Imagine you are 30 years old in 2019, and would like to retire in 2049 (when...

60.1K

Verified Solution

Question

Finance

Imagine you are 30 years old in 2019, and would like to retirein 2049 (when you are 60 years old). On December 31st 2019, youinvest $10,000 in an investment brokerage account. With the$10,000, you buy 2 mutual funds. $5000 is invested in a stockmutual fund that is expected to return 7% per year, and $5000 in aBond mutual fund that is expected to return 4% per year. Every yearon December 31st, you continue to add $5000 to the IRA, of which$4000 goes into the stock mutual fund and $1000 goes into the bondmutual fund.
a. Assuming you get the returns, anticipated, what will be thebalance in the stock mutual fund on December 31st 2049 (in 30years)? (5 pts)
b. Assuming you get the returns anticipated, what will be thebalance in the bond mutual fund on December 31st 2049 (in 30years)? (5 pts)
c. Given the above, what is the total balance in your account?Your goal is to accumulate $2 Million in this account by the timeyou retire. How much MORE will you need to contribute to theaccount (assume that the entire extra contribution will go into thestock mutual fund) each year to achieve this goal? (5 pts)

Answer & Explanation Solved by verified expert

3.8 Ratings (396 Votes)

The following table shows Values of Stock Mutual Funds and BondMutual funds during 30 yearsa Balance of Stock Mutual See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Imagine you are 30 years old in 2019, and would like to retirein 2049 (when you are 60 years old). On December 31st 2019, youinvest $10,000 in an investment brokerage account. With the$10,000, you buy 2 mutual funds. $5000 is invested in a stockmutual fund that is expected to return 7% per year, and $5000 in aBond mutual fund that is expected to return 4% per year. Every yearon December 31st, you continue to add $5000 to the IRA, of which$4000 goes into the stock mutual fund and $1000 goes into the bondmutual fund.a. Assuming you get the returns, anticipated, what will be thebalance in the stock mutual fund on December 31st 2049 (in 30years)? (5 pts)b. Assuming you get the returns anticipated, what will be thebalance in the bond mutual fund on December 31st 2049 (in 30years)? (5 pts)c. Given the above, what is the total balance in your account?Your goal is to accumulate $2 Million in this account by the timeyou retire. How much MORE will you need to contribute to theaccount (assume that the entire extra contribution will go into thestock mutual fund) each year to achieve this goal? (5 pts)