You started School of Engineering in Spring 2012. In order to pay for the first

Question

You started School of Engineering in Spring 2012. In order to pay for the first year, you closed on a loan on 31* December. 2011. The loan was for $25, 000 at 3.5% yearly compounded monthly and payable in maximum ten years after graduation. Graduation date is to be considered 31' December. 2015. At the beginning of the each following years of college, you will borrow the same amount under the same financial conditions you borrowed for the first year. In the second year of college, at June 1". in appreciation of your good grades, your Aunt Nancy Goodgal. rewards you with the amount of S5.000. with the condition that the money has to be paid as a lump sum on June 30* for one of your loans (remember: you have four separate loans, one for each year?). Aunt Nancy promised you. also, that on June 1". for the next two years, she was going to match the amount of money you had saved by working as an intern during the Summer time, with the condition that the entire amount of money to be deposited as a lump sum on 30* June in order to be paid for one of your loans. On January 1". 2016. you start to work for Smart Engineering PC in Austin. Texas. Your starting gross salary is $60, 000 a year. Moving to Texas, you have to rent a place to live and to buy a car in order to commute to your job. Moving expenses to Texas. $4, 000. Considering that you are 22 year old when you start the job, what will be your net present worth at 30 year old (assuming beginning of the college 0 as start of the time line)? You can make in projecting your income at Smart Engineering, the following assumptions: 1) Annually Salary Increase 4%. 2) Tax bracket 22%. 3) Annually Inflation 2%. 4) Annually bonus paid at January 1", 10% of the gross salary. Also, you will need to consider that after five years, due to the fact that you successfully passed the PE exam, a raise in salary of $10, 000 is awarded to you. In calculating your net worth present value, you have to figure out your house and car expenses and also you have to plan your household budget for food, clothes, entertainment, vacations etc.

Explanation / Answer

Time 0 when joined college = 2012

For first-year college fees used loan granted on Dec 31, 2011= $25,000/- 3.5% yearly compounded monthly due in 10 years after graduation.

Graduation date assumed = Dec 31st, 2015

Second year, Aunt provides loan on condition that the loan should be paid in lump sum on June 30th Aunt’s loan given on June 1st = $5,000/-

Aunt provides loan for the next 2 years equal to amount saved as an intern, condition that the whole amount to be paid on June 30th to repay the loan.

Question: Is 3.5% levied on the years when the student takes the loan or while repaying the loan duration of 10 years. Please clarify

Formula: 25000 * 0.0354 Or else : 25000 * 0.03510

Job commence on jan1 2016 at age 22

Starting gross salary = 60,000/- per year

After 5 years = $10,000 awarded

Relocate to Texas, rent a house and purchase a car =? Moving expenses = $4,000/-

Assuming the stated moving expense includes house and car

Net worth at 30 = ?

Annually salary increase = 4%

Tax bracket = 22%

Annually Inflation= 2%

Annually bonus paid on Jan 1st = 10% of the gross salary

Add 14 %, subtract 24%

Formula: 60000 * 0.147

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