After Saving Diligently Your Entire Career, You and Your Spouse

question 137

Multiple Choice

After saving diligently your entire career, you and your spouse are ready to retire with a nest egg of $500,000. You need to invest this money in a mix of stocks and bonds that will allow you to earn $4,000 per month for 30 years. What annual interest rate (APR) do you need to earn?

• A) 6.92 percent
• B) 7.45 percent
• C) 8.94 percent
• D) 9.17 percent

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Definitions:

Strike Price

The designated price point at which an option's holder has the right to purchase (in the case of a call option) or to sell (in the case of a put option) the underlying asset or commodity.

European Call

An option contract that gives the holder the right, but not the obligation, to buy an underlying asset at a specified price within a specified time, only exercisable at expiration.

American Call

An option contract that gives the holder the right to buy a security at a set price, called the strike price, at any time up to the expiration date.

Put Option

A financial agreement that permits the holder to choose whether to sell a specific quantity of a principal asset at a fixed price during an established period, without any mandatory commitment.