Suggested solution to Old Afred Minicase

This my individual assignment for Financial Management Semester January 2009

Dear Grandpa Alfred Road,
I. From what I got from the mini-case about how you use your investment portfolio, I would like to give some suggestions about the problem that you are worried. You are worried whether or not you could safely spend all the return from the portfolio. Let get some detail:
1. You expect to spend $1500 for monthly expenses and $500 for travelling and hobbies. So the overall expected expense is $2000. This money is the present value of money today.
2. The government offers you $750 per month, and it will fluctuate according to the consumer price index. If you focus only on $1500 of expense per month, $750 or 50% of it is sponsored by the government. However, if you love to take $2000 as your monthly expenses, only 37.5% is sponsored by the government.
3. Your investment portfolio is $180,000 today. It yields 9% at the end of the year.
4. You have $12,000 in your saving account with the interest of 5%. Yet you don’t want to touch them.
5. Now, it is assumed that the interest keep increasing 4% every year.
Now, I only talk about the money you invested in the portfolio which is $180,000. After a year, the interest return will be:
$196,200 = $ 180,000*1.09

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For overall detail, the word will help you.
Financial Cash Flow- Assingment 1

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5 comments on “Suggested solution to Old Afred Minicase

  1. This was soooo helpful. I compared it with my own solution for the case and found that we’ve gone about it in the same way! I’m so glad I’m not wrong.
    Thank u.

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