Adams fellow graduate, Jenna, has been trying to decide how much of her new salary she could save for retirement. Jenna is considering putting $6,600 of her annual savings in a stock fund. She just turned 24 and has a long way to go until retirement at age 65, and she considers this risk level reasonable. The fund she is looking at has earned an average of 7.26% over the past 15 years and could be expected to continue earning this amount, on average. While she has no current retirement savings, six years ago Jennas grandparents gave her a new 30-year U.S. Treasury bond with a $18,000 face value with 3.10% semiannual coupons.

7. Jenna expects her salary to grow regularly. While there are no guarantees, she believes an increase of 3.50% a year is reasonable. She plans to save $6,600 the first year, and then increase the amount she saves by the amount of her annual salary increase. Unfortunately, prices will also grow due to inflation. Suppose Jenna assumes there will be 3.25% inflation every year. In retirement, she will need to increase her withdrawals each year to keep up with inflation.

a. How much money will Jenna have at her retirement?

b. How much can she withdraw at the end of the first year of her retirement in todays dollars?

Hint: Value Jennas Retirement Fund at Retirement Age = FV of Treasury Bond + FV of Jennas Savings

8. Should Jenna sell her Treasury bond and invest the proceeds in the stock fund? Give at least one reason for and against this plan.

9. At the last minute, Jenna considers investing in Coca-Cola stock at a price of $62.50 per share instead. The stock just paid an annual dividend of $1.76 and she expects the dividend to grow at 3.20% annually. If the next dividend is due in one year, what expected return is Coca-Cola stock offering?

Question 7 (12 pts): Step 1: Find Cash flow for Jenna from now until retirement Question 8 (4 pts): Should Jenna sell her Treasury bond and invest the proceeds in the stock fund? Give at least one reason for and against this blan? Question 9 (12 pts): Coca-Cola stock \begin{tabular}{|l|l|} \hline Current Price & \\ \hline Annual Dividend & \\ \hline Dividend Growth & \\ \hline Expected Dividend in one year & \\ \hlinero & \\ \hline \end{tabular} Question 7 (12 pts): Step 1: Find Cash flow for Jenna from now until retirement Question 8 (4 pts): Should Jenna sell her Treasury bond and invest the proceeds in the stock fund? Give at least one reason for and against this blan? Question 9 (12 pts): Coca-Cola stock \begin{tabular}{|l|l|} \hline Current Price & \\ \hline Annual Dividend & \\ \hline Dividend Growth & \\ \hline Expected Dividend in one year & \\ \hlinero & \\ \hline \end{tabular}