PRINCIPLES OF FINANCE



PRINCIPLES OF FINANCEFIN 3403-001 & 020EXTRA CREDIT PROJECTSummer 2021SUBMISSION DEADLINE: Wednesday, August 4, 2021 at 11:59 p.m. Projects must be submitted via Canvas. Late projects will not be accepted even if they are only a few seconds late and regardless as to why they are late (even if your computer crashes). After 11:59 p.m. on August 4, Canvas will NOT accept your project. To ensure your project is accepted, it is recommended you submit it prior to 11:59 p.m. on August 4.SUBMISSION DEADLINE: Wednesday, August 4, 2021 at 11:59 p.m. Projects must be submitted via Canvas. Late projects will not be accepted even if they are only a few seconds late and regardless as to why they are late (even if your computer crashes). After 11:59 p.m. on August 4, Canvas will NOT accept your project. To ensure your project is accepted, it is recommended you submit it prior to 11:59 p.m. on August 4.PurposeThe purpose of this project is to apply some of the concepts covered in the course. Specifically, the project requires you to develop a retirement plan. The approach you should take when completing this project is that the only funds you receive at retirement are those that you contribute to specific retirement funds—that is, you should assume that a government retirement plan, such as Social Security, will not be available when you retire. In other words, the only funds that you will have available at retirement will include amounts that you have accumulated to date in investments that specifically are designated for retirement and any amounts that you accumulate in the future.Extra Credit PointsIf you successfully complete the project, up to 10 points will be added to the higher of the scores that you earn on Exam 1 or Exam 2 (although it doesn’t matter to which of the two exam scores the points are added). For example, if you receive a 78 on Exam 2, your grade on the exam will be increased to 88 if you earn full credit for the project. To receive any credit for the project, you must earn at least seven (7) points out of the possible 10 points—that is, you must get a grade of at least 70 percent; otherwise your grade for the project will be 0. The reason for this requirement is to ensure you take the extra credit project seriously enough to submit work that shows you put forth sufficient effort to merit having one of your exam scores adjusted. As a result, the score you earn on the extra credit project will be either 0 or some value ranging from seven (7) points to 10 points.Your extra credit project must follow the format contained in the Word template that you must use for your discussions/explanations and to record the results of your computations ( template-su21.docx). If you do not use the Word template, your project will not be graded, which means you will receive a grade of zero (0) for the work you submit. In addition, you should closely follow the instructions included in this document to ensure your project is graded and you do not lose points for not following the instructions. Prior to starting the extra credit project, it is recommended you work the Time Value of Money—Assignment #1 that is posted on the course website at . If you understand the two problems given in this assignment, you should be able to complete the extra credit project without much difficulty. You must use a spreadsheet to complete the computations required for the project (). The Comprehensive Notes for Chapter 4, which are posted on the course webpage, show how to use the time value of money functions available in Excel. The link for the Chapter 4 notes is . Requirements of the ProjectYou should already be planning for your retirement. For this reason, the extra credit project is designed to make you think about retirement now by requiring you to develop a simple, yet viable plan for achieving your retirement goals. Following are the requirements that must be included in the project. These requirements must be included in (1) the Word template that is available at template-su21.docx and (2) the spreadsheet template that must be used to complete the required computations, which is available at Expectations. Provide a brief description of what you expect your occupation(s) will be from the time you graduate from college until you retire. Include in the description the salary range you expect to earn at the various stages of your career. Salary estimates can be obtained from a variety of sources, including the USF Career Center website, but most of the needed information can be found on the Internet. To search the Internet, use the key phrase “business salaries” to get a listing of salaries in a variety of business areas (the number of hits will be extraordinary). For a particular business area, use a key phrase that includes the specific career you plan to pursue. For example, if you expect to work in the finance area, the key phrase for your search should be either “finance salaries” or “salaries in finance.” Estimate your salary in 10-year increments rather than annually—that is, estimate the average annual salary for the first 10 years of your career, the average annual salary for the second 10 years of your career, and so forth. If you expect to retire in 20 years or sooner, use five-year increments for the salary estimates. When estimating the salaries you expect to earn during your career, you must consider expected inflation rates, percentage raises, and the effects of promotions. For this project, assume inflation will be 2.6 percent annually for as long as you are expected to live. II.Investment Horizon and Life Expectancy. Determine how long you expect to be able to contribute to a retirement fund to meet your retirement goals—that is, the number of years you expect to earn a salary in your chosen career. For example, if you intend to retire at age 65, use the number of years from when you first start your career (upon graduation) until the age of 65. This will constitute your investment horizon, which is the length of time that you expect to be able to invest funds to build your retirement “nest egg.” You must also determine the number of years you expect to live after retirement. To forecast how long you are expected to live, you must complete the following life expectancy quizzes: Free-Online-Calculator-: . Print the