Each student should answer question 1 A and 1 B. Answer to the question 1 is related to your actual age. Simplify your age to the month, if for example your age is 20 years 1 month and 19 days, use 20 years and 2 months. If your age is 34 years and one month and 3 days, use 34 years and one month, in other words, bring your age to closest month.
(Age is 29 years and 3 months) Assume you drink one coffee per day, 5 days a week. Assume coffee price is $4.00. That makes it $20 per week and $80 per month. Assume you can invest $80 per month in the stock market and assume you can earn 1 % per month on your stock investment or 12 % per year.
A. At your retirement, when you are 65 years old, how much you will have in your retirement account if you switch from coffee drinking to investing in the stock market?
B. Assume that when you get to 65 (retirement age) you switch your funds from stock market investment to bond market investment.Assume you can earn 7% on your bond investment. You decide to withdraw a constant amount each year for the next 20 years when you get to retirement age of 65. How much will be your annual withdrawal from age 66 to 85 (Nothing left at 85) if you switch your coffee drinking to stock and bond investments.