Jenna believes she could easily set aside$4000of her$45,000salary.She is considering putting her savings in a stock fund. She just turned 22 and has a long way to go until retirement at age 65, and she considers this risk level reasonable. The fund she is looking at has earned an average of 8% over the past 15 years and could be expected to continue earning this amount, on average. While she has no current retirement savings, five years ago Jenna's grandparents gave her a new 30-year U.S. Treasury bond witha $10,000 facevalue.

Jenna wants to know her retirement income if she both (1) sells her Treasurybondatitscurrentmarketvalueandinveststheproceedsin the stock fund and (2) saves an additional$4000at the end of each year in the stock fund from now until she turns 65. Once she retires, Jenna wants those savings to last for 25 years until she is90.

1.Suppose Jenna's Treasury bond has a coupon interest rate of4%,paidsemiannually,whilecurrentTreasurybondswith the same maturity date have a yield to maturity of2.3567% (expressedasanAPRwithsemiannualcompounding).Ifshe has just received the bonds 10th coupon, for how much can Jenna sell her treasurybond?

2.Suppose Jenna sells the bond, reinvests the proceeds, and then saves as she planned. If, indeed, Jenna earns an7% annualreturnonhersavings,howmuchcouldshewithdraw eachyearinretirement?(Assumeshebeginswithdrawingthe money from the account in equal amounts at the end of each year once her retirementbegins.)

3.Should Jenna sell her treasury bond and invest the proceeds in the stock fund? Give one reason for and against the plan?