Mary and John, a young couple, come to you asking for financial advice. They recently graduated and have found entry-level positions in their chosen professions. They never received any formal financial education, but someone did give them a couple of The Wealthy Barber, and they read it.
Now they want to take action and begin saving for their future. Right now, they wish to save money for their 1-year old daughter’s college/university education.
They know how the Registered Education Savings Plan (RESP) works and consider themselves moderate risk-takers, given that they have an 18-year time horizon. However, they want to know how to invest through lump-sum (PMT = 0) or dollar cost (PV = 0) averaging?
Assume they could invest a maximum of $3,000 per year and earn a 6% annual return.
Your answer should address the following:
a) You will explain both the terms in simple language to the couple. (2 Marks)
b) Explain the advantage and disadvantages of both strategies. (4 Marks)
c) Recommend one strategy based on the discussion. There is no right or wrong answer here. Marking will be given based on your argument and conclusion. (1.5 Marks)

Answers

Answer 1

a) The lump-sum investment means that the young couple, Mary and John, will invest the total sum of $54,000 (18 x $3,000) at the beginning of the investment period, which yields a future value worth $154,134.31 at the end of the 18-year investment period,

On the other hand, the annuity investment of $3,000 implies that Mary and John will invest $3,000 annually, which yields a future value worth $98,279.98 at the end of the 18-year investment period.

b) The advantage of the lump-sum investment strategy over the annuity investment lies in the total interest generated, which is also compounded over the years.

Interest compounding means that Mary and John would be earning interest on interest.

The disadvantage  of the lump-sum strategy, which becomes the advantage of the annuity investment, is that Mary and John may not afford the lump-sum at the beginning of the investment.

c) Since Mary and John could only afford to invest $3,000 annually, they should go ahead with the annuity investment.

The recommendation of the investment strategy is based on the financial status of Mary and John at the beginning of the investment because they are:

Financially literateModerate risk-takers.  

What is future value?

The future value of an investment is the value of the cash flows in a future period. The future values of each investment strategy can be determined using the following future value formula:

FV = PV (1+r)^{n}

FV = future value

PV = present value

r = annual interest rate

{n} = number of periods interest held

Alternatively, it can be computed using an online finance calculator as follows:

Data and Calculations:

Lump-sum investment:

N (# of periods) = 18 years

I/Y (Interest per year) = 6%

PV (Present Value) = $54,000

PMT (Periodic Payment) = $0

Results:

FV = $154,134.31

Total Interest = $100,134.31

Annuity Investment:

N (# of periods) = 18 years

I/Y (Interest per year) = 6%

PV (Present Value) = $0

PMT (Periodic Payment) = $3,000

Results:

FV = $98,279.98

Sum of all periodic payments = $54,000 (18 x $3,000)

Total Interest = $44,279.98

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Related Questions

Alfred received a bonus and didn't need it for at least a year, so he wanted to put in somewhere where it would earn more interest than a savings account. What is the best option for Alfred

Answers

To save money and make profit, the best option for Alfred is money market.

What is money market?

The money market is known to be a term that connote the act of dealing with debt of less than one year.

It is often used by governments and corporations to keep one's cash flow steady, and for potential investors like Alfred to make a honest profit.

See options below

What is the best option for Alfred? Multiple Choice

eBook O

checking Print

cash

NOW

money market

certificate of deposit

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Answer:

Certificate of Deposit

Explanation:

which of the following is a potentional benefit of joining a business-related student organization?
A developing texting skills
B developing artistic skills
C developing technology skills
D developing athletic skills

Correct answer: C

Answers

I would say C is the correct answer.

Answer:

C, Developing technology skills

Explanation:

Verified answers with Verified results.

On May 1, 2020, Course Co. borrowed $16,000 and signed a three-year note bearing interest at 6% per annum. Interest is payable quarterly, starting on July 31. What amount should Course report as a liability for accrued interest on its December 31, 2021 balance sheet

Answers

The amount that Course Co. should report as a liability for accrued interest on its December 31, 2021 balance sheet is $240.

What is accrued interest?

Accrued interest is an accounting expression that shows a liability for interest payment has been incurred for a loan but the payment has not yet been made.

For Course Co., it incurs accrued interest of $240 every quarter for the three-year note payable. Usually, the accrued interest is paid at the beginning of the next quarter.

Data and Calculations:

3-year note payable = $16,000

Rate of interest = 6% per year

Date of loan = May 1, 2020

Interest payment = quarterly or 4 times annually

Interest per quarter = $240 ($16,000 x 6% x 1/4).

Thus, the accrued interest on Course Co.'s December 31, 2021 balance sheet is $240.

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Which protects whistleblowers from retaliation?
a. MIPPA
b. PPACA
c. ARRA
d. HIPAA

Answers

Answer:

HIPAA

Explanation:

HIPAA stands for Health Insurance Portability and Accountability ActIt was passed in 1996.

