Elliot makes $250,000 a year and pays 30% taxes on $150,000 and 35% on his remai
ID: 2753734 • Letter: E
Question
Elliot makes $250,000 a year and pays 30% taxes on $150,000 and 35% on his remaining salary. His expenses are $110,000 (per year). He wants to invest a fixed amount EVERY day into an investment fund for 5 years and he hopes to get a 12% return.
What is the maximum amount he can invest every day? (Find the annual investment amount and divide by 365).
What will be the worth of his portfolio after 5 years?
After 5 years, Kassidy’s income increases to $300,000. He wants to reinvest for another 5 year, but this time, his return will be 10% and his expenses have increased by 15%. What will be the worth of his portfolio after 5 years (total of 10 years)?
What will the Present Value of his portfolio, assuming a 6% discount rate and NPER is 10 years?
Explanation / Answer
the annual investment amount=250,000-taxes-expenses
the annual investment amount=250,000-.30*150,000-.35*(250,000-150,000)-110,000
the annual investment amount=250,000-45000-35000-110,000 =60,000
The maximum amount he can invest every day=60,000/365=164.38=164
(=FV(r,t,-A,0))
The future value of this portfolio value 410010.64(portfolio value after 5years) after another 5 years or 10 years.
After 5 years, the annual investment amount=300,000-.30*150,000-.35*(300,000-150,000)-110,000*1.15
the annual investment amount=300,000-.30*150,000-.35*(300,000-150,000)-110,000*1.15 =76000
The maximum amount he can invest every day=76000/365=208.22=208
the worth of his portfolio after 5 years (total of 10 years)=The future value of the portfolio value 410010.64 after another 5 years or 10 years+Contributions(years 5-10 of 208) value at End of Period after total 10 years
=660326.24+492423.47
=1152749.71
Present Value of his portfolio=1152749.71/1.06^10=643689.42
Periodic contributions A 164 Time T 1825 (=5*365 days) rate r 0.03288% (=12%/365) Portfolio at End of 5 yrs B 410010.64 (A*((1+r)^T-1)/r) 410010.64(=FV(r,t,-A,0))
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