $ 474.69
($676.40) $ 473.85
($676.40) $ 473.01
($676.40) $ 472.16
($676.40) $ 471.31
($676.40) $ 470.45
($676.40) $ 469.60
($676.40) $ 468.74
($676.40) $ 467.87
($676.40) $ 467.00
($676.40) $ 466.13
($676.40) $ 465.25
($676.40) $ 464.37
($676.40) $ 463.49
($676.40) $ 462.60
($676.40) $ 461.71
($676.40) $ 460.82
($676.40) $ 459.92
($676.40) $ 459.02
($676.40) $ 458.11
($676.40) $ 457.20
($676.40) $ 456.29
($676.40) $ 455.37
($676.40) $ 454.45
($676.40) $ 453.53
($676.40) $ 452.60
($676.40) $ 451.66
($676.40) $ 450.73
($676.40) $ 449.79
($676.40) $ 448.84
($676.40) $ 447.90
($676.40) $ 446.94
($676.40) $ 445.99
($676.40) $ 445.03
($676.40) $ 444.06
($676.40) $ 443.09
($676.40) $ 442.12
($676.40) $ 441.15

($187.94)
($188.72)
($189.51)
($190.30)
($191.09)
($191.89)
($192.69)
($193.49)
($194.29)
($195.10)
($195.92)
($196.73)
($197.55)
($198.38)
($199.20)
($200.03)
($200.87)
($201.70)
($202.54)
($203.39)
($204.23)
($205.09)
($205.94)
($206.80)
($207.66)
($208.53)
($209.39)
($210.27)
($211.14)
($212.02)
($212.91)
($213.79)
($214.68)
($215.58)
($216.48)
($217.38)
($218.28)
($219.19)
($220.11)
($221.02)
($221.95)
($222.87)
($223.80)
($224.73)
($225.67)
($226.61)
($227.55)
($228.50)
($229.45)
($230.41)
($231.37)
($232.33)
($233.30)
($234.27)
($235.25)

$117,041.88
$116,853.16
$116,663.65
$116,473.35
$116,282.26
$116,090.38
$115,897.69
$115,704.20
$115,509.91
$115,314.80
$115,118.89
$114,922.15
$114,724.60
$114,526.22
$114,327.02
$114,126.99
$113,926.12
$113,724.42
$113,521.88
$113,318.49
$113,114.25
$112,909.17
$112,703.23
$112,496.43
$112,288.77
$112,080.24
$111,870.85
$111,660.58
$111,449.44
$111,237.42
$111,024.51
$110,810.72
$110,596.04
$110,380.46
$110,163.98
$109,946.60
$109,728.32
$109,509.12
$109,289.02
$109,067.99
$108,846.05
$108,623.18
$108,399.38
$108,174.65
$107,948.98
$107,722.37
$107,494.82
$107,266.32
$107,036.87
$106,806.46
$106,575.09
$106,342.76
$106,109.46
$105,875.18
$105,639.94

108
109
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111
112
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142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162

$105,639.94
$105,403.71
$105,166.49
$104,928.29
$104,689.10
$104,448.91
$104,207.72
$103,965.52
$103,722.31
$103,478.10
$103,232.86
$102,986.60
$102,739.32
$102,491.00
$102,241.65
$101,991.26
$101,739.83
$101,487.35
$101,233.82
$100,979.23
$100,723.59
$100,466.87
$100,209.09
$99,950.23
$99,690.29
$99,429.28
$99,167.17
$98,903.97
$98,639.68
$98,374.28
$98,107.78
$97,840.16
$97,571.44
$97,301.59
$97,030.62
$96,758.51
$96,485.28
$96,210.91
$95,935.39
$95,658.73
$95,380.91
$95,101.93
$94,821.80
$94,540.49
$94,258.02
$93,974.36
$93,689.53
$93,403.50
$93,116.29
$92,827.88
$92,538.27
$92,247.45
$91,955.42
$91,662.17
$91,367.70