It protects whistle blowers from retailation

PLEASE ANSWER
Compare the major antitrust acts of the United States. Specify the intent and purpose of each, and draw conclusions about their effectiveness.

Answers

Some of the major antitrust acts of the United States are:

the Sherman Act;the Clayton Act; and.the Federal Trade Commission Act (FTCA).

What is Antitrust Act?

This refers to the federal laws which regulates the conduct of businesses to make sure that they engage in fair practises which helps to avoid monopolies.

With this in mind, we can see that the intent and purpose of the antitrust acts are to avoid monopolies, to ensure balanced competition and to avoid unlawful mergers.

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Gasoline currently sells for about $3 a gallon in the small town of Penfield. In an effort to help out the college students from a nearby university who road trip every year to see the old Greek Revival Chapel, the town is considering passing a law that will make it illegal to sell gasoline for more than 25 cents a gallon. What is the most likely result of such a price control

Answers

A likely result of the price control is a shortage of gasoline.

What is a price control?

A price control is when the government or an agency of the government sets the price of a good or service. When the government sets the maximum price for a good, it is known as price ceiling.

A price ceiling can result in:

shortages development of black market.it increases consumer surplus.

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The most likely result of the price control making it illegal to sell gasoline for more than 25 cents a gallon is artificial scarcity.

What is price control?

Price control is an economic mechanism instituted by the government to control the prices of goods and services.

Through price control, the government may regulate a price ceiling like 25 cents a gallon for gasoline.  The implication is that sellers of gasoline in the town cannot sell above 25 cents per gallon.

Thus, the resultant effect of the price control of a gallon of gasoline by the town is artificial scarcity.

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Distinguish between the two in operations management volume, variety and variation dimensions of canned fruit factory and hair salon

Answers

Answer:

Operation processes transform input into output in different ways, among them volume, variety and variation dimensions.

A canned fruit factory follows a volume dimension in the operation process. There is a high demand for canned fruits making it a high demand process whose high volume can be automated or standardized. This systemization leads to a lower cost base.

A hair salon uses a variety dimension in operation processes. Variety relates to a variety of goods or services being sold to customers. This increases sales and profit potential as opposed to offering one or two products. Hair salons have a lot of beauty and hair style offers.

Can Tatar come off your teeth?

Answers

Answer:

the dentist can remove it, or you can try flossing it out depending if it's between your teeth or on the surface i guess you can try using an electric toothbrush too

Answer:

Once tartar has formed, only a dental professional will be able to remove it from your teeth. So, visit your dentist every 6 months to remove any plaque and tartar that might have formed and to prevent further problems.

Mark fell behind in some of his bills and now a percentage of what he owes a
creditor is taken out of his paycheck. What is this an example of?
A. A surety
B. A garnishment
C. A foreclosure
D. Alien

Answers

I think it’s 4 or D.

Answer:

The correct answer is B. A garnishment

Explanation:

When a debtor falls behind on their debt, the creditor is entitled to seize assets/wages to pay for it.

What is the purpose of DSM-5?

Answers

Answer:

manual for assessment and diagnosis of mental disorders and does not include information or guidelines

A friend proposes a gamble to you. You roll 2 fair, six-sided dice, and add up the results of each die to find your total number. If your roll totals a 5 or 7, your friend pays you $10. If you roll any other total, you pay your friend $4. What is your expected payoff from playing this game 100 times

Answers

The payoff if you gamble 100 times is 22 dollars.

What is the probability of getting a 5 or a 7?

When you roll two dices, there are 36 different probabilities. Based on this number let's find out the probability of getting a 5 or a 7.

5= 1+4 / 4+1 /2+3 /3+27= 1+6/6+1 /2+5/ 5+2/3+4/4+3

This means the probability is 10/36 or  0,277 or 27%.

How many times will you probably win?

If you play 100 times you will win 27 times, this means you will get $270. In the same way, you will lose 73 times and this means you will pay $292.

This means the payoff would be -22 dollars (292-270=22).

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Can a society address all of these goals

Answers

A society can address the important goals that are set for its resident's success.

5 Basic Goals of a Society

There are 5 basic goals that a society wants to accomplish however not all the goals are achievable at once but still plans can be made accordingly and eventually success will be the destiny.

The 5 basic goals of a society are

Security StabilityFull EmploymentEconomic FreedomEconomic Growth

Therefore a society can achieve its goal if its vision and mission are clear.

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Nate collected Social Security payments of $220 a month in Year 1. If the price index rose from 90 to 108 between Year 1 and Year 2, then his Social Security payments for Year 2 should have been a. $238. b. $264. c. $257. d. $228.

Answers

The social security payment that will be paid in this scenario will be B. $264.

