Your friend Sue has asked you to help her out as she is developing her financial

Your friend Sue has asked
you to help her out as she is developing her financial plan. Help her come up
with a plan for her finances and how she can set herself up for financial
She has an after tax
income of $48,000 and budgets $30,000 for necessary expenses. This leaves
$18,000 to spend on debt and savings annually. (Assume all annuity payments are
in the form of ordinary annuities.)
Part A: Debt
1. Sue has
a current balance of $20,000 on her credit card. She has a minimum monthly
payment of $500 and an APR of 17.25% (divide by 12 to get the monthly rate).
How many months will it take Sue to pay off her credit card debt?
2. Suppose
Sue would like to purchase a new car. She believes she can spend $550 a month
on a car. She has been approved for a 4.50% loan (divide by 12 for monthly
rate) for 36 months. What is the maximum amount she can spend on a car as not
to exceed her $550 a month budget?
Part B: Savings
1. Sue
would like to save up for a down payment on a home she hopes to purchase in 5
years. If she wishes to have $20,000 saved up at the end of five years and can
earn 3.5% annually in her savings account. If she would like to make equal
annual deposits, what amount will her deposits need to be in order to reach her
2. Sue
received $20,000 as an inheritance from her uncle. He stipulated that she save
this money for her 2 children’s college education. She would like to have
$50,000 saved up in 10 years. What annual interest must she earn in order to
reach this goal (she will make no additional deposits to this account)?
Part C: Offering Advice
1. Calculate
the total annual amount of debt and savings payments Sue has planned in the
scenarios above.
2. If she
has any of her $18,000 remaining after her credit card, auto loan, and savings
are made offer advise on how this should be divided (make more than the minimum
payments or make additional deposits to savings). Be sure to offer reasons on
why she should choose to follow your advice rather than spend the cash.
3. How
does time and interest rates impact the present value of a sum of money?
with a minimum of four references (at least 2 scholarly/peer
Use terms, evidence, and concepts from the textbook
Reference that need to be used:
1. Gitman, L. J., & Zutter, C. J. (2014). Principles of managerial finance (7th ed.). Pearson Education.
2. Dhar, J., & Sinha, R. P. (2016). Risk, return and market
timing: A conditional performance benchmarking model. IUP Journal of Financial
Risk Management, 13(2), 7-20.
3. Womack, K. L. & Zhang, Y. (19 Dec 2003). Understanding
risk and return, the CAPM, and the Fama-French three factor model. Available at
4. Do not have an the 4th source necessary. Please use whatever you feel is most appropiate.
If any of the sources do not seem to be a good fit, please contact me.

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