| Ruby is 25 and has a good job at a biotechnology company. She currently has $9,200 in an IRA, an important part of her retirement nest egg. She believes her IRA will grow at an annual rate of 7 percent, and she plans to leave it untouched until she retires at age 65. Ruby estimates that she will need $875,000 in her total retirement nest egg by the time she is 65 in order to have retirement income of $20,000 a year (she expects that Social Security will pay her an additional $15,000 a year). |
| a. | How much will Rubys IRA be worth when she needs to start withdrawing money from it when she retires? Use Exhibit 1-A. (Round time value factor to 3 decimal places and final answer to the nearest whole dollar.) |
| Future value of IRA: $_______________ | |
| b. | How much money will she have to accumulate in her companys 401(k) plan over the next 40 years in order to reach her retirement income goal? (Round your answer to the nearest whole dollar.) |
| Required future value of 401(k):$___________ | |
Exhibit 1-A Future Value (Compounded Sum) of $1 after a Given Number of Time Periods Period 4% 10% 11% 1% 2% 3% 5% 6% 7% 8% 9% 1.030 1.070 1.010 1.020 1.040 1.050 1.060 1.080 1.090 1.100 1.110 1.124 1.145 1.166 1.188 1.210 1.082 1.020 1.040 1.061 1.103 1.232 1.093 1.030 1.061 1.125 1.158 1.191 1.225 1.260 1.295 1.331 1.368 1.041 1.082 1.126 1.170 1.216 1.262 1.311 1.360 1.412 1.464 1.518 1.051 1.104 1.159 1.217 1.276 1.338 1.403 1.469 1.539 1.611 1.685 1.062 1.126 1.194 1.265 1.340 1.419 1.501 1.587 1.677 1.772 1.870 1.072 1.149 1.230 1.316 1.407 1.504 1.606 1.714 1.828 1.949 2.076 1.083 1.172 1.267 1.369 1.477 1.594 1.718 1.851 1.993 2.144 2.305 1.094. 1.195 1.305 1.423 1.551 1.689 1.838 1.999 2.172 2.358 2.558 10 1.105. 1.219 1.344 1.480 1.629 1.791 1.967 2.159 2.367 2.594 2.839 11 1.116 1.243 1.384 1.539 1.710 1.898 2.105 2.332 2.580 2.853 3.152 12 1.127 1.268 1.426 1.601 1.796 2.012 2.252 2.518 2.813 3.138 3.498 1.469 1.665 1.886 13 1.138 1.294. 2.133 2.410 2.720 3.066 3.452 3.883 1.732 14 1.149 1.319 1.513 1.980 2.261 2.579 2.937 3.342 3.797 4.310 2.759 3.642 15 1.16 1.346 1.558 1.801 2.079 2.397 3.172 4.785 1.873 3.970 16 1.173 1.373 1.605 2.183 2.540 2.952 3.426 4.595 5.311 1.948 2.693 17 1.184 1.400 1.653 2.292 3.159 3.700 4.328 5.054 5.895 18 1.196 1.428 1.702 2.026 2.407 2.854 3.380 3.996 5.560 6.544 2.527 19 1.208 1.457 1.754 2.107 3.026 3.617 4.316 5.142 6.116 7.263 20 1.220 1.486 1.806 2.191 2.653 3.207 3.870 4.661 5.604 6.727 8.062 1.282 1.641 2.094. 2.666 3.386 4.292 5.427 6.848 8.623 10.835 13.585 1.348 1.811 2.427 3.243 4.322 5.743 7.612 10.063 13.268 17.449 22.892 3.262 40 1.489 2.208 4.801 7.040 10.286 14,974 21.725 31.409 45.259 65.001 50 1.645 2.692 4.384. 7.107 11.467 18.420 29.457 46.902 74.358 117.390 184.570 Period 12% 13% 14% 15% 16% 17% 18% 19% 20% 25% 1.130 1.120 1.140 1.150 1.160 1.170 1.180 1.190 1.200 1.250 1.300 1.254 1.277 1.300 1.323 1.346 1.369 1.392 1.416 440 1.563 1.690 1.405 1.443 482 1.52 1.561 1.602 1.643 1.685 1.728 1.953 2.197 1.574 1.630 689 1.749 1.811 1.874 1.939 2.005 2.074 2.44 2.856 1.762 1.842 925 2.011 2.100 2.192 2.288 2.386 2.488 3.052 3.713 1.974 2.082 2.195 2.313 2.436 2.565 2.700 2.840 2.986 3,815 4.827 2.211 2.353 2.502 2.660 2.826 3.001 3.185 3.379 3.583 4.768 6.276 2.476 2.658 2.853 3.059 3.278 3.5 3.759 4.021 4.300 5.960 8.157 10.604 2.773 3.004 4.108 4.435 5.160 7.451 3.252 3.518 3.803 4.785 4.807 10 3.106 3.395 3.707 4.046 4.411 5.234 5.696 6.192 9.313 13.786 6.176 11 3.479 3.836 4.226 4.652 5.624 7.430 11.642 17.922 12 3.896 4.335 4.818 5.350 5.936 6.580 7.288 8.064 8.916 14.552 23.298 18.190 13 4.363 4.898 5.492 6.153 6.886 7.699 8.599 9.596 10.699 30.288 14 4.887 5.535 6.261 7.076 7.98B 9.007 10,147 11.420 12.839 22.737 39.374 13.590 9.266 10.539 15 5.474 6.254 7.138 8.137 11.974 15.407 28.422 51.186 16 6.130 7.067 8.137 9.358 10.748 12.330 14.129 16.172 18.488 35.527 66.542 7.986 17 6.866 9.276 10.761 12.46B 14.426 16.672 19.244 22.186 44.409 86.504 18 7.690 9.024 10.575 12.375 14.463 16.879 19.673. 22.091 26.623 55.511 112.460 19 8.613 10.197 12.056 14.232 16.777 19.748 23.214 27.252 31.948 69.389 146.190 20 9.646 11.523 13.743 16.367 19.461 23.106 27.393 32.429 38.338 86,736 190.050 05.640 25 17.000 21.231 26.462 32.919 40.874 50.658 62.669 77.388 95.396 264.700 29.960 39.116 66.212 807.790 30 50.950 85.850 111.070 43.370 184.680 237.380 2.620.000 40 93.051 132.760 188.880 267.860 378.720 533.870 750.380 1,051.700 469.800 7,523.200 36,119.000 50 289.000 450.740 700.230 1,083.700 1,670.700 2,566.200 3,927.400 5,998.900 9,100.400 70,065.000 497,929.000
