Excel Assignment: This assignment focuses on Time Value of Money concepts. There are a couple of things to keep in mind as you work on the problems of this assignment. First - disregard any...

Excel Assignment:

This assignment focuses on Time Value of Money concepts. There are a couple of things to keep in mind as you work on the problems of this assignment. First - disregard any "Penalties" associated with early withdrawal of funds from the IRA. In "real life", our investor would be required to pay for early withdrawal of funds from the IRA. Until you turn 59 1/2, if you withdraw from an IRA, you would likely need to pay a 10% early withdrawal penalty unless you can prove hardship. Second - when this problem was created, the retirement age was different than today to secure full social security benefits. We used 65 in the problem but the new retirement age is now slightly higher than 67 to receive full benefits from Social Security. In the real world, our investor might want to defer her retirement to maximize her social security retirement benefits but for the purposes of the problem, just use 65 as the retirement age. Just some things to be aware of!! By the time all of us can retire, the age to collect max benefits will probably be well in excess of 70!!

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TVM retirement TVM with Excel Assignment: There are two major goals for this assignment: (1) to demonstrate your understanding and the correct application of Time Value of Money concepts in a financial problem solving situation, and (2) to demonstrate your ability to use the TVM functions of Excel. This is intended to be a short assignment - solving the problem shouldn’t take more than 30-45 minutes, plus a little more perhaps to make it look nice. When Yvonne was twelve, her grandfather gave her $5,000 to be used for college. Yvonne was a good student and dreamed of going to a good school so she invested the gift in a 10-year bank CD earning 7¼%. She received a generous scholarship and never needed to use the money from her grandfather. After graduating from college at age 22, she began working at a great job. Knowing the value of early investing, she began saving for retirement right away. When the CD matured she put it into an investment account earning 6¾ % and made an additional annual investment of $1,500 every January 1st. She also opened an IRA account and put $2,000 into it every year on January 1st and over the years it earned a steady 7%. Now Yvonne is 45 and thinking she’d like to retire early at age 55. At age 65 she’ll get an extremely generous corporate pension, which along with Social Security payments will allow her to live very well indeed. She believes that with clever investing strategies both of her accounts will be able to earn 8%. She plans to continue making the same annual contributions to her accounts until retirement. What Yvonne wants to know is whether her retirement savings will be able to provide enough income each year to allow her to live comfortably until age 65 when the pension kicks in. 1. How much was the CD worth when she transferred it into that investment account? 2. How much is the investment account worth now? 3. How much is the IRA account worth now? 4. How much will she have accumulated when she takes early retirement? 5. How much will she be able to withdraw each January 1st if she takes early retirement? Guidelines: 1. Number and briefly explain each of your steps 2. Show your inputs for each step using the TVM functions of Excel, not the financial calculator 3. Laying out your solution using a timeline may help you visualize the cash flows better 4. Follow the facts as given in the narrative, but list any additional assumptions you make 5. Complete the solution using Excel (.xls or .xlsx) – no other software/file format is acceptable 6. Upload your solution file through the assignment link 7. I must be able to easily follow and replicate your work - points off if I have to struggle with it Category Points Nicely formatted with inputs shown, work explained, easy to follow 5 Solution reflects the facts of the problem, 1 pt/sub-question 5 Correct application of TVM, 3 pts/sub-question 15 25 Late work will not be accepted