Erika and Kitty, who are twins, just received $30,000 each for their 29th birthdays. 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. Erika opened an account with the Safety First Bond Fund, a mutual fund that invests in high-quality bonds whose investors have earned 5% per year in the past. Kitty 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 15% per year in the fund's relatively short history.
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If Erika's fund earns the same returns in the future as in the past, how old will she be when she becomes a millionaire? Round your answer to two decimal places.
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If Kitty's fund earns the same returns in the future as in the past, how old will she be when she becomes a millionaire? Round your answer to two decimal places.
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How large would Erika's annual contributions have to be for her to become a millionaire at the same age as Kitty, assuming their expected returns are realized? Round your answer to the nearest cent.
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Is it rational or irrational for Erika to invest in the bond fund rather than in stocks?