Amy Parker, a 22-year-old and newly hired marine biologist, has opened a 401(k) retirement plan with her employer. Amy's contribution, plus that of her employer, amounts to $2,200 per year starting at age 23. Amy expects this amount to increase by 3% each year until she retires at the age of 57 (there will be 35 EOY payments). What is the compounded future value of Amy's 401(k) plan, in millions of $, if it earns an annual interest rate of 9% per year? (a) The compounded future value of Amy's 401(k) plan is $ million. (Round to three decimal places. (b) What will be the compounded future value if the plan earns an annual interest rate of 3% per year (instead of 9% per year)? million. (Round to three decimal places.)
Amy Parker, a 22-year-old and newly hired marine biologist, has opened a 401(k) retirement plan with her employer. Amy's contribution, plus that of her employer, amounts to $2,200 per year starting at age 23. Amy expects this amount to increase by 3% each year until she retires at the age of 57 (there will be 35 EOY payments). What is the compounded future value of Amy's 401(k) plan, in millions of $, if it earns an annual interest rate of 9% per year? (a) The compounded future value of Amy's 401(k) plan is $ million. (Round to three decimal places. (b) What will be the compounded future value if the plan earns an annual interest rate of 3% per year (instead of 9% per year)? million. (Round to three decimal places.)
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter27: Time Value Of Money (compound)
Section: Chapter Questions
Problem 6E
Related questions
Question
Amy Parker, a 22-year-old and newly hired marine biologist, has opened a 401(k) retirement plan with her employer. Amy's contribution, plus that of her employer, amounts to $2,200 per year starting at age 23. Amy expects this amount to increase by 3% each year until she retires at the age of 57 (there will be 35 EOY payments). What is the compounded
(a) The compounded future value of Amy's 401(k) plan is $ million. (Round to three decimal places.
(b) What will be the compounded future value if the plan earns an annual interest rate of 3% per year (instead of 9% per year)? million. (Round to three decimal places.)
Expert Solution
Step 1
The FV of an annuity refers to the accumulated worth of the cash flows assuming that they grow at a fixed rate to maturity. It uses the concept of TVM in its calculations.
Step by step
Solved in 3 steps
Recommended textbooks for you
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning
