Imagine you are 30 years old in 2019, and would like to retire in 2049...
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Imagine you are 30 years old in 2019, and would like to retire in 2049 (when you are 60 years old). On December 31st 2019, you invest $10,000 in an investment brokerage account. With the $10,000, you buy 2 mutual funds. $5000 is invested in a stock mutual fund that is expected to return 7% per year, and $5000 in a Bond mutual fund that is expected to return 4% per year. Every year on December 31st, you continue to add $5000 to the IRA, of which $4000 goes into the stock mutual fund and $1000 goes into the bond mutual fund.
a. Assuming you get the returns, anticipated, what will be the balance in the stock mutual fund on December 31st 2049 (in 30 years)? (5 pts)
b. Assuming you get the returns anticipated, what will be the balance in the bond mutual fund on December 31st 2049 (in 30 years)? (5 pts)
c. Given the above, what is the total balance in your account? Your goal is to accumulate $2 Million in this account by the time you retire. How much MORE will you need to contribute to the account (assume that the entire extra contribution will go into the stock mutual fund) each year to achieve this goal? (5 pts)
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