Mae, who are twins, just received P30,000 each for their 25th birthday. They both have aspirations to become millionaires. Each plan to make a P5,000 annual contribution to her “early retirement fund” on her birthday, beginning a year from today. Sarah opened an account with the First Bond Fund, a mutual fund that invests in high-quality bonds whose investors have earned 6% per year in the past. Mae invested in the New Issue Bio-Tech Fund, which invests in small, newly issued biotech stocks and whose investors have earned an average of 20% per year in the fund’s relatively short history. Post your Excel file here to answer the questions below: a. Draw a timeline of the cash flows.
Sarah and Mae, who are twins, just received P30,000 each for their 25th birthday. They both have aspirations to become millionaires.
Each plan to make a P5,000 annual contribution to her “early retirement fund” on her birthday, beginning a year from today.
Sarah opened an account with the First Bond Fund, a mutual fund that invests in high-quality bonds whose investors have earned 6% per year in the past.
Mae invested in the New Issue Bio-Tech Fund, which invests in small, newly issued biotech stocks and whose investors have earned an average of 20% per year in the fund’s relatively short history.
Post your Excel file here to answer the questions below:
a. Draw a timeline of the
b. If the two women’s funds earn the same returns in the future as in the past, how old will each be when she becomes a millionaire?
c. How large would Sarah’s annual contributions have to be for her to become a millionaire at the same age as Mae, assuming their expected returns are realized?
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