Sarah and Mae, who are twins, just received P30,000 each for their 25th birthday. They both have aspirations to become millionaires. Each plan to make a P5,000 annual contribution to her early retirement fund on her birthday, beginning a year from today. Sarah opened an account with the First Bond Fund, a mutual fund that invests in high-quality bonds whose investors have earned 6% per year in the past. Mae invested in the New Issue Bio-Tech Fund, which invests in small, newly issued biotech stocks and whose investors have earned an average of 20% per year in the funds relatively short history.

Questions:

a. Draw a timeline of the cash flows. b. If the two womens funds earn the same returns in the future as in the past, how old will each be when she becomes a millionaire? c. How large would Sarahs annual contributions have to be for her to become a millionaire at the same age as Mae, assuming their expected returns are realized?