Portfolio = $180,000
• We get $16,200 a year or $1,350 a month in nominal terms.
• Our portfolio grows at a nominal rate of 9% or a real annual rate of 4.8% = (1.09/1.04) - 1
Savings = $12,000
• Our savings is growing at a nominal rate of 5% or a real annual rate of .96% = (1.05/1.04) – 1
Social Security
• We will get $750 a month from social security; this amount will always stay true since it is indexed for inflation. In other words its real interest rate is 0%.
Expenses
• We have $1,500 living expenses and $500 for fun and travel. We should ask if these are real values? In other words, if the real rate at which these expenses are growing is 0%.


1.) Can he safely spend all the interest from his portfolio investment?

o No, because the real value of his monthly interest is $720 = $180,000 * (.048/12) and when we add $750 we have a total amount of $1,470 which does not cover the $2,000 or $1,500 if we were to drop all of his hobby expenses.

2.) How......

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Title: Old Alfred Road
Approximate Word Count: 451
Approximate Pages: 2 (250 words per double-spaced page)

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