Separate bond and stock funds

Assignment Help Corporate Finance
Reference no: EM13210673

Suppose you are 35 years old and want to save for your retirement. You have two options, a bond fund and a stock fund. You decide to put money in both of them. Starting immediately, you will deposit $5,000 into each account (so the total is $10,000 right now). The amount you deposit into each account will increase by 4% each year after that initial deposit; you make the new deposit each year after your account has been credited for its return that year. You expect the bond account to earn 3% per year and the stock account to earn 5% per year. You do this for 20 years, at which time you are 55. At that point, you merge both accounts into one account whose risk is smaller. This account in mostly in Treasury securities and will earn 2% per year.

You continue to contribute the total amounts you would have contributed to the separate bond and stock funds. Ten years later, at age 65, you retire, stop making payments into the account, and begin to take payouts from this account to fund your retirement. If you want the payouts to last 20 years, how much can you take out each year?'

Reference no: EM13210673

Questions Cloud

Stress is likely to speed progression from HIV to AIDS : stress is most likely to speed the progression from HIV to AIDS by:
How to identify product in organic chemistry : What are these 3 techniques? Explain in detail how each technique is used and what information you receive from using them?
What are the tensions in cables ab and ad : The 20-kg mass is suspended from three cables. Cable AC is equipped with a turnbuckle so that its tension can be adjusted and a strain gauge that allows its tension to be measured. If the tension in cable AC is 40 N, what are the tensions in cable..
What is the elevation difference between the high points : An equal-tangent crest vertical curve has a 50 mi/h design speed. The initial grade is +3%. The high point is at station 33+37.43 and the PVT is at station 37+18.26. What is the elevation difference between the high point and the PVT?
Separate bond and stock funds : You continue to contribute the total amounts you would have contributed to the separate bond and stock funds. Ten years later, at age 65, you retire, stop making payments into the account, and begin to take payouts from this account to fund your r..
What kind of preconceptions : Did the European explorers and missionaries confront the Native Americans with an open mind? What kind of preconceptions did they have?
Explain different types of purification techniques : Explain how to purify a product using each of the 3 different techniques, elaborate on what these techniques achieve at the molecular level.
Punishment is effective in suppressing behavior : Punishment is most effective in suppressing behavior when it is
Explain the molarity ofa saturated aqueous solution : Use the following data, as appropriate to estimate the molarity ofa saturated aqueous solution of Sr(IO3)2.

Reviews

Write a Review

 

Corporate Finance Questions & Answers

  How much can sales increase without outside financing

If you need $0.80 in assets for every $1.00 in sales, by how much can sales increase without obtaining additional outside financing?

  What are retained earnings for last year

What are retained earnings for last year and how much debt will be needed for the new project

  Should ccc take the discount

The supplier is now offering a quantity discount of $0.03 per gallon if CCC orders 10,000 gallons at a time. Should CCC take the discount? WHY?

  International banking facilities

How do International banking facilities contribute to interdependence between economies & financial markets, & to global financial stability.

  Analyzing each of profitability ratios for jackson

write a paragraph analyzing each of the profitability ratios for Jackson, Inc. given the following information from previous years and competitors - Net income should have a double underline.

  Show the graph showing total cost expenditures

Show the graph showing total cost expenditures for different numbers of testers employed and  If Globus's goal is to minimize labor costs, how many testers should they use to carry out the testing effort? Explain your rationale.

  Contribution margin and breakeven analysis

Develop the Contribution Margin and Breakeven Analysis on a spreadsheet for the below company

  Finding the best alternatives between two stocks

Suppose you are comparing stock A and B. Given the following data, which one of these two (2) Stocks should you prefer explain your reasoning.

  Determination of monthly payments

Suppose you borrow $350000 to create a new home. The bank charges an interest rate of 5 percent compounded monthly. If you pay back the loan after 25 years find your monthly payments.

  Calculate the expected portfolio return

What is the security market line, and how has it been used in practice to quantify the equity cost of capital faced by a company - calculate the expected portfolio return and the standard deviation of portfolio returns.

  Evaluate what is the net income for the year

Common stock increased by $197 and retained earnings decreased by $123 and evaluate what is the net income for the year

  What is the irr of the project

What is the IRR of the project and what is the NPV of the project, based on the required rate of return of 12%

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd