Question

Please adhere to the rounding instructions(in red) for calculations and final answer. If the answer is not exact, it will be incorrect. Thanks!

Question 13 0.5 pts You are planning to save for retirement over the next 26 years. To do this, you will invest $505 per month in a stock account and $284 per month in a separate bond account. The return of the stock account is expected to be 12%, and the bond account will pay 6%. When you retire, you will combine your money into an account with an expected 9% return. How much will be in the bond account at retirement? (Round answer to 2 decimal places. Do not round intermediate calculations) Topic: Discounted Cash Flow Valuation 1 pts Question 14

Answer 1

Bond Account:

Monthly deposit = $284
Annual interest rate = 6%
Monthly interest rate = 0.50%
Period = 26 years or 312 months

Accumulated sum = $284*1.005^311 + $284*1.005^310 + .... + $284*1.005 + $284
Accumulated sum = $284 * (1.005^312 - 1) / 0.005
Accumulated sum = $284 * 748.071876
Accumulated sum = $212,452.41

So, you will have $212,452.41 in the bond account at retirement.