You have the following assets: $25,000 in US stocks and $20,000 in International Stocks

Finance Dec 21, 2020

You have the following assets: $25,000 in US stocks and $20,000 in International Stocks. You plan on retiring in 30 years. How much will each one of your assets be worth, if the average rate of return for US stocks was 7% and the average rate of return for International Stocks is 3%?

Expert Solution

For US stocks-

Since, they have not mentioned any compunding, we consider simple interest-

SI- PNR/100

SI= 25000*7*30/100

SI= 52500

The US stocks will be worth A= 25000+52500= $77500

For International Stocks-

SI- PNR/100

Si= 20000*3*30/100

SI= 18000

The international stocks will be worth A= 20000+18000= 38000

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