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finance questions related to :- Time value of money risk and returns financial analysis bonds Document Preview: A1, ACC00716 S1 2014 Page 1 of 6 ACC00716 Finance, Session 1 2014 Assignment 1 The assignment has a 25% weighting in your overall mark for this unit. It will be marked out of 25 and consists of two main questions, with several sub-questions. Marks will be allocated as indicated for each question below. Your total assignment submission should not exceed five (5) A4 pages, excluding a reference list, with roughly 2 pages for Question 1 and 3 pages for Question 2. Question 1: Time Value of Money and Bonds (10 marks total) (a) Assume you are 25 years of age and have just got your first real job. You want to estimate how much money you will need to put into superannuation every year between now and retirement in 40 years. You estimate that in retirement you will need about $50,000 per year in today’s dollars in order to have a reasonable lifestyle (you assume you will already own your own home by the time you retire). The expected long-term average annual inflation rate is 3%. The expected average annual rate of return on your superannuation investment prior to retirement is 8% but after retirement, when you shift the weighting of your superannuation investments more towards cash and other less risky options, the average annual rate of return is expected to be 5%. (Round to the nearest dollar in the calculations below and ignore taxes.) i) How much will your desired annual retirement income be at the time you retire after taking inflation into account? (That is, calculate your inflation-adjusted desired annual income at retirement, which will be the future value of your desired annual retirement income at the time you retire compounded by the inflation rate.) (0.5 marks) ii) Based on actuarial estimates, you expect to live for 20 years in retirement. What lump sum will you need at retirement to receive the annual income (in nominal terms) you calculated in part i)? (Assume an ordinary annuity.) (0.5 marks) iii) What amount will you need to put into superannuation at the... Attachments: A1-details.pdf

 

Solution ID:565824 | This paper was updated on 26-Nov-2015

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