Question

Allison and Leslie, who are twins, just received $50,000 each for their 29th 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 6% 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 20% 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.

Answer 1

a: Allison =64.95 years

Leslie = 43.34 years

a		Allison	Leslie
	Initial amount	50000	50000
	Annual contribution	5000	5000
	Rate	6%	20%
	FV required	1000000	1000000
	No of years in which the FV is achieved	35.95	14.34
	Age of the investor	64.95	43.34

b:

Annual contribution required

40628.42

b		Allison
	Initial amount	50000
	No of years in which the FV is required	14.34
	Rate	6%
	FV required	1000000
	Annual contribution required	40628.42

Workings

AutoSave Off Book1- Excel Sign in Comments Share File Home Formulas Review View Help OTell me what you want to do Insert Draw Page Layout Data Σ X Insert A A General Calibri 10 Delete Conditional Format as Find & Cell Sort & Paste A BI U - Format T T T Formatting Table Filter Select Styles Clipboard Alignment Number Styles Cells Editing Font г. fitr B1 A В C E F G 1 a Allison Leslie Allison Initial amount 50000 50000 Initial amount 50000 3 Annual contribution 5000 5000 No of years in which the FV is required D7 4 Rate 0.06 0.2 Rate 0.06 5 FV required FV required 1000000 1000000 1000000 6 No of years in which the FV is achieved NPER(C4,-C3,-C2,C5)=NPER(D4, -D3, -D2,D5) 7 8 -РMТ([Н4, НЗ, -Н2, Н5) 9 Annual contribution required Age of the investor -29+C7 - 29+D7 10 11 12. 13 14 15 16 17 18 19 Sheet2 Sheet3 Sheet6 Sheet7 Sheet8 Sheet1 Sheet4 Sheet5 +100 % E Ready w ENG ха P3 (? 11:23 AM