Problem:

Maryanne, a baby boomer who turns 50 today, begins to save for retirement with $200,000 that she just receives from a trust fund. She immediately invests this $200,000 in a stock fund. In addition, she plans to contribute $10,000, $15,000, and $20,000, respectively, at the end of the next 3 years to the same stock fund. The stock fund generates a nominal rate of return of 10%, compounded annually.

Required:

(a) What will be the value of her stock fund when she retires at the age of 67?

(b) Right after her retirement, she transfers her nest egg into a conservative investment that compounds monthly. If Maryanne wants to withdraw a fixed monthly payment of $7,000 from this investment indefinitely, what should be the annual rate of return of this conservative investment?

Explain comprehensively and provide step by step solution.