An employee contributes $16,900 to a 401(k) plan each year, and the company matches 10 percent of this annually, or $1,690. The employee can allocate the contributions among equities (earning 14 percent annually), bonds (earning 7 percent annually), and money market securities (earning 5 percent annually). The employee expects to work at the company 15 years. The employee can contribute annually along one of the three following patterns: Equities Bonds Money market securities Option 1 Option 2 70 % 30 0 100 % 60% 35 5 100% Option 3 50% 40 10 100% Calculate the terminal value of the 401(k) plan for each of the 3 options, assuming all returns and contributions remain constant over the 15 years. (Do not round intermediate calculations. Round your answers to the nearest whole number. (e.g., 32))

An employee contributes $16,900 to a 401(k) plan each year, and the company matches 10 percent of this annually, or $1,690. The employee can allocate the contributions among equities (earning 14 percent annually), bonds (earning 7 percent annually), and money market securities (earning 5 percent annually). The employee expects to work at the company 15 years. The employee can contribute annually along one of the three following patterns: Equities Bonds Money market securities Option 1 Option 2 70 % 30 0 100 % 60% 35 5 100% Option 3 50% 40 10 100% Calculate the terminal value of the 401(k) plan for each of the 3 options, assuming all returns and contributions remain constant over the 15 years. (Do not round intermediate calculations. Round your answers to the nearest whole number. (e.g., 32))

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

An employee contributes $15,900 to a 401(k) plan each year, and the company matches 10 percent of this annually, or $1,590. The employee can allocate the contributions among equities (earning 12 percent annually), bonds (earning 4 percent annually), and money market securities (earning 2 percent annually). The employee expects to work at the company 20 years. The employee can contribute annually along one of the three following patterns: Equities Bonds Money market securities Option 1 70% 30 0 100% Option 1 Option 2 Option 3 Option 2 60% 35 5 100% Option 3 50% 40 10 100% Calculate the terminal value of the 401(k) plan for each of the 3 options, assuming all returns and contributions remain constant over the 20 years. (Do not round intermediate calculations. Round your answers to the nearest whole number. (e.g., 32))
Employee B has the opportunity to contribute to a payroll deduction 401(k) plan at work. This employee selects an option that averages 3% per year compounded monthly and contributes $250 per month. How much should he have in the account in 10 years? A payroll-deduction plan is considered to be an ordinary annuity.
DealsToday offers its employees a defined contribution plan. The company matches employee contributions at 75% up to 8% of salary. Scott works for DealsToday, and he earns an annual salary of $69,495. Suppose Scott decides to contribute $150 per month to his retirement account. What is the total contribution to his retirement account each year?
How do I solve the following: An employee that has 35 years until retirement has a current salary of $30,000 per year. The employee's wages are expected to increase by 5% annually over the next 35 years. The employer has a defined benefit pension plan in which a worker’s annual pension benefit is equal to 2% of the employee's final year’s wage for each year of employment, multiplied by the number of years of employment. The employee's expected annual pension benefit is calculated as $115,836.32. The cmpany contributes to the pension plan each year for the next 35 years. Assume 10% actuarial rate of return, and 30 years of retirement life. At the employee's time of retirement, what does the accumulated amount in the employee's pension plan have to be in order to meet the employee's annual pension benefit each year in 30 years?
OHaganBooks.com has just introduced a retirement package for its employees. Under the annuity plan operated by Sleepy Hollow, the monthly contribution by the company on behalf of each employee is $700. Each employee can then supplement that amount through payroll deductions. The current rate of return of Sleepy Hollow's retirement fund is 7.1%. Jane Callahan, the website developer at OHaganBooks.com, plans to retire in 10 years. She contributes $1,000 per month to the plan (in addition to the company contribution of $700). Currently, there is $40,000 in her retirement annuity. How much (to the nearest dollar) will it be worth when she retires? (Assume interest is compounded monthly.) $
An individual entering the workforce plans to make monthly contributions to a retirement account in the amount of $250 beginning at the end of next month and continuing for the next 40 years. (a) If the retirement account earns 8% compounded monthly, find the amount expected in the retirement account at the end of 40 years. Round to the nearest penny. (b) If the retirement account charges a maintenance fee of 2% each year, the net interest rate earned by the retiree becomes 6%. Find the amount expected in the retirement account. Round to the nearest penny. (c) Compare the answers from part (a) and part (b) above to determine the total percent lost by the retiree due to the fee. Round your answer to two decimal places. % lost
Joshua Company has a define contribution plan that covers its existing employees. The terms of the plan require Joshua to contribute 5% of the annual employee salaries to the retirement plan each year. The payroll shows the annual salaries and contributions made as follows: Year Gross Payroll Contributions made 2021 P10,000,000 P670,000 2022 12,200,000 430,000 How much is the benefit expense in 2022 profit or loss and the amount of prepaid (accrued) banefit as of December 31, 2022?
Joshua Company has a define contribution plan that covers its existing employees. The terms of the plan require Joshua to contribute 5% of the annual employee salaries to the retirement plan each year. The payroll shows the annual salaries and contributions made as follows: Year Gross Payroll Contributions made 2021 P10,000,000 P670,000 2022 12,200,000 430,000 How much is the benefit expense in 2022 profit or loss and the amount of prepaid (accrued) banefit as of December 31.2022? O P430.000 and P180,000 accrued O P610,000 and P180,000 accrued O P430,000 and P10,000 prepaid O P610.000 and P10.000 prepaid
The management of a certain company deposits P1,500.00 for each of its employees in a retirement fund at the end of each year for the next 12 years. How much is each employee’s fund at the end of 12 years if it accumulates 8% for the first 8 years and 6% for the last 4 years?
Suppose that Jerry's 401(k) will have an average APR of 8% for 40 years. Assume both he and his employer each deposit $175.00 each month over that time. How much money will Jerry and his employer deposit into the account over 40 years? How much interest will be earned? (175.00 401(k) contribution )
Tyler Winkle's employer in Pittsburgh makes a matching contribution of $2,000 a year to his 401(k) retirement account at work. If the dollar amount of the employer's contribution increases 6 percent annually, how much will the employer contribute to the plan in the twentieth year from now? Round Future Value of a Single Amount in intermediate calculations to four decimal places
Mai Lee has contributed $250 at the end of each month into her company's employee retirement account for the past 10 years. Her employer has matched her contribution each month. If the account has earned interest at the rate of 3%/year compounded monthly over the 10-year period, determine how much Mai Lee now has in her retirement account. (Round your answer to the nearest cent.)

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