Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

An employee contributes $ 1 6 , 1 0 0 to a 4 0 1 ( k ) plan each year, and the company matches

An employee contributes $16,100 to a 401(k) plan each year, and the company matches 10 percent of this annually, or $1,610. The employee can allocate the contributions among equities (earning 11 percent annually), bonds (earning 5 percent annually), and money market securities (earning 3 percent annually). The employee expects to work at the company 20 years. The employee can contribute annually along one of the three following patterns:
Option 1 Option 2 Option 3
Equities 60%50%40%
Bonds 404550
Money market securities 0510
100%100%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.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance

Authors: Angelico Groppelli, Ehsan Nikbakht

7th Edition

1438010362, 9781438010366

More Books

Students also viewed these Finance questions