Finance

a.	How much would the Dunns have to put down if the lender required a minimum 20% down payment? Could they afford it?
b.	Given that the Dunns want to put only $25,000 down, how much would closing costs be? Considering only principal and interest, how much would their monthly mortgage payments be? Would they qualify for a loan using a 28% affordability ratio?
c.	Using a $25,000 down payment on a $215,000 home, what would the Dunns loan-to-value ratio be? Calculate the monthly mortgage payments on a PITI basis.
d.	What home insurance coverage amount would you recommend?  Any additional home insurance endorsements you would recommend?

e.	Considering the Dunns do not have any life insurance, what amounts and type(s) would you recommend for the couple?
withdrawn above your basis may be taxed as ordinary income.

Question #2
a.	Describe the DJIA, S&P 400, S&P 500, NASDAQ Composite, Russell 2000, and Dow JonesWilshire 5000 indexes. Which segments of the market does each measure 1) Dow Jones Wilshire U.S. Large-Cap Index: Stocks ranked 1-750

b.	Describe the concept of asset allocation and note how it works.



Question #3
Elena Diaz is 57 years old and has been widowed for 13 years. Never remarried, she has worked full-time since her husband died—in addition to raising her two children, the youngest of whom is now finishing college. After being forced back to work in her 40s, Elena- first job was in a fast-food restaurant. Eventually, she upgraded her skills sufficiently to obtain a supervisory position in the personnel department of a major corporation, where she- now earning $58,000 a year.
Although her financial focus for the past 13 years has, of necessity, been on meeting living expenses and getting her kids through college, she feels that now she can turn her attention to her retirement needs. Actually, Elena hasn’t done too badly in that area, either. By carefully investing the proceeds from her husband- life insurance policy, Elena has accumulated the following investment assets:
Money market securities, stocks, and bonds	$72,600
IRA and 401(k) plans	$47,400
Other than the mortgage on her condo, the only other debt she has is $7,000 in college loans.
Elena would like to retire in 8 years, and she recently hired a financial planner to help her come up with an effective retirement program. He has estimated that, for her to live comfortably in retirement, she’ll need about $37,500 a year (in today- dollars) in retirement income.
a.	After taking into account the income Elena will receive from Social Security and her company-sponsored pension plan, the financial planner has estimated that her investment assets will need to provide her with about $15,000 a year to meet the balance of her retirement income needs. Assuming a 6% after-tax return on her investments, how big a nest egg will Elena need to earn that kind of income?
b.	Suppose she can invest the money market securities, stocks, and bonds (the $72,600) at 5% after taxes and can invest the $47,400 accumulated in her tax-sheltered IRA and 401(k) at 7%. How much will Elena- investment assets be worth in 8 years, when she retires?
c.	Elena- employer matches her 401(k) contributions dollar for dollar, up to a maximum of $3,000 a year. If she continues to put $3,000 a year into that program, how much more will she have in 8 years, given a 9% rate of return?
d.	Assuming she has not done any estate planning, what would you recommend she do immediately?  Explain.

e.	What would you advise Elena about her ability to retire in 8 years, as she hopes to?