Explain the common stocks and average return

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Reference no: EM133119592

Please show all your work

Please show all your work

1. You want to retire has a millionaire. How much do you need to put away each month if:  (Current age 34)

  1. You use common stocks and have an average return of 10%?
  2. You use corporate bonds and have an average return of 6%?
  3. You use government bonds and have an average return of 4%?
  4. You put your money in a CD at 2.5% interest rate?

2. You are offered a contract with a signing bonus. If they offered you either $215,000 in cash or $2,000 a month for 15 years, guaranteed, which do you take (based strictly on the math)? Your safe rate of return is 7.5%.

3. You are 30 years old today and planning to retire at age 62. You want to plan your finances for living 35 years past age 62 and die dead broke. You determine you will need $3000 per month from age 62 for the 35 years.

Your plan is to go live in the tropics, on the beach, and live on coconuts and fishing. Also, you need to conclude your retirement savings at age 55 because all your spare money then will be going to your children's education.

The question is how much money you will need to save each month between now and 55 so that you can quit contributing. The expected return on your investments over the whole period is 10% per year. Please ignore inflation.

Reference no: EM133119592

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