Allison and Leslie, who are twins, just received $10,000 each for the 25^th birthday. The both aspire to become millionaires. Each plan to make a $5,000 annual contribution to her early retirement fund on her birthday, beginning a year from today. Allison opened an account with the Safety-First Bond Fund, a mutual fund that invests in investment-grade (AAA rated) bonds whose investors have earned 6% per year in the past. Leslie invested in the New Issue Bio-Tech Fund, which invests in small, newly issued bio-tech stocks and whose investors have earned an average 10.8% per year in the funds relatively short history.

a. If the tow womens funds earn the same returns in the future as in the past, how old will each be when she becomes a millionaire?

b. How large would Allisons annual contributions have to be for her to become a millionaire at the same age as Leslie, assuming their expected returns are realized?

c. Is it rational or irrational for Allison to invest in the bond fund rather than in stocks?