《金融学（第二版）》讲义大纲及课后习题答案详解 第5章.doc

Instructor’s Manual Chapter 5 Page PAGE79 CHAPTER 5 LIFE-CYCLE FINANCIAL PLANNING Objectives In this chapter you will learn how to analyze: How much to save for retirement. Whether to defer taxes or pay them now. Whether to get a professional degree. Whether to buy or rent an apartment. How to minimize estate taxes. Outline TOC \f 5.1 A Life-Cycle Model of Saving 5.2 Taking Account of Social Security 5.3 Deferring Taxes Through Voluntary Retirement Plans 5.4 Should You Invest in a Professional Degree? 5.5 Should You Buy or Rent? Summarytc \l 1 “Summary” In making lifetime saving/consumption decisions: (1) Do the analysis in real terms (constant dollars) to simplify the calculations and to avoid having to forecast inflation. (2) Start by computing the present value of your lifetime resources. The present value of your lifetime spending cannot exceed this amount. Social security or any other forced saving program will offset voluntary saving. It may have a positive or a negative effect on the present value of your total lifetime resources. Tax-deferred retirement accounts are advantageous because they allow you to earn a before-tax rate of return until money is withdrawn from the account. They are advantageous if you are in the same tax bracket before and after you retire, and even more so if your tax bracket is lower after you retire. Getting a professional degree can be evaluated as an investment in human capital. As such, it should be undertaken if the present value of the benefits (such as increase in your earnings) exceeds the present value of the costs (such as tuition and forgone salary.) In deciding whether to buy or rent an apartment or a consumer durable, choose the alternative with the lower present value of costs Solutions to Problems at End of Chapter Saving for Retirement Assume that you are 40 years old and wish to retire at age 65. You expect to be able to average a 6% annual rate of interest on your savings over your lifetime (both prior to r