Question

30. Allison and Leslie, who are twins, just received $40,000 each for their 24th birthday. They both have aspirations to become millionaires. Each plans to make a $5,000 annual contribution to her "early retirement fund" on her birthday, beginning a year from today. Allison opened an account with the Safety First Bond Fund, a mutual fund that invests in high-quality bonds whose investors have earned 5% per year in the past. Leslie invested in the New Issue Bio-Tech Fund, which invests in small, newly issued bio-tech stocks and whose investors have earned an average of 15% per year in the fund's relatively short history.

1. If the two women’s funds earn the same returns in the future as in the past, how old will each be when she becomes a millionaire? Do not round intermediate calculations. Round your answers to two decimal places.
   Allison: _______ years
   Leslie: _______ years

2. How large would Allison's annual contributions have to be for her to become a millionaire at the same age as Leslie, assuming their expected returns are realized? Do not round intermediate calculations. Round your answer to the nearest cent.
   $ ___________

3. Is it rational or irrational for Allison to invest in the bond fund rather than in stocks?

   1. High expected returns in the market are almost always accompanied by a lot of risk. We couldn't say whether Allison is rational or irrational, just that she seems to have less tolerance for risk than Leslie does.
   2. High expected returns in the market are almost always accompanied by less risk. We couldn't say whether Allison is rational or irrational, just that she seems to have more tolerance for risk than Leslie does.
   3. High expected returns in the market are almost always accompanied by a lot of risk. We couldn't say whether Allison is rational or irrational, just that she seems to have more tolerance for risk than Leslie does.
   4. High expected returns in the market are almost always accompanied by less risk. We couldn't say whether Allison is rational or irrational, just that she seems to have less tolerance for risk than Leslie does.
   5. High expected returns in the market are almost always accompanied by a lot of risk. We couldn't say whether Allison is rational or irrational, just that she seems to have about the same tolerance for risk than Leslie does.

Choose an answer: __________

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

Home ert Page Layout Formulas Data Review V Add-Ins 義Cut Σ AutoSum , General aCopy Format Painter Fill В า 프. m. d..Δ. Ξミ 迣锂函Merge & Center. 弼皛Conditional-Format. Cell. Insert Delete Format Formatting as Table Styles Paste $, % , Sort &Find & ClearFilter Select Clipboard Font Styles dting Alignment Cells EA701 DZ EA EB EC ED EF 684 ALLISON LESLIE RATE 15% 685 5% 686 DEPOSI 5000 5000 687 FV 1000000 1000000 688 49.15 NO OF YEARS 24.57NPER(EC685,-EC686,,EC687)] 689 -NPER(EB685,-EB686,,EB687)] 690 691 692 4+49.15- 693 a 73.15 YEARS ALLISON WILL BE 694 48.57 YEARS LESLIE WILL BE 24 +24.57 695 696 b ALLISON'S ANNUAL CONTRIBUTION 21588.09 [-PMT(EB685,EC689,,-EB687)] 697 I. High expected returns in the market are almost always accompanied by a lot of risk We couldn't say whether Allison is rational or irrational, just that she seems to have less tolerance for risk than Leslie does. 698 C 699 700 701 702 LOCK BOX DILUTIONDOLLAR COST AVGMORTGAGE EXPO APR OP ear FVA CAP STRU VALUE fv Sheet2 erences: X262 01-06-2019