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An employee contributes $16,300 to a 401(k) plan each year, and the company matches 10 percent of this annually, or $1,630. The employee can allocate
An employee contributes $16,300 to a 401(k) plan each year, and the company matches 10 percent of this annually, or $1,630. The employee can allocate the contributions among equities (earning 12 percent annually), bonds (earning 5 percent annually), and money market securities (earning 3 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 1 608 40 0 100% Option 2 50% 45 5 Option 3 40% 50 10 1008 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)) Option 1 Option 2 Option 3
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