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John Smith graduated 5 years ago, with a Business degree and an emphasis in Finance. John is currently employed as a Sr . Financial Analyst
John Smith graduated years ago, with a Business degree and an emphasis in Finance. John is currently employed as a Sr Financial Analyst in the Corporate Finance department of a multinational corporation. He has progressed well in his career, with the ultimate goal of becoming the companys CFO. Johns current salary of $ has increased at an average rate of per year, with routine merit raises, and he expects to continue doing so
Johns firm, ABC Corporation, has a defined contribution plan k plan in place.
Employees are allowed to contribute up to of their gross annual salary up to a
maximum of $ per year and the firm will match of the employees
contribution. Unfortunately, John has not yet taken Professor Money Mans advice to
Save Start Young, and Pay Yourself First. Instead, John has enjoyed his postcollege, nicesalary life by leasing a new car, renting an apartment and going out to Players every weekend. Now that he has wedding plans on the horizon, John has come to the realization with help from his fiance Jane Doe that its time to start saving while hes still young!
John expects that the lovebirds two largest future expenses will be the cost of a wedding shortterm then later the down payment on a house mediumterm The couple plans to spend $ of their own money on the wedding in twelve months. They also hope to purchase a $ house in years. Janes parents have promised to match their down payment, but only if they manage to save it within years. Talk about motivation to save! Both future spouses agree that John will automate his savings by setting up monthly contributions to his k wedding and house accounts.
PLEASE ANSWER ALL OF THE FOLLOWING
If John Smith had fully taken advantage of his employers k plan and company
match, what would be his current k balance based on his historical last five years
salary and contributions? Assume that John made the maximum contribution every year, with a annual return compounded annually. Second part, what would be his current k balance, had he taken more risk and achieved an annual return of
You cant change the past. John will save better in the future. Assuming he starts in
January of next year at age and contributes the maximum to his k what will be his account balance at age years later Second part, what if John decides to retire early at age years later what will be his account balance? For both calculations, assume an annual rate of return of compounded annually.
Johns fiance Jane Doe, is adamant about getting married in the next year. She is
insisting that John makes saving towards the $ needed a top priority. John recalls that Professor Money Man says not to invest in longterm investments with shortterm money. Therefore, he plans to keep the wedding account in the bank and buy shortterm under year maturity CDs Assuming John stays continuously invested in CDs yielding annual yield for the duration of each monthly deposit from the beginning month Month how much will he have to contribute to the wedding fund every month for the next months?
Jane does acknowledge that saving for a home down payment is not as big of a priority. But both future spouses agree that they should start putting money away towards the goal of $ within five years. John recalls that a mediumterm investing plan should not take as much risk, so he will plan to earn annually with a conservative strategy for their house fund. How much money will he have to save every month for the next months?
Dreaming of early retirement at age how much could John start withdrawing from his k per month, if planning for a life expectancy of years? Assume a more moderate rate of return of annually, compounded annually, during his retirement years.
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