1. Today is your 25th birthday, and you want to save $1.1 Million by your birthday at age 70. If you expect to earn 6% APR compounded monthly in your retirement account, what constant payment at the end of each month must you deposit into the account through your 70th birthday in order to reach your retirement savings goal on your 70th birthday? (Answer to the nearest penny.)
2. After some study of the economy, your forecast for next year is that a boom economy has a 30% chance of occurring, a neutral economy 50%, and a bust economy a 20% chance of occurring. You also estimate that a certain stock would have a return of 32% in a boom economy next year, 20% in a neutral economy , and -11% in a bust economy. The risk-free rate is 4.1%. What is the expected return for this stock next year? (Answer to the nearest tenth of a percent, but do not use a percent sign).
Probability Return Boom Economy 30% 32%
Neutral Economy 50% 20%
Bust Economy 20% -11%
Risk-Free Rate = 4.1%