Aqr Review Unit VI Name 1. You have just finished medical school and you have been offered two jobs at a local hospital. The first one is a physical therapist for the hospital with a salary of $45,500. The other position is a full time Critical Care Nurse position that pays an hourly wage of $22.50. These jobs assume five 8-hour days per week and 52 weeks per year. Complete the table based on the following information: Federal income tax is 15%, Social Security is 6.2% and Medicare is 1.45%. Since we live in Texas, there is no state income tax. Both positions have fully paid retirement and fully paid heath insurance. The physical therapist pays in full the life insurance but the life insurance for the critical care nurse will cost $30 per month. You think you will miss 7 days of work this next year for vacation time and be out a total of 6 days for illness. The physical therapist job is offering you 2 weeks of paid vacation and 2 weeks of paid sick days. The critical care nurse job is offering you 1 week of paid vacation and 1 week of paid sick days. Job Physical Therapist Critical Care Nurse Income Information Gross Annual Income Gross Monthly Income After-tax Monthly Income Vacation Sick Leave Health Insurance Life Insurance Retirement Plan Monthly Take-Home Income
2. Which job offer is going to be the best for you to choose and why? 3. Now that you are employed by the hospital, you want to start saving some money up to start up your retirement fund. You have been given $10,000 by your grandparents to start this up and you promised them that you would put that money in a savings account and not touch it until you retire at age 65. You are 25 right now. If the interest rate is 2.5% and it is compounding on a monthly basis, how much will your $10,000 be worth when you are 65. 4. Your grandparents find a CD that pays 4% interest annually and thinks that is a better place to put your money. Explain how this would or would not be better for your $10,000. nt r 5. Use the equation FV PV 1 to determine how much $2300 would be in 40 n years if the interest rate was 7% and it was compounded quarterly.
6. Using the same formula as in question #5, determine how much money you need to start an investment up with right now in order to get 1.5 million dollars in 45 years. You have found a good account that averages 8.2% in interest that is compounded monthly. 7. Since you do have a calculator that can do all of these calculations very easily for you, we are going to use the TVM Solver from this point on. Fill in the chart below with the appropriate numbers on how you can determine the amount of money that $5,000 will turn into if it earns 6.25% compounded quarterly for 35 years. N = I%= PV= PMT= FV= P/Y= C/Y= PMT: End Begin 8. Now it is time to try the stock market and bonds for some investments. Mr. Fore is 35 years old and he has inherited $50,000. He wants to invest that in his investment portfolio of stocks, bonds and cash. Right now interest rates are on the low side but will probably be increasing before long. Decide the percentage and amount that Mr. Fore should invest in each category and explain your reasoning. Explanation: Investment Percentage Amount Stocks Bonds Cash
9. Since Mr. Fore is 35 and wants to hopefully retire at age 65, use the TVM to calculate the value of each category if stocks have an average annual rate of increase of 11%, bonds an average rate of increase of 5.5% and cash an average annual rate of increase of 2.5%. Stocks Bonds Cash N = N = N = I%= I%= I%= PV= PV= PV= PMT= PMT= PMT= FV= FV= FV= P/Y= P/Y= P/Y= C/Y= C/Y= C/Y= PMT: End Begin PMT: End Begin PMT: End Begin 10. Bob wasn t as smart as you in high school and didn t take AQR to learn as much as you have now about his financial decisions. He ended up going to college and spent quite a bit of money that he really didn t have and charged many things on his credit card. He totaled up to a balance of $22,457.48 after his 4 years of college. Now he is serious about getting this card paid off so he isn t charging anything else to his account. The APR is 22.25% for this particular card. The company calculates the minimum payment based on a 2.4% of the balance each month. How much would Bob s minimum monthly payment be for this card? 11. If Bob only pays the minimum amount that you determined in question 10, how long would it take him to pay off this credit card? And how much in total interest would this cost Bob?
12. Calculate the EAR for this credit card? Why is this value either higher or lower than the APR? Now that you have accepted one of the positions that were offered to you at the beginning of this test and after you have invested some money to get your retirement money rolling, you want to buy a new car. You go to Vandergriff Chevrolet here in Arlington and found your dream car. The price is $32,399.00. 13. Your bank offers you a loan for 4.25% APR for a 5-year car loan with 5% down. A. Calculate the monthly payment if you were to take this loan. B. This car will be worth $15,000 at the end of the loan period. What will the total cost of the car be at the end of the loan? 14. The dealership offers you a 0% down and 0% APR for 3 years. The car is worth $21,376 in 3 years. How much will the total cost of the car be if you decide to take this loan? 15. Which loan would you pick and why? 16. Explain what leasing a car means and discuss some advantages or disadvantages to leasing a car. Would you lease a car?