How to calculate the social security payment

From the information given, Nate collected Social Security payments of $220 a month in Year 1 and the price index rose from 90 to 108 between Year 1 and Year 2.

Therefore, the Social Security payments for Year 2 will be:

= 220 × (108/90)

= $264

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Uber and Spotify have a streaming partnership that allows riders to stream their personal Spotify playlists while riding with Uber. This inter-organizational relationship affords both Uber and Spotify a business advantage and is best described how?

Answers

The partnership between Uber and Spotify who had a streaming partnership is an example of strategic alliance.

What is a strategic alliance?

A strategic alliance refers to a business arrangement between firms  to undertake a mutually beneficial project while each retains its independence

In conclusion, the benefit of a strategic alliance is that its allow partners to scale quickly and build innovative solutions for their customers.

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Answer:

The partnership between Uber and Spotify which had a streaming partnership is an example of a strategic alliance.

What is a strategic alliance?

A strategic alliance refers to a business arrangement between firms  to undertake a mutually beneficial project while each retains its independence

In conclusion, the benefit of a strategic alliance is that its allow partners to scale quickly and build innovative solutions for their customers.

Sort the following statements based on whether demand is relatively elastic or relatively inelastic. There are four pairs of statements, each pair relating to a different determinant of demand elasticity.

Answers

The correct matching of the given scenarios are"

Klaus' demand for orange juice- Relatively elasticAmanda's annual demand for coffee- Relatively elasticJackson's demand for mystery novels- Relatively inelasticHermy's demand for Minute Maid orange juice- Relatively inelasticOlivia's daily demand for Starbucks latte- Relatively inelasticStephen spends a very little part of his income on soda- Relatively elasticXavier's demand for his economics textbook- Relatively inelastic

What is Elasticity of Demand?

This refers to the substantial change in demand of a particular product as a result of an economic factor.

With this in mind, we can see that inelastic demand has to do with the situation where the demand does not change regardless of the price change.

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During the past month, Jennifer Johnson had income of $3,500. During the month, her net worth declined by $300. If no other financial activities occurred, this means Jennifer's payments for the month were:

Answers

I think Jennifer’s payment for the month is 3,800

If no other financial activities occurred, this means Jennifer's payments for the month were $3,200.

What is income?

Income is the money that a person gets by giving his services to a company common industry or as a freelancer. Income is used for paying house bills, food bills, and other bills of the person.

Companies engage in financial operations to further their goals and objectives in terms of the economy. They consist of occurrences and acts that have an impact on a company's equity and long-term liabilities. Financial activities include all actions involving the inflow and outflow of cash.

Income of Jennifer Johnson in the past was $3,500

Her income declined by $300

$3,500 - $300 = $3,200

Therefore, the income of Jennifer's payments for the month was $3,200.

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Bristo Corporation has sales of 1,900 units at $50 per unit. Variable expenses are 20% of the selling price. If total fixed expenses are $66,000, the degree of operating leverage is:

Answers

Answer: 7.6

Explanation:

Degree of operating leverage (DOL) = contribution margin / operating income

- contribution margin = sales - variable cost = [(1900 x $50) - (1900 x $50 x 20%)] = $95,000 - $19,000 = $76,000

- operating income = contribution margin - fixed expenses = $76,000 - $66,000 = $10,000

DOL = $76,000 / $10,000 = 7.6


ANSWER FAST PLEASE!!
If you borrow $2,000 at 5 percent simple interest, how much will you owe after one year?
A. you will owe the principal of $2,000 minus 5 percent of the principal
B. you will owe the principal of $2,000 only
C. you will owe the principal of $2,000 plus 5 percent of the principal
D. you will owe 5 percent of the principal only
THIS IS FOR FINANCIAL LITERACY

Answers

Answer:

c

Explanation:

A person will owe the principal of $2,000 plus 5 percent of the principal is the amount after one year. Hence, option C is correct.

What is principal?

Principal is the actual amount that a person agrees to pay back, whereas interest is the amount of borrowing. Principal money is given by the lender to the borrower.

Formula of finding the out principal amount is Principal = Interest/ rate*time period.

Thus, option C is correct.

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In order to promote growth in living standards, policymakers must a. rise taxes to increase government revenue. b. minimize accumulation of factors of production. c. protect property rights and maintain political stability . d. promote bureaucracy

Answers

To promote growth in living standards, policymakers must : Property rights and maintain political stability.

What is property right?

Property right is the access granted to someone to have legal and intellectual ownership of assets and resources. This gives the owner full benefit of enjoying the properties.

Property rights are essential because it gives the owners of their property full control over its use, hence promote growth in living standards.

Hence, policymakers must property rights and maintain political stability in order to promote growth in living standards.

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Nike purchases a patent that costs $12,000. The patent is sold 7 years later for $16,372. What is the nominal rate of return on this investment

Answers

The nominal rate of return on this investment is 4.5%.

