Compute the balance in retirement account

Assignment Help Financial Management

Reference no: EM13846723

Stock returns and your retirement account: Suppose your retirement account has a balance today of $25,000 and you are 20 years old. If you are invested in a diversified portfolio of stocks, you might hope that the historical return of about 6% continues into the future. Consider how the balance in your retirement account evelves as you age under the different assumptions below.

a) Compute the balance in your retirement account when you will be 25, 30, 40, 50, and 65 years old assuming the average annual rate of return is 6%. Assume there are no deposits or withdrawals in this account, so the original balance just accumulates.

b) Do the same thing for rate of return of 5% and 7%. How sensitive is the calculation to the rate of return?

c) Plot your retirement account balance for these three scenarios (6%, 5%, 7%) on a standard scale.

d) Do the same thing with a ratio scale.

Reference no: EM13846723

Questions Cloud

What is the cost of goods sold for the company : Saunders Corp. has current liabilities of $500,000, a quick ratio of 0.92, inventory turnover of 6.8, and a current ratio of 1.3. What is the cost of goods sold for the company?

What was the cash coverage ratio for the year : Hedgepeth Inc.’s net income for the most recent year was $16,185. The tax rate was 40 percent. The firm paid $3,906 in total interest expense and deducted $2,585 in depreciation expense. What was the cash coverage ratio for the year?

The ethical implications of insider trading : Write a 3-5 page essay about the ethical implications of insider trading. Financial statements and information are very important to investors. If some of this information is used or shared before it is released to the public, this could cause substa..

What is this firms debt–equity ratio : Kindle Fire Prevention Corp. has a profit margin of 4.8 percent, total asset turnover of 2.0, and ROE of 19.34 percent. What is this firm’s debt–equity ratio?

Compute the balance in retirement account : Stock returns and your retirement account: Suppose your retirement account has a balance today of $25,000 and you are 20 years old. If you are invested in a diversified portfolio of stocks, you might hope that the historical return of about 6% contin..

What is the total amount jennifer must repay at maturity : On September 14, Jennifer Rick went to Park Bank to borrow $2,500 at formula9.mml interest. Jennifer plans to repay the loan on January 27. Assume the loan is on ordinary interest. What interest will Jennifer owe on January 27? What is the total amou..

Spot rate-estimate the profit or loss per unit : The spot rate of the New Zealand dollar is $.70. A call option on New Zealand dollars with a 1-year expiration date has an exercise price of $.71 and a premium of $.02. A put option on New Zealand dollars at the money with a 1-year expiration date ha..

What is the price per share of bremmers stock : If Bremmer's eranings per share is $1.35, what is the price per share of Bremmer's stock? Using the price per share in part (A) determine the price per book ratio if Bremmer's equity book value per share is $9.58.

Excess capacity-how large of increase in fixed assets : Walter Industries has $8 billion in sales and $1.3 billion in fixed assets. Currently, the company's fixed assets are operating at 95% of capacity. If Walter's sales increase 12%, how large of an increase in fixed assets will the company need to meet..

User Account

All Pages