Time Value

Question 1

Bob and Lisa are both married, working adults. They both plan for retirement and consider the $2,000 annual contribution a must. 

First, consider Lisa’s savings. She began working at age 20 and began making an annual contribution of $2,000 at the first of the year beginning with her first year. She makes 13 contributions. She worked until she was 32 and then left full time work to have children and be a stay at home mom. She left her IRA invested and plans to begin drawing from her IRA when she is 65. 

Bob started his IRA at age 32. The first 12 years of his working career, he used his discretionary income to buy a home, upgrade the family cars, take vacations, and pursue his golfing hobby. At age 32, he made his first $2,000 contribution to an IRA, and contributed $2,000 every year up until age 65, a total of 33 years / contributions. He plans to retire at age 65 and make withdrawals from his IRA. 

Both IRA accounts grow at a 7% annual rate. Do not consider any tax effect.
Write a two to three (2-3) paragraph summary in which you:

• Create a chart summarizing the details of the investment for both Bob and Lisa.
• Explain the results in terms of time value of money.

Question 2

Specifically, the following critical elements must be addressed:

V. Macroeconomic Items: The CEO of the company is convinced that financial analysis should hinge only on what is happening internally within the company. Convince him otherwise based on the following:

1. Analyze the implications of interest rate changes on any of the calculations you performed. Be sure to substantiate your claims.
2. How might an issue (negative or positive) within the overall stock market impact the company’s stock valuation numbers, other financialvariables, or its overall portfolio management? Be sure your response is supported by evidence.
3. Analyze the impact of any external factor (i.e., external to the company) discussed throughout the course on the company’s financial position. Besure to justify your reasoning.