Exclusive of pension and social security benefits

Assignment Help Financial Management

Reference no: EM131958955

1. Colin is 40 years old and wants to retire in 27 years. His family has a history of living well into their 90s. Therefore, he estimates that he will live to age 95. He currently has a salary of $150,000 and expects that he will need about 75% of that amount annually if he were retired. He can earn 8 percent from his portfolio and expects inflation to continue at 3 percent. Some years ago, he worked for the government and expects to receive an annuity that will pay him $20,000 in today’s dollars per year beginning at age 67. The annuity includes a cost of living adjustment, which is equal to inflation. Colin currently has $200,000 invested for his retirement. His Social Security benefit in today’s dollars is $30,000 per year at normal age retirement of age 67. How much does he need to accumulate at age 67 exclusive of his pension and Social Security benefits?

a. $2.1 million.

b. $2.2 million.

c. $2.8 million.

d. $2.9 million.

2. If semistrong, or strong, form efficiency exists, then, on average, investors are probably best served by

investing based solely on a stock’s past performance.

investing in index funds rather than in actively managed mutual funds.

avoiding all mutual funds.

randomly purchasing stocks by just throwing darts.

avoiding the stock market altogether.

Reference no: EM131958955

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