(a) If you invest $10,000 each year for the next 30 years in small-company stocks how much would you retire with (before taxes)? (b) Suppose you wanted to retire with enough to buy a 1,000 acre spread in the Hill Country with horses, a ranch house and a very large Winnebago ($6 million). If you were willing to put off retirement until 75 and set aside $10,000 each year, what investment categories could you have to be in to achieve this objective? (c) Suppose you were risk-averse and would only invest in long-term government bonds. How many years would you have to save at $10,000 a year to get that ranch?
(a) If you invest $10,000 each year for the next 30 years in small-company stocks how much would you retire with (before taxes)? (b) Suppose you wanted to retire with enough to buy a 1,000 acre spread in the Hill Country with horses, a ranch house and a very large Winnebago ($6 million). If you were willing to put off retirement until 75 and set aside $10,000 each year, what investment categories could you have to be in to achieve this objective? (c) Suppose you were risk-averse and would only invest in long-term government bonds. How many years would you have to save at $10,000 a year to get that ranch?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Please complete without using excel
Transcribed Image Text:9. EASY STREET?
You are now 35 years old and will retire at the age of 65. While you currently have no savings, you are
going to start a personal investment plan now and learn that you can expect the following average annual
returns in various investments:
Investment
Emerging stock market stocks
Small-company U.S. stocks
European and Asian stocks
S&P 500 Index (large U.S. stocks)
Art
Residential real estate
U.S. Corporate bonds
Long-term U.S. government bonds
Silver
After-inflation return
11.5%
9.0%
8.2%
7.2%
4.0%
2.8%
0.9%
0.4%
-0.3%
(a) If you invest $10,000 each year for the next 30 years in small-company stocks how much
would you retire with (before taxes)?
(b) Suppose you wanted to retire with enough to buy a 1,000 acre spread in the Hill Country with horses,
a ranch house and a very large Winnebago ($6 million). If you were willing to put off retirement until
75 and set aside $10,000 each year, what investment categories could you have to be in to achieve
this objective?
(c) Suppose you were risk-averse and would only invest in long-term government bonds. How many
years would you have to save at $10,000 a year to get that ranch?
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