Retirement planning. Karen Corvettis would like to retire in 14 years and has specific retirement goals involving set cost of living requirements and several "bucket list" items. a) Karen currently has $457,400 in her retirement account. At this stage in saving she has shifted most of her money to an account that is mostly bonds and has a return rate of 4% per year, compounded monthly. How much will she have in this account at the end of 14 years? b) Karen would also like to go on a grand European tour for several months that she estimates will cost $42,000. She plans to invest this bucket of money in a mutual fund that tracks the entire DJIA, which over the last 30 years has grown at an average rate of 10.7% (continuously). If she puts $8,000 into the account now then how soon would she expect to take her vacation (assuming constant DJIA growth)? c) Karen's last “bucket list" item is a fully restored candy apple red 1976 Chevrolet Corvette Stingray with a 2015 LT4 6.2 V8 engine, which she will call "Karen the Corvette" and estimates that it will cost about $85,000. She decides to buy an Elon Musk themed cryptocoin and hope that it is able to match the actual return of bitcoin over the past 5 years (89.4% compounded continuously). How much would she need to invest to meet her goal in 10 years?
Retirement planning. Karen Corvettis would like to retire in 14 years and has specific retirement goals involving set cost of living requirements and several "bucket list" items. a) Karen currently has $457,400 in her retirement account. At this stage in saving she has shifted most of her money to an account that is mostly bonds and has a return rate of 4% per year, compounded monthly. How much will she have in this account at the end of 14 years? b) Karen would also like to go on a grand European tour for several months that she estimates will cost $42,000. She plans to invest this bucket of money in a mutual fund that tracks the entire DJIA, which over the last 30 years has grown at an average rate of 10.7% (continuously). If she puts $8,000 into the account now then how soon would she expect to take her vacation (assuming constant DJIA growth)? c) Karen's last “bucket list" item is a fully restored candy apple red 1976 Chevrolet Corvette Stingray with a 2015 LT4 6.2 V8 engine, which she will call "Karen the Corvette" and estimates that it will cost about $85,000. She decides to buy an Elon Musk themed cryptocoin and hope that it is able to match the actual return of bitcoin over the past 5 years (89.4% compounded continuously). How much would she need to invest to meet her goal in 10 years?
PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN:9781337117005
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter2: Using Financial Statements And Budgets
Section: Chapter Questions
Problem 6FPE
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Transcribed Image Text:Retirement planning. Karen Corvettis would like to retire in 14 years and has specific
retirement goals involving set cost of living requirements and several "bucket list" items.
a) Karen currently has $457,400 in her retirement account. At this stage in saving she has
shifted most of her money to an account that is mostly bonds and has a return rate of 4% per
year, compounded monthly. How much will she have in this account at the end of 14 years?
b) Karen would also like to go on a grand European tour for several months that she estimates
will cost $42,000. She plans to invest this bucket of money in a mutual fund that tracks the
entire DJIA, which over the last 30 years has grown at an average rate of 10.7% (continuously).
If she puts $8,000 into the account now then how soon would she expect to take her vacation
(assuming constant DJIA growth)?
c) Karen's last "bucket list" item is a fully restored candy apple red 1976 Chevrolet Corvette
Stingray with a 2015 LT4 6.2 V8 engine, which she will call "Karen the Corvette" and estimates
that it will cost about $85,000. She decides to buy an Elon Musk themed cryptocoin and hope
that it is able to match the actual return of bitcoin over the past 5 years (89.4% compounded
continuously). How much would she need to invest to meet her goal in 10 years?
d) What is the effective rate of return for bitcoin (89.4% compounded continuously) over the last
five years?
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