Please help me answer all questions The median salary and bo

Please help me answer all questions! The median salary and bonus is $70,000 I stated it in red in question 1...$70,000 is “my salary” which will be used to answer questions 2-5. This is for a corporate finance class.

1. What is the median salary and bonus the business major received in investment banking area? You can find this information from www.careers-in- business.com. The link to this website is also available in chapter one\'s lecture notes. $70,000 2. Suppose you get a job offer from an investment bank, and your compensation package is the following: your annual income (including salary and bonus) will be the same as median salary and bonus in investment banking but your basic salary is 70% income while bonus takes 30%. Your employer will match your deposit in your 40lk plan but the amount of match money will be capped by 6% of your salary If you decide to input 8% of your salary in your 401k account each month and expect to make 10% return, at time when you retire, how much money will you have in your 401k account? If you need S1.5 million dollars for your retirement life, based on the above investment in your 401lk plan, at what age can you retire to enjoy life? of your annual 3. After arranging your retirement money, you are Suppose your investment in 401k is tax taxable income. planning to save money for down payment of house purchase. deductible. That means the amount you invest in 401k will be subtracted from Assuming your personal income tax rate is 25% roughly, how much money do you think you can save each month based on your estimation expenses? your for your monthly 4. If you choose to save $500 each month from your salary and invest them in stock market for three years, how much will you have at end of year three? Assume your expected return is 8%. In addition to save $500 per month, each year you invest bonus you receive at end of year in stock expected return, how much money will you have totally (from investments of both monthly saving and market with 890

Solution

1.) The median salary and bonus is $70000 (as mentioned)

2.) Future value required for retirement (401k account)=$1,500,000.00

Rate of return =10%

Annual instalment would be:

a) Contribution from employes = 49000*0.06= $2940.00

b) contribution from employee=49000*0.08= $3920.00

total contribution towards 401k a/c= a) +b) =$2940+ $3920 = $6860

hence number of payments he needs to do every year to get a lumpsum of $1,500,000.00

Formula to calculate number of payment (which will be add on to the current age of employee to know the retirement age) :

n = ( log (1+ k(FV/PMT)))/log(1+k)

where FV = Future Value of Annuity

           PMT= Payment Amount

           k= annual interest rate

          n= number of payments

n= log(1+0.10(1.5M/6860)/ log(1+0.10)

hence after solving this, value coming is 33 years

hence, after 33 years he can get the retirement

3) As monthly expenses are not mentioned hence not possible to calculate the saving amount out of it.

4) monthly investment is stocks for 3 years= $500.00 at expected return of 8%

(monthly cal for interest= 8/12 =0.67 and total payments for 3 years= 3*12=36

FV= pmt/k (1-1/(1+k)^n) = 500/0.67 (1-(1/1.0067)^36 = $93550.00

5) yes, after three years he will have $93550+ the lumsum bonus with 8% return

Hence, he will be able to afford the house as required amount for house would be:

Downpayment= 300,000*.20 =$60,000.00

                      + closing cost=   $5000.00             

                                              = $65000.00 (which is lower than his savings)