Question
You are planning to save for retirement over the next 30 years. To save for retirement, you will invest $2,000 per month in a stock
You are planning to save for retirement over the next 30 years. To save for retirement, you will invest $2,000 per month in a stock account in real dollars and $625 per month in a bond account in real dollars. The effective annual return of the stock account is expected to be 12 percent, and the bond account will earn 7 percent. When you retire, you will combine your money into an account with an effective return of 9 percent. The returns are stated in nominal terms. The inflation rate over this period is expected to be 4 percent. |
a. | How much can you withdraw each month from your account in real terms assuming a 25-year withdrawal period? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
b. | What is the nominal dollar amount of your last withdrawal? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
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