($676.40) $ 440.17
($676.40) $ 439.18
($676.40) $ 438.19
($676.40) $ 437.20
($676.40) $ 436.20
($676.40) $ 435.20
($676.40) $ 434.20
($676.40) $ 433.19
($676.40) $ 432.18
($676.40) $ 431.16
($676.40) $ 430.14
($676.40) $ 429.11
($676.40) $ 428.08
($676.40) $ 427.05
($676.40) $ 426.01
($676.40) $ 424.96
($676.40) $ 423.92
($676.40) $ 422.86
($676.40) $ 421.81
($676.40) $ 420.75
($676.40) $ 419.68
($676.40) $ 418.61
($676.40) $ 417.54
($676.40) $ 416.46
($676.40) $ 415.38
($676.40) $ 414.29
($676.40) $ 413.20
($676.40) $ 412.10
($676.40) $ 411.00
($676.40) $ 409.89
($676.40) $ 408.78
($676.40) $ 407.67
($676.40) $ 406.55
($676.40) $ 405.42
($676.40) $ 404.29
($676.40) $ 403.16
($676.40) $ 402.02
($676.40) $ 400.88
($676.40) $ 399.73
($676.40) $ 398.58
($676.40) $ 397.42
($676.40) $ 396.26
($676.40) $ 395.09
($676.40) $ 393.92
($676.40) $ 392.74
($676.40) $ 391.56
($676.40) $ 390.37
($676.40) $ 389.18
($676.40) $ 387.98
($676.40) $ 386.78
($676.40) $ 385.58
($676.40) $ 384.36
($676.40) $ 383.15
($676.40) $ 381.93
($676.40) $ 380.70

($236.23)
($237.21)
($238.20)
($239.19)
($240.19)
($241.19)
($242.20)
($243.21)
($244.22)
($245.24)
($246.26)
($247.28)
($248.31)
($249.35)
($250.39)
($251.43)
($252.48)
($253.53)
($254.59)
($255.65)
($256.71)
($257.78)
($258.86)
($259.94)
($261.02)
($262.11)
($263.20)
($264.30)
($265.40)
($266.50)
($267.61)
($268.73)
($269.85)
($270.97)
($272.10)
($273.23)
($274.37)
($275.52)
($276.66)
($277.82)
($278.97)
($280.14)
($281.30)
($282.48)
($283.65)
($284.84)
($286.02)
($287.21)
($288.41)
($289.61)
($290.82)
($292.03)
($293.25)
($294.47)
($295.70)

$105,403.71
$105,166.49
$104,928.29
$104,689.10
$104,448.91
$104,207.72
$103,965.52
$103,722.31
$103,478.10
$103,232.86
$102,986.60
$102,739.32
$102,491.00
$102,241.65
$101,991.26
$101,739.83
$101,487.35
$101,233.82
$100,979.23
$100,723.59
$100,466.87
$100,209.09
$99,950.23
$99,690.29
$99,429.28
$99,167.17
$98,903.97
$98,639.68
$98,374.28
$98,107.78
$97,840.16
$97,571.44
$97,301.59
$97,030.62
$96,758.51
$96,485.28
$96,210.91
$95,935.39
$95,658.73
$95,380.91
$95,101.93
$94,821.80
$94,540.49
$94,258.02
$93,974.36
$93,689.53
$93,403.50
$93,116.29
$92,827.88
$92,538.27
$92,247.45
$91,955.42
$91,662.17
$91,367.70
$91,072.00

163
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197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217

$91,072.00
$90,775.08
$90,476.91
$90,177.50
$89,876.85
$89,574.94
$89,271.77
$88,967.34
$88,661.64
$88,354.67
$88,046.42
$87,736.89
$87,426.06
$87,113.94
$86,800.52
$86,485.79
$86,169.76
$85,852.40
$85,533.72
$85,213.72
$84,892.38
$84,569.71
$84,245.68
$83,920.31
$83,593.58
$83,265.50
$82,936.04
$82,605.21
$82,273.01
$81,939.41
$81,604.43
$81,268.06
$80,930.28
$80,591.09
$80,250.49
$79,908.48
$79,565.03
$79,220.16
$78,873.85
$78,526.09
$78,176.89
$77,826.23
$77,474.11
$77,120.52
$76,765.47
$76,408.93
$76,050.90
$75,691.38
$75,330.37
$74,967.85
$74,603.82
$74,238.28
$73,871.21
$73,502.61
$73,132.47

