Question
You are planning to save for retirement over the next 30 years. To do this, you will invest $700 a month in a stock account
You are planning to save for retirement over the next 30 years. To do this, you will invest $700 a month in a stock account and $300 a month in a bond account. The return of the stock account is expected to be 11% APR compounded monthly, and the bond account pays an EAR of 6.5%.
A. How much will the stock account be worth when you retire in 30 years?
B. How much will the bond account be worth when you retire in 30 years?
C. When you retire, you will combine your money into an account that pays an EAR of 8%. How much can you withdraw each month from your account assuming a 25-year withdrawal period?
D. How much would you need to invest each month if your stock account is worth $2 million when you retire in 30 years if you earned a 9% annual return?
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