Quilici Family Case Study (Time Value of Money Case Study)

S

Quilici Family Case Study (Time Value of Money

Case Study)

Type of Financial Goals

S Near-term (nearly 3 months) → kehidupan sehari-hari (uang jajan, pengeluaran transport, pengeluaran untuk bahan baku jualan sehari-hari)

S Short-term (within 2 years) → lulus kuliah (menyanggupi biaya kuliah selama 2 tahun), kerja (pemasukan gaji tetap, pengeluaran transport, uang makan)

S Mid-term (2-10 years)→ menikah (biaya pernikahan akad &

resepsi), beli rumah (cicilan berapa persen, DP berapa persen)

S Long-term (>10 years)→ dana pensiun (retirement planning, penyisihan gaji per bulan, tunjangan pension di tempat kerja, penjualan asset yang dimiliki), tunjangan pendidikan anak

(reksadana, tabungan pendidikan), membuat bisnis (pemasukan dari bisnis, pengeluaran per bulan)

S KPR (bank apa? Berapa bunga nya?)

Fixed Rate → sampai dengan jatuh tempo bunga tetap (10%) p.a. (per annum/per tahun)

Pokok hutang: 950 juta→ pokok+bunga : 1,9 Miliar Jatuh tempo = 10 tahun

Bunga perbulan: (10%/12)*(1,9 Miliar) = Rp 15.833 juta

S KPR

Floating Rate → bunga akan menyesuaikan dengan kondisi pasar sampai dengan jatuh tempo

Pokok hutang: 950 juta→ pokok+bunga : 1,9 Miliar Jatuh tempo = 10 tahun

Tahun 1-5: bunga = 9%, tahun 6-10: bunga = 12%

Bunga perbulan tahun 1-5 : (9%/12)*(1,9 Miliar) = Rp 14,25 juta Bunga perbulan tahun 6-10: (12%/12)*(1,9 Miliar) = Rp 19 juta

Quilici Family

S Composed of Greg (father), Debra (mother), and 5 year old son Brady.

S Greg is a partner in the family owned commercial painting business.

S Debra is a housewife.

The visit to the financial planner

S Greg and Debra became concerned of their spending, and that they are not putting enough money for their son’s future education needs as well as their own retirement

S They have a Koegh plan (retirement plan for self-employed individuals and small businesses in the US), but they did not account for Brady’s education.

Money Matters

S Greg earns $85,000 a year.

S Greg is an alumnus of Stanford University (Tuition = $20,000 per year)

S Debra graduated from University of North Carolina at Chapel Hill (Tuition = $2,500 per year)

S The couple wants to send Brady to either school when he turns 18, with a slight preference towards Stanford

Money Matters (cont.)

S Tuition is expected to increase at an annual rate of 5%

S Living expenses are estimated to be $6000 per year for both schools (expecting to grow 3% per year)

S The couple can deposit their money into a growth oriented mutual fund (reksadana) at Neuberger and Berman

Management, Inc. (historically earning 12% per annum)

Questions (Pendidikan Anak)

S How much will the tuition and living expenses be per year when Brady is ready to attend? Give an answer for each university.

S Once Brady starts college what will his total expenses be in each of his four years? Again, give an answer for each

university.

S How much money will Greg and Debra have to deposit per month to allow Brady to attend Stanford University? How much money will have to be deposited per month to allow Brady to attend the University of North Carolina? (Consider the cost of all four years.)

Questions (cont.)

S What if the Quilicis feel the Neuberger & Berman mutual fund will only yield 10 percent? How much will have to be deposited per month in order for Brady to attend each

college?

S What is the relationship between the amount that must be deposited monthly by the parents and the future increases in both tuition and living expenses?

Question 1

S Tuition and living expenses for both schools

S Stanford:

Given: $20,000 for tuition (5% increase/year)

$6,000 for living expenses (3% increase/year) Using the Future Value of Money Formula:

FV_n= PV*(1+i)ⁿ

Total Costs for Stanford = (20,000 (1+0.05)^18-5) + (6,000 (1+0.03)¹³)

= $37,712.98 + $8,811.20 (tuition dan living expense di tahun pertama kuliah)

=$46,524.18

Question 1 (cont.)