results given at the bottom of the quiz along with the suggested actions that you can take to extend your life.John Hancock Life Expectancy Calculator: The results appear in the upper right portion of the second page of questions. University of Connecticut Healthy Life Expectancy Calculator: The results will appear at the bottom of the page. Below the results you will be provided information about how your lifestyle affects your life expectancy. You can access the quizzes by clicking the links given above. If clicking a link does not work, simply copy the link and paste it into the address line of your web browser. The life expectancy quizzes will provide a good estimate as to how long you should expect to live given your current lifestyle. To determine your life expectancy, average the results of the quizzes. You must turn in with your extra credit project a copy of the results for each quiz; so make sure you print the results of each quiz when you complete it. You can use your computer’s print screen function (PrtScn key) to print the results that appear on the last page of each quiz. III.Risk Preferences. Think about the degree of risk you are willing to take when investing to meet your retirement goals, and then describe your risk preferences. Include in your description a discussion of how you think your risk preferences might change as you progress through your career and get closer to your retirement age. Part of this process is determining what risks you are willing to take as you build your retirement fund. To assess your risk preferences, you must complete the following risk tolerance surveys/quizzes. The results will help you determine your risk tolerance level, as well as the composition of a portfolio of investments that is appropriate for you (at this time of your life).: (1) take the risk tolerance quiz, named “What is my risk tolerance,” which can be accessed at . Print the page that gives you the results of the quiz; and (2) take the quiz named “How should I allocate my assets,” which can be accessed at (this link is also given in the area that reports the results for the risk tolerance quiz). Print the page that shows the pie chart with the recommended allocation of investments. risk tolerance quiz: . The result provided on the last page indicates how your investment portfolio should be allocated.Hansard International/Fidelity International: . At the end of the questionnaire, you will see your “risk score.” Below the risk score will be a pie chart that shows the recommended allocation of your funds between stocks and bonds.You can access the quizzes by clicking the links given above. If clicking a link does not work, simply copy the link and paste it into the address line on your web browser. These risk tolerance quizzes will provide a good estimate of your tolerance for taking risk when investing. Be sure to print the results of each quiz you complete, because you must turn in a copy of the results for each quiz with your extra credit project. You can use your computer’s print screen function (PrtScn key) to print the results of the quizzes.IV.Retirement Goals. This is the most important part of the project. In this section, you must describe your retirement goals and determine how these goals can be achieved. You must determine the amount of funds you need at retirement to achieve the retirement goals you establish and how much you should invest each year to ensure sufficient funds are available at retirement. In this part of the project you must develop the numerical details of your retirement plan. All computations must be completed using the spreadsheet template provided with the extra credit project (link: ). If you do not use the spreadsheet for the computations, your project will not be graded (i.e., you will receive a score of zero for the entire project). For this portion of the project, you must complete the following:Determine the average annual dollar amount that you expect to need during your retirement—that is, determine the amount that you want your retirement fund to “pay” you each year during retirement so you can live the lifestyle you desire. To estimate your financial needs at retirement, first determine the dollar amount you would need each year if you were retired today. To estimate the needed retirement income in terms of current dollars, you can talk with persons who are currently retired—that is, ask what their living expenses are and what amount of income they need to meet such expenses. You can also search online to determine the average living expenses and other financial needs of persons who currently are retired. After you estimate your retirement needs in terms of current dollars, you must translate those dollars to the years when you expect to be retired. In other words, when determining your income needs during your retirement years (withdrawals from your retirement fund), you must consider the impact of inflation. (Time Value of Money—Assignment #1, which is posted on the course webpage at , shows how to adjust current values for expected inflation.) For this project, assume that inflation will be 2.6 percent annually from now until the date you retire. After retirement, you will receive a constant payout equal to the average annual dollar amount you determine you want to receive from your retirement fund. You must explain how you determined that the annual retirement amount is appropriate for your retirement plan. pute the total dollar amount your retirement fund must equal at the time you retire so you can withdraw the amount you want to collect from your retirement fund each year as determined in Part A of this section. You should assume the first withdrawal from your retirement account will be on the day you retire. For your computations, use an average rate of return (opportunity cost) for all the years you expect to withdraw funds from your retirement fund. Compute the average rate of return using the information provided at the beginning of Section IV of the spreadsheet template.C.Any funds you currently have invested for your retirement will decrease the future contributions that must be made to your retirement fund during your career to meet your retirement goals. As a result, if you currently have funds invested for retirement purposes, you must compute how much these