# Assume a hypothetical age. Assume you drink one coffee per day, 5 days a week. Assume the

## Question:

Assume a hypothetical age. Assume you drink one coffee per day, 5 days a week. Assume the coffee price is $4.00.

1. That makes it $20 per week and $80 per month. Assume you can invest $80 per month in the stock market and assume you can earn 11 % per year compounded monthly on your stock investment.

A) What is your assumed age to the closest month? Your assumption must have a month, for example, 22 years is not acceptable since it does not have a month but 22 years and one month are acceptable. So, choose an age that has 1 to 11 months.

B) At your retirement, when you are 68 years old, how much will the total amount of money be if you switch from coffee drinking to investing in the stock market?

C) Assume that when you get to 68 (retirement age) you switch your funds from stock market investment to bond market investment. Assume you can earn 7.5% on your bond investment. You decide to withdraw a constant amount each year for the next 20 years when you get to retirement age How much will be your annual withdrawal from age 69 to 88 (Nothing left at 88, 20 years of withdrawals) if you switch your coffee drinking to stock and bond investments?

D) If you aim to have one million in your retirement account when you get to age 68, how much you must invest in the stock market per month if the stock market monthly average return is 0.83 %?

E) Assume you bought a stock at $60 and 4 months later, you sold it for $80 dollars. Assume no dividends and no transaction commission costs

i. What is your holding period return both in dollars and in percentage?

ii. What is your Effective Annual Return in percentage? Answer all questions using Excel functions, no mathematical solutions. All answers must be done using PV, FV, Rate, and PMT functions.

**Related Book For**