Reference no: EM133495819

Joonho and Yunhan were born on the same day, and both turn 25 today. Joonho began putting $4,500 per year into a retirement account on his 21st birthday and he just made a 5th payment into the fund. He will make 40 more annual $4,500 deposits until a 45th and final payment is made on his 65th birthday. Joonho's saving account pays an average annual return of 9%. Upon learning this, Yunhan also wants to save annually for his retirement. He plans to make the first saving on his 26th birthday and make the same annual saving until his 65th birthday. His retirement account pays an average annual return of 5%.

1. If Yunhan wants to end up with the same balance in his account on his 65th birthday as Joonho, how much does his annual saving needs to be?

2. Joonho expects to live another 35 years after retirement. If his account balance is expected to continue to earn 9% annual return, how much can he withdraw every year?

3. (Continued from 2) If Joonho followed the annual withdrawal plan you outlined in part (b) but had an accident and dies 10 years after retirement, what is his remaining account balance?

4. Joonho's account invest in small, newly issued social-network company stocks. Yunhan's account invests mainly in high-quality corporate bonds. Given that Joonho's fund have earned an average return of 9% and Yunhan's account 5%. Is it rational or irrational for Yunhan to invest in bonds rather than social-media stocks?