Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Business & Finance Posted 29 May 2018 My Price 6.00

Mike and Teresa

Time value of money and retirement

5. Today, Mike and Teresa each have $550,000 in an investment account. No other contributions will be made to their investment accounts. Both have the same goal: They each want their account to reach $1 million, at which time each will retire. Mike has his money invested in risk-free securities with an expected annual return of 3%. Teresa has her money invested in a stock fund with an expected annual return of 9%. How many years after Teresa retires will Mike retire?

 

a.   6.94

b.   9.33

c.  13.29

d.  16.50

e.  20.23

 

I got answer c. 13.29, is that right?

They both start off with $550,000, but in year 8 Teresa has $1,005,421.52 and Mike only has $676,430.63. Mike gets to 1 million in year 22 when he reaches $1,023,162.01. So-- Teresa retired 13.29 years before Mike.

Answers

Maurice Tutor
(5)
Status NEW Posted 29 May 2018 09:05 PM My Price 6.00

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