Would it be feasible for a person earning $75,000 per year over a 40-year time period to save enough to become a millionaire?
A) No; even if the person saved $10,000 per year (more than 10 percent of their income) , they would have only $400,000 after 40 years.
B) Yes; if a person saved $5,000 per year (6.7 percent of their income) and invested it in a diverse stock portfolio earning a real annual rate of return of 7 percent (the long-term average of the stock market) , the person would be a millionaire after 40 years.
C) No; unless they were extremely fortunate, the person would have to save approximately $50,000 per year (two-thirds of their income) in order to become a millionaire.
D) Yes: but only if they were able to earn an annual real rate of return of at least 15 percent, which is well above the long-term average of stocks.
Correct Answer:
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