Math 123 Quantitative Reasoning Fall 2016 Financial Project Due: December 1, 2016 As an Ivy Tech student, you are making an investment in your...

Financial Project

Due: December 1, 2016

As an Ivy Tech student, you are making an investment in your education. This project will look at how that investment will pay off when you graduate and get a job in your desired field.

Assume that the median annual income for a high school graduate is $25,000. This is the value that you will be comparing your expected salary and lifestyle to in the following areas:

1. Income Comparison: Research your expected income after you graduate college. Assume you obtain whatever level of education needed to enter your desired area of employment and that you will have a salary equivalent to the annual Median salary found at: http://www.bls.gov/oes/current/oes_in.htm#27-0000 *You will need to click on your desired career in order to see the Annual Median wage. (MEDIAN, not AVERAGE)

   • Your reflection paper should explain your desired area of employment and report the median annual salary for that position.

• Your reflection paper should contain at least one statement comparing your expected salary to the median income of a high school graduate.

1. Housing Comparison: Assume that you plan to spend 25% of your gross income on house payments. Assume a fixed rate 30-year mortgage with an APR of 3.5%. Use Excel to calculate the highest price for a house you could afford with your predicted salary and the highest price for a house that a high school graduate could afford.

   • Your reflection paper should contain at least one statement comparing the price of the house that a high school graduate can afford and that you expect to be able to afford.

• Explain in your reflection paper what Excel function was used for these calculations.

• Reflect on the price of the home that you could afford. Do these values meet your needs and expectations, or should you consider other housing options?

1. Retirement: Your future employer will match your 401k investments 50%, but a high school graduate does not receive help with their retirement plan from their employer. You are able to invest 5% of your salary in a 401k investment that will earn a 7% annual return. Use Excel to determine the balance in the accounts after 40 years of investments for your predicted salary and for a high school graduate’s salary. Experts recommend having 10 times your salary in funds when you retire. How many years of investing would it take each of you to reach this savings goal?

   • Your reflection paper should contain at least one statement comparing the value of the 401k investment for the high school graduate and for your expected salary.

• Explain in your reflection paper what Excel function was used for these calculations and how the investment values were determined.

• Explain and compare how many years it takes for the investments to reach the savings goal (ten times the salary) for your predicted salary and for a high school graduate’s salary.

• Reflect on the values you found, do these values meet your expectations, or will you change your investment strategy?

Raises: The high school graduate’s income is not expected to increase over the next four years, but assume that your field will guarantee you a 3.25% raise on your annual salary each year for the next four years. Determine what your new annual salary will be after four years of raises. Using this new income, recalculate the value of a house that you could afford from part 2. Also recalculate the 40 year 401k information from part 3 using this new income (use the new income and 40 years for this, don’t worry about the complication of 4 years of changes).

• Your reflection paper should contain at least one statement comparing your initial salary with the salary after 4 years of raises.

• Your paper should explain how you determined the increased salary.

• Your paper should address how your increased salary might impact the house you can afford and 401k values. Include the updated values for the house and your 401k.

Project Checklist:

• Explanation of career choice and the salary for this career.

• Comparison of your expected salary vs. hs graduate.

• Comparison of house you could afford with your expected salary vs. hs grad.

• Explanation of how house value was determined.

• Comparison of 401k value from your expected salary vs. hs grad.

• Explanation of how the 401k value is determined.

• Comparison of length of time you and the hs grad must invest to reach the savings goal.

• Explanation of how the length of time to reach savings goal is determined.

• Comparison of starting salary to salary after 4 years of raises.

• Explanation of how increased salary is determined.

• Discussion of how the increased salary might affect house and 401k values. Including specific quantities.

• Paper should be elegant and coherent with a logical organization.

• Paper should be free of grammatical and mechanical errors.

• Paper must contain at least two relative change statements.

In addition to addressing the statements above, your project should:

• Contain your name, course name and project name.

• Be well organized and easy to follow.

• The paper should be in paragraph form (not just bulleted answers!).

• Be clear to by someone who is not familiar with the project.

• Provide support for your statements e.g. explain how values were found.

• Give specific values (i. e. quantify statements).

• Use appropriate representations (tables, color, formatting) that helps the reader understand the project.

• Contain a variety of comparison statements, including the use of relative change sentences.

• Project should be your original work, copying someone else’s work is cheating, sharing your work with someone else is cheating.

These instructions cover the MINIMUM expectations of this project. Students are encouraged to make additions beyond these items.