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Answer 1-8 with work written out please, thank you.

R2 0.7 0.3 12 1.1 0.9 15 0.6 7 8 0.2 4 Ken Saffaf's 22-year-old daughter Bozena has just ac- cepted a job with Doctor Medical Systems (DMS), a firm specializing in computer services for doctors. DMS offers employees a 401(k) plan to which em- ployees may contribute 5 percent of their salary. DMS will match $0.50 for every dollar contributed. Boze- na's starting salary is $32,000, so she could contribute up to $1,600 and DMS would contribute an addi- tional $800. If she did decide to contribute to the plan, she has the following choices of funds, all managed by Superior Investments. She may select any combina- tion of the funds and change the selection quarterly. a) U.S. Value Funda fund invested solely in stocks of U.S.firms that management believes to be undervalued b) Research & Technology Funda fund specializ- ing in stocks of companies or firms primarily em- phasizing computer services and programming c) Global Equitiesa fund invested solely in stocks of firms with international operations, such as Sony d) Government Bond Funda fund devoted to debt issued or guaranteed by the federal government e) High-Yield Debt-a fund devoted to bonds with non-investment grade ratings f) Money Funda fund investing solely in short- term money market instruments The historic returns of each fund, the standard deviation of the returns, the fund's beta (computed relative to the S&P 500 stock index), and the RP of beta are provided in the table. Ken's employer offers a defined benefit pension plan in which his retirement income depends on the average of his salary for the last five years in which he works. Since the employer guarantees and funds the plan, Ken does not understand Bozena's choices. He believes that she should participate but does not know the advantages and risks associated with each choice. Since Ken is your cousin, he has asked you to answer the following questions to convince Bozena to participate in the 401(k) plan and to help her choose among the six alternative funds. Standard Deviation Return of Return Beta a. USVE 13% 20% b. RTF 10 C. GE 40 1.5 d. GBF 0.3 e. HYD 10 12 0.4 0.3 f. ME 1 0.0 0.0 1. If Bozena participates and the 401(k) earns 10 percent annually, how much will she have accumulated in 45 years (to age 67) even if her salary does not change? 2. If she does not participate and annually saves $1,600 on her own, how much will she have ac- cumulated if she earns 10 percent (before tax) and is in the 20 percent federal income tax bracket? 3. If she retires at age 67, given the amounts in (1) and (2), how much can Bozena withdraw and spend each year for 20 years from each alternative? Assume she continues to earn 10 percent (before tax) and remains in the 20 percent federal income tax bracket. 4. If her salary grows, what impact will the in- crease have on the 401(k) plan? To illustrate the effect on her accumulated funds, assume a $5,000 increment every five years so that she is earning $72,000 in years 41-45 (ages 63-67). 5. What are the risks and potential returns asso- ciated with each of the six alternative funds? 6. Who bears the risk associated with Bozena's retirement income? 7. Why does Ken not have to make these invest- ment decisions? What are the risks associated with his retirement plan? 8. At this point in Bozena's life, which alternative(s) do you suggest she select? R2 0.7 0.3 12 1.1 0.9 15 0.6 7 8 0.2 4 Ken Saffaf's 22-year-old daughter Bozena has just ac- cepted a job with Doctor Medical Systems (DMS), a firm specializing in computer services for doctors. DMS offers employees a 401(k) plan to which em- ployees may contribute 5 percent of their salary. DMS will match $0.50 for every dollar contributed. Boze- na's starting salary is $32,000, so she could contribute up to $1,600 and DMS would contribute an addi- tional $800. If she did decide to contribute to the plan, she has the following choices of funds, all managed by Superior Investments. She may select any combina- tion of the funds and change the selection quarterly. a) U.S. Value Funda fund invested solely in stocks of U.S.firms that management believes to be undervalued b) Research & Technology Funda fund specializ- ing in stocks of companies or firms primarily em- phasizing computer services and programming c) Global Equitiesa fund invested solely in stocks of firms with international operations, such as Sony d) Government Bond Funda fund devoted to debt issued or guaranteed by the federal government e) High-Yield Debt-a fund devoted to bonds with non-investment grade ratings f) Money Funda fund investing solely in short- term money market instruments The historic returns of each fund, the standard deviation of the returns, the fund's beta (computed relative to the S&P 500 stock index), and the RP of beta are provided in the table. Ken's employer offers a defined benefit pension plan in which his retirement income depends on the average of his salary for the last five years in which he works. Since the employer guarantees and funds the plan, Ken does not understand Bozena's choices. He believes that she should participate but does not know the advantages and risks associated with each choice. Since Ken is your cousin, he has asked you to answer the following questions to convince Bozena to participate in the 401(k) plan and to help her choose among the six alternative funds. Standard Deviation Return of Return Beta a. USVE 13% 20% b. RTF 10 C. GE 40 1.5 d. GBF 0.3 e. HYD 10 12 0.4 0.3 f. ME 1 0.0 0.0 1. If Bozena participates and the 401(k) earns 10 percent annually, how much will she have accumulated in 45 years (to age 67) even if her salary does not change? 2. If she does not participate and annually saves $1,600 on her own, how much will she have ac- cumulated if she earns 10 percent (before tax) and is in the 20 percent federal income tax bracket? 3. If she retires at age 67, given the amounts in (1) and (2), how much can Bozena withdraw and spend each year for 20 years from each alternative? Assume she continues to earn 10 percent (before tax) and remains in the 20 percent federal income tax bracket. 4. If her salary grows, what impact will the in- crease have on the 401(k) plan? To illustrate the effect on her accumulated funds, assume a $5,000 increment every five years so that she is earning $72,000 in years 41-45 (ages 63-67). 5. What are the risks and potential returns asso- ciated with each of the six alternative funds? 6. Who bears the risk associated with Bozena's retirement income? 7. Why does Ken not have to make these invest- ment decisions? What are the risks associated with his retirement plan? 8. At this point in Bozena's life, which alternative(s) do you suggest she select

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