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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 After-inflation return 11.5% 9.0% 8.2%

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 After-inflation return 11.5% 9.0% 8.2%

Essentials Of Investments
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
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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?
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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