Please use excel if applicable Elliot makes $200,000 a year and pays 28% taxes o
ID: 2800032 • Letter: P
Question
Please use excel if applicable
Elliot makes $200,000 a year and pays 28% taxes on $150,000 and 25% on his remaining salary. His expenses are $140,000 (per year). He wants to invest a fixed amount EVERY day into an investment fund for 5 years and he hopes to get a 10% return. (20 PTS)
What is the maximum amount he can invest every day? (5 PTS) (Find the annual investment amount and divide by 365).
What will be the worth of his portfolio after 5 years? (5 PTS)
After 5 years, Kassidy’s income increases to $250,000. He wants to reinvest for another 5 year, but this time, his return will be 8% and his expenses have increased by 15%. What will be the worth of his portfolio after 5 years (total of 10 years)? (5 PTS)
What will the Present Value of his portfolio, assuming a 9% discount rate and NPER is 10 years? (5 PTS)
Explanation / Answer
The maximum amount that he can invest annually =
= (150000*(1-0.28) + 50000*(1-0.25)) - 140000
= 5500
So, daily Investment = 5500/365 = 15.07
Worth of portfolio = 15.07*((1+(0.1/365))^(5*365) - 1)/(0.1/365) = 35677.03
Annual savings after increase in income
= (200000*(1-0.28)+50000*(1-0.25) - 140000*1.15)
= 20500
Daily Investment = 20500/365
= 56.16
Worth of portfolio = 56.16*((1+(0.08/365))^(5*365) - 1)/(0.08/365) + 35677.03*(1+0.08)^5
= 178424.75
Present value of portfolio = 178424.75/(1.09^10)
= 75368.54