($676.40) $ 379.47
($676.40) $ 378.23
($676.40) $ 376.99
($676.40) $ 375.74
($676.40) $ 374.49
($676.40) $ 373.23
($676.40) $ 371.97
($676.40) $ 370.70
($676.40) $ 369.42
($676.40) $ 368.14
($676.40) $ 366.86
($676.40) $ 365.57
($676.40) $ 364.28
($676.40) $ 362.97
($676.40) $ 361.67
($676.40) $ 360.36
($676.40) $ 359.04
($676.40) $ 357.72
($676.40) $ 356.39
($676.40) $ 355.06
($676.40) $ 353.72
($676.40) $ 352.37
($676.40) $ 351.02
($676.40) $ 349.67
($676.40) $ 348.31
($676.40) $ 346.94
($676.40) $ 345.57
($676.40) $ 344.19
($676.40) $ 342.80
($676.40) $ 341.41
($676.40) $ 340.02
($676.40) $ 338.62
($676.40) $ 337.21
($676.40) $ 335.80
($676.40) $ 334.38
($676.40) $ 332.95
($676.40) $ 331.52
($676.40) $ 330.08
($676.40) $ 328.64
($676.40) $ 327.19
($676.40) $ 325.74
($676.40) $ 324.28
($676.40) $ 322.81
($676.40) $ 321.34
($676.40) $ 319.86
($676.40) $ 318.37
($676.40) $ 316.88
($676.40) $ 315.38
($676.40) $ 313.88
($676.40) $ 312.37
($676.40) $ 310.85
($676.40) $ 309.33
($676.40) $ 307.80
($676.40) $ 306.26
($676.40) $ 304.72

($296.93)
($298.17)
($299.41)
($300.66)
($301.91)
($303.17)
($304.43)
($305.70)
($306.97)
($308.25)
($309.54)
($310.82)
($312.12)
($313.42)
($314.73)
($316.04)
($317.35)
($318.68)
($320.00)
($321.34)
($322.68)
($324.02)
($325.37)
($326.73)
($328.09)
($329.46)
($330.83)
($332.21)
($333.59)
($334.98)
($336.38)
($337.78)
($339.19)
($340.60)
($342.02)
($343.44)
($344.87)
($346.31)
($347.75)
($349.20)
($350.66)
($352.12)
($353.59)
($355.06)
($356.54)
($358.02)
($359.52)
($361.01)
($362.52)
($364.03)
($365.55)
($367.07)
($368.60)
($370.13)
($371.68)

$90,775.08
$90,476.91
$90,177.50
$89,876.85
$89,574.94
$89,271.77
$88,967.34
$88,661.64
$88,354.67
$88,046.42
$87,736.89
$87,426.06
$87,113.94
$86,800.52
$86,485.79
$86,169.76
$85,852.40
$85,533.72
$85,213.72
$84,892.38
$84,569.71
$84,245.68
$83,920.31
$83,593.58
$83,265.50
$82,936.04
$82,605.21
$82,273.01
$81,939.41
$81,604.43
$81,268.06
$80,930.28
$80,591.09
$80,250.49
$79,908.48
$79,565.03
$79,220.16
$78,873.85
$78,526.09
$78,176.89
$77,826.23
$77,474.11
$77,120.52
$76,765.47
$76,408.93
$76,050.90
$75,691.38
$75,330.37
$74,967.85
$74,603.82
$74,238.28
$73,871.21
$73,502.61
$73,132.47
$72,760.80

218
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252
253
254
255
256
257
258
259
260
261
262
263
264
265
266
267
268
269
270
271
272

$72,760.80
$72,387.57
$72,012.79
$71,636.45
$71,258.54
$70,879.06
$70,497.99
$70,115.34
$69,731.09
$69,345.24
$68,957.78
$68,568.71
$68,178.02
$67,785.70
$67,391.74
$66,996.15
$66,598.90
$66,200.00
$65,799.44
$65,397.21
$64,993.30
$64,587.71
$64,180.43
$63,771.46
$63,360.78
$62,948.38
$62,534.27
$62,118.44
$61,700.87
$61,281.56
$60,860.51
$60,437.70
$60,013.12
$59,586.78
$59,158.67
$58,728.77
$58,297.07
$57,863.58
$57,428.29
$56,991.18
$56,552.24
$56,111.48
$55,668.89
$55,224.44
$54,778.15
$54,330.00
$53,879.98
$53,428.08
$52,974.30
$52,518.63
$52,061.07
$51,601.59
$51,140.20
$50,676.89
$50,211.65