S Tuition and living expenses for both schools

S University of North Carolina at Chapel Hill:

Given: $2,500 for tuition (5% increase/year)

$6,000 for living expenses (3% increase/year) Using the Future Value of Money Formula:

FV_n= PV*(1+i)ⁿ

Total Costs for UNC = (2,500 (1+0.05)^18-5) + (6,000 (1+0.03)¹³)

= $4,714.12+ $8,811.20

=$13,525.32

Question 2

S Expenses for each of Brady’s four years in both universities

S Stanford University

Using the Future Value of Money Formula (FV_n= PV*(1+i)ⁿ) Year 1: Tuition: $37,712.98 (1+0.05)⁰ = $37,712.98

Year 1: Living Expenses: $8,811.20 (1+0.03)⁰ = $8,811.20 Year 1 Total: $46,524.18

Year 2: Tuition: $37,712.98 (1+0.05)¹ = $39,598.63

Year 2: Living Expenses: $8,811.20 (1+ 0.03)¹= $9,075.54 Year 2 Total: $48,674.17

Question 2 (cont.)

S Expenses for each of Brady’s four years in both universities

S Stanford University

Using the Future Value of Money Formula (FV_n= PV*(1+i)ⁿ) Year 3: Tuition: $37,712.98 (1+0.05)² = $41,578.56

Year 3: Living Expenses: $8,811.20 (1+0.03)² = $9,347.80 Year 3 Total: $50,926.36

Year 4: Tuition: $37,712.98 (1+0.05)³= $43,657.49

Year 4: Living Expenses: $8,811.20 (1+ 0.03)³= $9,628.24 Year 4 Total: $53,285.73

Question 2 (cont.)

S Expenses for each of Brady’s four years in both universities

S University of North Carolina at Chapel Hill

Using the Future Value of Money Formula (FV_n= PV*(1+i)ⁿ) Year 1: Tuition: $4714.12 (1+0.05)⁰ = $4,714.12

Year 1: Living Expenses: $8,811.20 (1+0.03)⁰ = $8,811.20 Year 1 Total: $13,525.32

Year 2: Tuition: $4714.12 (1+0.05)¹ = $4,949.83

Year 2: Living Expenses: $8,811.20 (1+ 0.03)¹= $9,075.54 Year 2 Total: $14,025.37

Question 2 (cont.)

S Expenses for each of Brady’s four years in both universities

S University of North Carolina at Chapel Hill

Using the Future Value of Money Formula (FV_n= PV*(1+i)ⁿ) Year 3: Tuition: $4,714.12(1+0.05)² = $5,197.32

Year 3: Living Expenses: $8,811.20 (1+0.03)² = $9,347.80 Year 3 Total: $14,545.12

Year 4: Tuition: $4,714.12 (1+0.05)³= $5,457.18

Year 4: Living Expenses: $8,811.20 (1+ 0.03)³= $9,628.24 Year 4 Total: $15,085.42

Question 3

S How much money should be deposited per month to allow Brady to go to Stanford? to go to University of North

Carolina? Annuity→ pembayaran sama setiap periode

Using the formula for Annuity Due Payments Given Future Value:

Question 3 (cont.)

S Stanford University

S Year 1: $123.76 FV =46,524.18 Pmt=

46524.18*((12%/12)/((1+12%)^

13*12)-1))-(1/(1+(12%/12)))

S Year 2: $111.53 FV= 48,674.17 Pmt=

48,674.17*(12%/((1+12%)^14)- 1))-(1/(1+12%))

S Year 3:$100.93

S Year 4: $91.65

S Four Year Total: $427.87

S University of North Carolina

S Year 1: $35.98

S Year 2: $32.14

S Year 3: $28.83

S Year 4: $25.95

S Four Year Total: $122.90

Question 4

S Similar to Question 3, only the interest rate was changed (10%

per annum)

Using the formula for Annuity Due Payments Given Future Value:

Question 4 (cont.)

S Stanford University

S Year 1: $145.16 FV =46,524.18 Pmt=

46524.18*((10%/12)/((1+12%)^

13*12)-1))-(1/(1+(10%/12)))

S Year 2: $132.73

S Year 3:$121.90

S Year 4: $112.38

S Four Year Total: $512.17

S University of North Carolina

S Year 1: $42.20

S Year 2: $38.25

S Year 3: $34.82

S Year 4: $

S Four Year Total: $31.81

Question 5

S What is the relationship between the amount that must be deposited monthly by the parents and the future increases in both tuition and living expenses?

There is a positive relationship between the amount that must ne deposited every month and the future increase in tuition and

living expenses.

Task Week 8

S Please build your own financial planner to achieve your own financial goals:

1. Short-term goal (<1-year) 2. Medium-term goal (1-3 year) 3. Long-term goal (>3 year)