Fin360 case 1 (Graded A+) - use as a guide only - 35823

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Case 1

Bill and Donna are 35 years old with two children, a boy 7 and a girl 6. Bill makes $47,000 per year and Donna makes $39,000 as a teacher. Bill does not have a pension but does have a 401(k). He currently has $49,000 in that 401(k) and contributes $450 per month with a $150 employer match in addition to his $450. Donna has a modest 403(b) with $6500 balance and contributes $150 per month. They are anticipating annual raises and bonus amounts of 6.5% and would like to retire at 64 years old. Plan to age 100. Donna has found that she should estimate her pension at 60% of her highest salary with annual 2.5% increases. You estimate Bill’s social security at $36,000 at age 67. Donna does not have social security. If they want 100% of their combined salaries at retirement, and are willing to take enough risk to earn an average of 8% on their investments, how much do they need to save?

Using American Funds, what would be an appropriate portfolio? (Do a print out of the portfolio comparison screen of your two most likely portfolios)


Assume 2% inflation and a return of 5% during retirement.



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