($676.40) $ 303.17
($676.40) $ 301.61
($676.40) $ 300.05
($676.40) $ 298.49
($676.40) $ 296.91
($676.40) $ 295.33
($676.40) $ 293.74
($676.40) $ 292.15
($676.40) $ 290.55
($676.40) $ 288.94
($676.40) $ 287.32
($676.40) $ 285.70
($676.40) $ 284.08
($676.40) $ 282.44
($676.40) $ 280.80
($676.40) $ 279.15
($676.40) $ 277.50
($676.40) $ 275.83
($676.40) $ 274.16
($676.40) $ 272.49
($676.40) $ 270.81
($676.40) $ 269.12
($676.40) $ 267.42
($676.40) $ 265.71
($676.40) $ 264.00
($676.40) $ 262.28
($676.40) $ 260.56
($676.40) $ 258.83
($676.40) $ 257.09
($676.40) $ 255.34
($676.40) $ 253.59
($676.40) $ 251.82
($676.40) $ 250.05
($676.40) $ 248.28
($676.40) $ 246.49
($676.40) $ 244.70
($676.40) $ 242.90
($676.40) $ 241.10
($676.40) $ 239.28
($676.40) $ 237.46
($676.40) $ 235.63
($676.40) $ 233.80
($676.40) $ 231.95
($676.40) $ 230.10
($676.40) $ 228.24
($676.40) $ 226.37
($676.40) $ 224.50
($676.40) $ 222.62
($676.40) $ 220.73
($676.40) $ 218.83
($676.40) $ 216.92
($676.40) $ 215.01
($676.40) $ 213.08
($676.40) $ 211.15
($676.40) $ 209.22

($373.23)
($374.78)
($376.34)
($377.91)
($379.48)
($381.07)
($382.65)
($384.25)
($385.85)
($387.46)
($389.07)
($390.69)
($392.32)
($393.95)
($395.60)
($397.24)
($398.90)
($400.56)
($402.23)
($403.91)
($405.59)
($407.28)
($408.98)
($410.68)
($412.39)
($414.11)
($415.84)
($417.57)
($419.31)
($421.06)
($422.81)
($424.57)
($426.34)
($428.12)
($429.90)
($431.69)
($433.49)
($435.30)
($437.11)
($438.93)
($440.76)
($442.60)
($444.44)
($446.29)
($448.15)
($450.02)
($451.90)
($453.78)
($455.67)
($457.57)
($459.47)
($461.39)
($463.31)
($465.24)
($467.18)

$72,387.57
$72,012.79
$71,636.45
$71,258.54
$70,879.06
$70,497.99
$70,115.34
$69,731.09
$69,345.24
$68,957.78
$68,568.71
$68,178.02
$67,785.70
$67,391.74
$66,996.15
$66,598.90
$66,200.00
$65,799.44
$65,397.21
$64,993.30
$64,587.71
$64,180.43
$63,771.46
$63,360.78
$62,948.38
$62,534.27
$62,118.44
$61,700.87
$61,281.56
$60,860.51
$60,437.70
$60,013.12
$59,586.78
$59,158.67
$58,728.77
$58,297.07
$57,863.58
$57,428.29
$56,991.18
$56,552.24
$56,111.48
$55,668.89
$55,224.44
$54,778.15
$54,330.00
$53,879.98
$53,428.08
$52,974.30
$52,518.63
$52,061.07
$51,601.59
$51,140.20
$50,676.89
$50,211.65
$49,744.47

273
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291
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300
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304
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306
307
308
309
310
311
312
313
314
315
316
317
318
319
320
321
322
323
324
325
326
327

$49,744.47
$49,275.35
$48,804.26
$48,331.22
$47,856.20
$47,379.21
$46,900.23
$46,419.25
$45,936.27
$45,451.27
$44,964.26
$44,475.22
$43,984.13
$43,491.01
$42,995.82
$42,498.58
$41,999.26
$41,497.86
$40,994.37
$40,488.79
$39,981.10
$39,471.29
$38,959.36
$38,445.29
$37,929.09
$37,410.73
$36,890.21
$36,367.53
$35,842.66
$35,315.61
$34,786.36
$34,254.91
$33,721.25
$33,185.36
$32,647.23
$32,106.87
$31,564.25
$31,019.37
$30,472.23
$29,922.80
$29,371.08
$28,817.07
$28,260.74
$27,702.10
$27,141.13
$26,577.82
$26,012.17
$25,444.16
$24,873.78
$24,301.02
$23,725.88
$23,148.35
$22,568.40
$21,986.04
$21,401.25