funds will be worth (grow to) at the time you expect to retire so that you can determine the additional amount you must contribute to your retirement fund in the future to achieve your goals. For the computations in this section, assume the rate of return these funds earn is the average rate determined at the beginning of Section IV in the spreadsheet. If you currently have no funds invested for your retirement, assume you actually have $5,000 invested in a retirement fund at this time.pute the contributions you must make during your professional career to ensure your retirement fund accumulates the total amount you need when you retire. In this section, compute the annual contributions you need to make during your career so your retirement fund has the amount you specified in Part B of this section. You must consider the amount you currently have (or are assumed to have) invested in a retirement fund (computed in Part C), because this amount will decrease the future contributions you must make to accomplish your retirement goals. For your computations, use an average rate of return for each of the years that you expect to contribute to your retirement fund as the base-case scenario (see Section IV of the spreadsheet template that is required for the project). Compute the contributions that are necessary based on estimates for the average return in three different markets—a normal, or average, market, which is based on the expected returns given in Section IV of the spreadsheet, a lower-than-normal, or below-average, market, and a higher-than-normal, or above-average, market. The return that you use for the above-average market should be 3.3?percent greater than the portfolio return given in Section IV of the spreadsheet; the return that you use for the below-average market should be 2.4 percent less than the portfolio return given in Section IV of the spreadsheet. E.Re-compute the contributions needed to accumulate the amount of funds required at retirement (computed in Section IV-B & C) assuming you wait to start making contributions to your retirement fund so that there are 20 years remaining until you retire. If the number of “Years to retirement” that you originally determined in Section II is less than 30 years, then use 50 percent of the number of years that you originally determined to complete this section—that is, if you plan to retire 24 years from today, then use 12 years to complete this section. For the computation in this portion of the project, follow the instructions given in Part D of this section. Compute the annual contributions that must be made to a retirement account for the three different markets described in Section IV, Part?D.F.Discuss the feasibility of your retirement plan (Parts A-E of this section). Do you think the plan is attainable? You should consider the fact that you need some of the income you earn each year during your career to support your existing lifestyle and you must pay taxes. If your plan requires that you invest 80 percent of the annual income you estimated earlier (in Part I) in a retirement fund, then it is not realistic.-1657351905000IMPORTANT! READ CAREFULLY1.The extra credit project must be turned in on time. The project is due at 11:59 p.m. on Wednesday, August 4, 2021.2.It is a good idea to review the Time Value of Money—Assignment #1 that is posted on the course website at . If you understand the two problems given in this assignment, you should be able to complete the extra credit project without much difficulty.3.You must submit your extra credit project on Canvas. You should submit only three documents:a.The Word template. You must use the Word template to provide your answers and discussions/explanations. Simply fill in the requested information on the form. Your project will not be graded (i.e., you will receive a score of zero for the entire project) if any other format is used. The pages that contain the required layout for the project are formatted so you can easily fill in the spaces with the necessary information/discussions. You can use more space than is provided on the form for your discussions. The Word template is available at . b.The Excel spreadsheet template. You must use the spreadsheet template that has been created for the project to complete your computations. If you do not use the spreadsheet template or follow the instructions given, your project will not be graded (i.e., you will receive a score of zero for the entire project). You must either use spreadsheet functions or set up equations in the appropriate cells to solve the computations required in the spreadsheet. Do not plug in any numbers where computations are required or where you should reference a number that is located in another cell in the spreadsheet; otherwise, you will lose valuable points (one point will be deducted for each instance where you enter numbers where either computations are required or you should reference the results from another cell in the spreadsheet). In other words, the appropriate computations should be completed in the spreadsheet, not on your calculator. If you input values (numbers) for all your answers in the spreadsheet rather than using the appropriate functions or setting up equations to complete the computations, your grade on the project will be zero. The Excel template is available at Word document or a PDF file that contains the results of the life expectancy quizzes and the risk tolerance quizzes you completed. You can use the print screen (PrtScn) function on your computer to capture an image of the results of the quizzes. You should place all the results of the quizzes in one file. If you do not attach copies of these quizzes, you will lose 1/2 point for each quiz that is missing.4.This is not a group project; it is an individual project. The project you turn in should be your own work. Neither cheating nor plagiarism will be tolerated. If it appears that your project has been copied, both the person(s) who copied the project and the person whose project was copied will receive a grade of zero (0).5.Do not turn in a project that was completed in a previous semester. If it looks like the project you turn in is from a previous semester, you will receive a grade of zero.center57975500 ................
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