You earn $48,000 per year, an amount that you expect to grow by 2.5% each year on average.

Your year-0 balance sheet is given in the next sheet. What is your net worth? How is your portfolio of financial assets (not liabilities) allocated between stocks, bonds, and cash? Count "savings" as a financial asset, but not your checking account. Given that you want to retire in 48 years, is this allocation recommended? How would you change it?

1) What is the expected return on your initial portfolio?

2) What will your income be in the year you retire?

Your initial plan is to save the $7,000 each year, all in cash. Ignore the debt that needs to be paid down (suppose you are saving additional money to pay down the debt each year until it's gone). What percentage of your initial income are you saving? What percentage of your final income? How does this compare to the recommendations in the reading?

Assume all three accounts (cash, bonds, and stocks) grow at the indicated rates. How much will you have saved by the time you retire? What is your financial allocation at retirement? If you live for another 35 years and die with exactly zero savings, how much income can you generate per year in retirement, if your savings in retirement earn 5%?

Now repeat the previous question, but instead of saving $7,000 per year in cash, you put it all in the bond fund.

Now repeat the previous question, but instead of saving $7,000 per year in cash, you put it all in the stock fund.

Rate (earned or paid) 0 Account Name Checking Savings Bond Fund Index Fund Credit Card Student Loan Account Type Cash Cash Mutual Fund Mutual Fund Debt Balance $ 1,500.00 $ 4,500.00 $ 10,000.00 $ 5,000.00 $ 900.00 $ 15,000.00 0.75% 4.00% 12.00% 24.00% 9.00% Debt The two rows are given below to help you get started; you will need to fill in the current allocation, and then the subsequent years. Please delete these instructions, and answer all questions in this space, *above* the calculations. You can insert more rows if you need more space (right-click a row number and select "Insert"). year cash % bond % stock % income 0 $ savings cash 48,000.00 $ 7,000.00 $ bond 4,500.00 $ stock 10,000.00 $ total 5,000.00 $ 19,500.00