($676.40) $ 207.27
($676.40) $ 205.31
($676.40) $ 203.35
($676.40) $ 201.38
($676.40) $ 199.40
($676.40) $ 197.41
($676.40) $ 195.42
($676.40) $ 193.41
($676.40) $ 191.40
($676.40) $ 189.38
($676.40) $ 187.35
($676.40) $ 185.31
($676.40) $ 183.27
($676.40) $ 181.21
($676.40) $ 179.15
($676.40) $ 177.08
($676.40) $ 175.00
($676.40) $ 172.91
($676.40) $ 170.81
($676.40) $ 168.70
($676.40) $ 166.59
($676.40) $ 164.46
($676.40) $ 162.33
($676.40) $ 160.19
($676.40) $ 158.04
($676.40) $ 155.88
($676.40) $ 153.71
($676.40) $ 151.53
($676.40) $ 149.34
($676.40) $ 147.15
($676.40) $ 144.94
($676.40) $ 142.73
($676.40) $ 140.51
($676.40) $ 138.27
($676.40) $ 136.03
($676.40) $ 133.78
($676.40) $ 131.52
($676.40) $ 129.25
($676.40) $ 126.97
($676.40) $ 124.68
($676.40) $ 122.38
($676.40) $ 120.07
($676.40) $ 117.75
($676.40) $ 115.43
($676.40) $ 113.09
($676.40) $ 110.74
($676.40) $ 108.38
($676.40) $ 106.02
($676.40) $ 103.64
($676.40) $ 101.25
($676.40) $ 98.86
($676.40) $ 96.45
($676.40) $ 94.04
($676.40) $ 91.61
($676.40) $ 89.17

($469.13)
($471.08)
($473.04)
($475.02)
($476.99)
($478.98)
($480.98)
($482.98)
($484.99)
($487.01)
($489.04)
($491.08)
($493.13)
($495.18)
($497.25)
($499.32)
($501.40)
($503.49)
($505.59)
($507.69)
($509.81)
($511.93)
($514.06)
($516.21)
($518.36)
($520.52)
($522.69)
($524.86)
($527.05)
($529.25)
($531.45)
($533.67)
($535.89)
($538.12)
($540.37)
($542.62)
($544.88)
($547.15)
($549.43)
($551.72)
($554.02)
($556.32)
($558.64)
($560.97)
($563.31)
($565.65)
($568.01)
($570.38)
($572.75)
($575.14)
($577.54)
($579.94)
($582.36)
($584.79)
($587.22)

$49,275.35
$48,804.26
$48,331.22
$47,856.20
$47,379.21
$46,900.23
$46,419.25
$45,936.27
$45,451.27
$44,964.26
$44,475.22
$43,984.13
$43,491.01
$42,995.82
$42,498.58
$41,999.26
$41,497.86
$40,994.37
$40,488.79
$39,981.10
$39,471.29
$38,959.36
$38,445.29
$37,929.09
$37,410.73
$36,890.21
$36,367.53
$35,842.66
$35,315.61
$34,786.36
$34,254.91
$33,721.25
$33,185.36
$32,647.23
$32,106.87
$31,564.25
$31,019.37
$30,472.23
$29,922.80
$29,371.08
$28,817.07
$28,260.74
$27,702.10
$27,141.13
$26,577.82
$26,012.17
$25,444.16
$24,873.78
$24,301.02
$23,725.88
$23,148.35
$22,568.40
$21,986.04
$21,401.25
$20,814.03

328
329
330
331
332
333
334
335
336
337
338
339
340
341
342
343
344
345
346
347
348
349
350
351
352
353
354
355
356
357
358
359
360

$20,814.03
$20,224.36
$19,632.23
$19,037.64
$18,440.57
$17,841.01
$17,238.95
$16,634.38
$16,027.30
$15,417.68
$14,805.53
$14,190.82
$13,573.56
$12,953.72
$12,331.30
$11,706.28
$11,078.66
$10,448.43
$9,815.57
$9,180.07
$8,541.93
$7,901.12
$7,257.65
$6,611.49
$5,962.65
$5,311.10
$4,656.83
$3,999.84
$3,340.11
$2,677.63
$2,012.39
$1,344.38
$673.59

