What is ending balance in scenario

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Suppose that you deposit $10,000 in a tax- deferred retirement account today. (Hence we can ignore taxes in this problem.) You select a well-diversi?ed equity mutual fund as your investment. Your account is set up so that all dividends are reinvested. Moreover, you do not make any withdrawals over the next 40 years (your holding period until retirement). The ending balance in your account is $217,245. This balance corresponds to compound annual rate of return of 8%. Now suppose instead that you borrow from your retirement account from time to time. Ignoring the complications involved, suppose that your borrowing reduces your compound annual rate of return by "only" 1.4%. (Hint: think of this of the rate as if it were an investment expense over the life of your retirement account.) What is your ending balance in this scenario?

Reference no: EM133031255

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