What is the nominal rate of return?

In order to determine the nominal rate of return, the internal rate of return would be calculated. Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested.

IRR can be calculated with a financial calculator

Cash flow in year 0 = $-12,000

Cash flow in year 1 - 6 = 0

Cash flow in year 7 = $16,372.

IRR = 4.5%

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If price increases by 12 percent and quantity demanded decreases by 12 percent, demand is:
- inelastic
- elastic
- unit-elastic

Answers

Answer:

inelastic

Explanation:

Price elasticity of demand = percentage change in quality /percentage change in price

-12/12=-1

This tells us that it is a relatively large price change in order to cause a relatively small change in quantity demanded. In other words consumer responsiveness to change is relatively small so it is inelastic

As a concept, logos often refers to the what

Answers

Answer:

a universal divine reason, immanent in nature,

Explanation:

A principle originating in classical Greek thought which refers to a universal divine reason, immanent in nature, yet transcending all oppositions and imperfections in the cosmos and humanity.

In the sentence They discussed four important issues at the meeting, the word at is a(n) ____.

preposition
adverb
conjunction
adjective

Answers

From the sentence, it can be deduced that "at" is used a preposition.

What is a preposition?

It should be noted that a preposition simply means a word that is used before a noun or pronoun to show direction, place, time, etc.

In the sentence "They discussed four important issues at the meeting", the word at is a preposition. It is used to show where the issue took place.

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Subject: economics/history

Can someone help me with this

Extra points because this whole problem is just ://

Answers

Yeah ur right, it’s worker (:

Answer:

Worker is correct

Explanation:

good job on getting it right!

Unbundling is:

a. sorting claims upon submission to collect and verify information about the patient and provider

b. submitting multiple CPT codes when one code should be submitted

c. assigning lower-level codes than documented in the record

d. contracting out delinquent accounts to a collections agency

Answers

Answer:

[B] submitting multiple CPT codes when one code should be submitted

Explanation:

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A participating provider (PAR):

a. is not allowed to bill patients for the difference between the contracted rate and their normal fee

b. does not contract with the insurance plan

c. is responsible for paying health care fees

d. may bill patients for the difference between the contracted, rate and their normal fee

Answers

Answer:

c

Explanation:

Answer:

[A] is not allowed to bill patients for the difference between the contracted rate and their normal fee

Explanation:

Explain 2 main ways to increase added value.

Answers

Answer:

7 Ways To Add Massive Value To Your Business

The Faster The Better. The first way to increase value is simply to increase the speed you deliver the kind of value people are willing to pay for. ...

Offer Better Quality. ...

Add Value. ...

Increases Convenience. ...

Improve Customer Service. ...

Changing Lifestyles. ...

Offer Planned Discounts.

Explanation:

hope it will help you have a great day bye and Mark brainlist if the answer is correct

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The beneficiary is the person who:

a. is eligible to receive health care benefits

b. accepts assignment

c. oversees coordination of benefits

d. receives the provider remittance notice

Answers

Answer:

[D] receives the provider remittance notice

Explanation:

A beneficiary is the person or entity that you legally designate to receive the benefits from your financial products.

Levon sells cartoon balloons in town. His family business thrives. Levon's balloons are priced at $8.00 each and sells 350 balloons each month. His largest competitor, Paul, sells 874 balloons each month at a price of $3.00 each. Levon estimates the total balloon market in town to be 2000 per month at an average price of $5.00 per balloon. What is Levon's relative market share based on units

Answers

The market share of Levon is 28%

Market Share of Levon

Total revenue of Levon is calculated:

$8 * 350 balloons = $2,800 per month

Total Revenue of the market:

$5 * 2000 balloons = $10,000 per month

Dividing Total Revenue of Levon with Total Revenue of the market

$2,800 / $ 10,000 = 0.28

Convert into percentage by multiplying with 100

0.28 * 100 = 28%

Conclusion

The market share of Levon is 28%

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how a teacher can use motivational strategies to control problem behavior in classroom give an example

Answers

Answer

The Earth’s mantle is made up of Tectonic plates that are forever moving as the Earth cools down. This happens over billions of years, and one of the most notable ones is around the Pacific rim where Earthquakes, (seismic activity) happens quite often

The Rift Valley in Ethiopia lies along the edge of the African Tectonic Plate, and continues down through parts of Somalia and into Kenya.

Just recently a rift opened up in Kenya, which seismologists seem to think is the pre-cursor of a major tectonic plate movement, splitting apart a part of Africa, which could include Ethiopia

Here are some strategies that can be used in the classroom to help motivate students:

Promote growth mindset over fixed mindset. Develop meaningful and respectful relationships with your students. Grow a community of learners in your classroom.Establish high expectations and establish clear goals. Be inspirational.
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