($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $
($676.40) $

86.73
84.27
81.80
79.32
76.84
74.34
71.83
69.31
66.78
64.24
61.69
59.13
56.56
53.97
51.38
48.78
46.16
43.54
40.90
38.25
35.59
32.92
30.24
27.55
24.84
22.13
19.40
16.67
13.92
11.16
8.38
5.60
2.81

($589.67)
($592.13)
($594.59)
($597.07)
($599.56)
($602.06)
($604.57)
($607.09)
($609.61)
($612.15)
($614.71)
($617.27)
($619.84)
($622.42)
($625.01)
($627.62)
($630.23)
($632.86)
($635.50)
($638.14)
($640.80)
($643.47)
($646.16)
($648.85)
($651.55)
($654.27)
($656.99)
($659.73)
($662.48)
($665.24)
($668.01)
($670.79)
($673.59)

$20,224.36
$19,632.23
$19,037.64
$18,440.57
$17,841.01
$17,238.95
$16,634.38
$16,027.30
$15,417.68
$14,805.53
$14,190.82
$13,573.56
$12,953.72
$12,331.30
$11,706.28
$11,078.66
$10,448.43
$9,815.57
$9,180.07
$8,541.93
$7,901.12
$7,257.65
$6,611.49
$5,962.65
$5,311.10
$4,656.83
$3,999.84
$3,340.11
$2,677.63
$2,012.39
$1,344.38
$673.59
$0.00

6. If the Halls want to have as much of an after-tax income when they retire as they
currently have, and assuming they live until they are 80 years old, how much money
should they set aside each month so as to have enough money accumulated in their
retirement nest egg? Assume that annual inflation rate is 4% per year for the whole
term, the investment return is 8% per year before and after retirement, and that their
tax rate is 28% throughout their life.
The Hall's Current Combined Income
Tax rate
Current After-tax income
Current Age
Retirement Age
Expected age at death
Number of Years until retirement
Number of Years in Retirement Phase
Annual Inflation Rate
Equivalent Annual Income Desired at age 65
PV = -54,000, I/Y= 4, N = 35, CPT = 0, CPT FV =
Annual Investment Yield

75,000
28%
54,000
30
65
80
35
15
4%
$213,088.81
8%

Future Value of annual withdrawals needed during retirement phase

Income
Age
Needed
FV = $213,088.81*( 1+ i)^n
66 221,612.3579
67 230,476.8522
68 239,695.9263
69 249,283.7634
70 259,255.1139
71 269,625.3185
72 280,410.3312
73 291,626.7445
74 303,291.8142
75 315,423.4868
76 328,040.4263
77 341,162.0433
78 354,808.5251
79 369,000.8661
80 383,760.9007
Total:
4,437,474.47
Present Value at age 65 (Retirement Nest Egg that must be
accumulated)
PV of FV 1 (n = 1) to PV of FV15 (n = 15) at I/Y = 8%
Monthly deposit needed to reach retirement goal
FV = -2,394,895, I/Y= 8/12, N = 420, PV = 0, CPT PMT =

$2,394,895.49
($1,044.04)

7. If the Halls continue paying the minimum 3% on their credit card debt each month, how long will
it take them to pay it off and how much total interest will they have paid? If you were Dan, what
would you advice them to do?
Credit Card Balance
Interest Rate

10,000
15.99%

3% Minimum Payment
Number of months required to pay off debt

-300
44.367051

Total Interest Paid

3310.1153

Dan's Advice
1. Continue paying minimum on:
Car
College Loans
2.

($221.58)
($527.80)

Live cheap for the next few months and pay maximum available on credit card debt

Available income after rent, car payment, and college loan payments =
They should be able to clear the debt within 6 months.
3. Then start putting money away towards the house down payment, child's education, and
retirement
Down payment
Child's education
Retirement plan
Note...They may have to save a little less than the calculated amount each month

$2,550.62

($1,326.92)
($319.28)
($1,044.04)
($2,690.23)

4. Within 24 months, their college loans will be paid off, the deposit towards the down payment will have
ended, and they could work towards paying off their mortgage as quickly as possible.

12