1. How much is allocated to each class of assets?
2. Based on the historical returns in Exhibit 10.2, how much will be in each account when the girls approach college age ten years from now?
3. Since historical returns are averages, how much will be in each account assuming that the worst-and best-case scenarios based on Exhibit 10.4 were to occur? (Be careful to select the appropriate time horizon for the comparisons.)
4. What would have been the impact on the terminal amounts in Question 3 if the allocation had been 40 percent large cap companies and 60 percent small cap companies?
5. Given the values in Question 3, what is the portfolio?s asset allocation after ten years have passed? What steps should be taken?
6. If the Bruckners do not need the funds to finance their daughters? college education, how much will be in each account when they approach retirement in their mid-60s under the original allocation?
7. Based on the rate of inflation in Exhibit 10.2, goods and services costing $100 will cost how much at their retirement? How much annual income is necessary to maintain their standard of living?
8. If their combined life expectancy is 15 years at retirement, can they maintain their standard of living if their funds as a whole earn 7 percent after they retire? What is the future rate of inflation assumed in your answer to the previous question? Is that assumption reasonable?
9. Based on the above answers, what are some suggested courses of actions the Bruckners should consider taking?
MINI CASE
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DATE
Question answered on Jul 22, 2018
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Solution~000685096.zip (18.37 KB)