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 $2,200 per year starting at age 23. Amy expects this amount to increase by 3% each year until she retires at the age of 57 (there will be 35 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 9% per year? (a) The compounded future value of Amy's 401(k) plan is $ million. (Round to three decimal places. (b) What will be the compounded future value if the plan earns an annual interest rate of 3% per year (instead of 9% per year)? million. (Round to three decimal places.)
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 $2,200 per year starting at age 23. Amy expects this amount to increase by 3% each year until she retires at the age of 57 (there will be 35 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 9% per year? (a) The compounded future value of Amy's 401(k) plan is $ million. (Round to three decimal places. (b) What will be the compounded future value if the plan earns an annual interest rate of 3% per year (instead of 9% per year)? million. (Round to three decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
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 $2,200 per year starting at age 23. Amy expects this amount to increase by 3% each year until she retires at the age of 57 (there will be 35 EOY payments). What is the compounded
(a) The compounded future value of Amy's 401(k) plan is $ million. (Round to three decimal places.
(b) What will be the compounded future value if the plan earns an annual interest rate of 3% per year (instead of 9% per year)? million. (Round to three decimal places.)
Expert Solution
Step 1
The FV of an annuity refers to the accumulated worth of the cash flows assuming that they grow at a fixed rate to maturity. It uses the concept of TVM in its calculations.
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