Ab 54 Economics WRONG ANSWERS Amy Parker, a 22-year-old and newly hired marine biologist, has opened a 401(k) retirement plan withher employer. Amy's contribution, plus that of her employer, amounts to $2,100 per year starting at age23. Amy expects this amount to increase by 4% each year until she retires at the age of 67 (there will be45 EOY payments). What is the compounded future value of Amy's 401(k) plan, in millions of $, if itearns an annual interest rate of 7% per year?(a) The compounded future value of Amy's 401(k) plan is $ 64517.763 million. (Round to threedecimal places.)(b) What will be the compounded future value if the plan earns an annual interest rate of 4% peryear (instead of 7% per year)? $ 31554.128 million. (Round to three decimal places.)

Here we can use the formula: FVGA=P[(1+r)n-(1+g)nr-g] Here given that P = the first payment = $2,100…

(a) The compounded future value of Amy's 401(k) plan is $ 64517.763 million. (Round to three decimal places.) (b) What will be the compounded future value if the plan earns an annual interest rate of 4% per year (instead of 7% per year) ? $31554.128 million. (Round to three decimal places.)

(a) The compounded future value of Amy's 401(k) plan is $ 64517.763 million. (Round to three decimal places.) (b) What will be the compounded future value if the plan earns an annual interest rate of 4% per year (instead of 7% per year) ? $31554.128 million. (Round to three decimal places.)

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Question

Ab 54

Economics

WRONG ANSWERS

Amy Parker, a 22-year-old and newly hired marine biologist, has opened a 401(k) retirement plan with
her employer. Amy's contribution, plus that of her employer, amounts to $2,100 per year starting at age
23. Amy expects this amount to increase by 4% each year until she retires at the age of 67 (there will be
45 EOY payments). What is the compounded future value of Amy's 401(k) plan, in millions of $, if it
earns an annual interest rate of 7% per year?
(a) The compounded future value of Amy's 401(k) plan is $ 64517.763 million. (Round to three
decimal places.)
(b) What will be the compounded future value if the plan earns an annual interest rate of 4% per
year (instead of 7% per year)? $ 31554.128 million. (Round to three decimal places.)

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