An employee contributes $15,700 to a 401(k) plan each year, and the company matches 10 percent of this annuall. employee can allocate the contributions among equities (earning 12 percent annually), bonds (earning 6 percent ar market securities (earning 4 percent annually). The employee expects to work at the company 15 years. The emplo annually along one of the three following patterns: Option 1 70% Option 2 60% Option 3 50% Equities Bonds 30 35 40 Money market securities 5 10 100% 100% 100% Calculate the terminal value of the 401(k) plan for each of the 3 options, assuming all returns and contributions rem the 15 years. (Do not round intermediate calculations. Round your answers to the nearest whole number. (e.g., Option 1 Option 2 Option 3
An employee contributes $15,700 to a 401(k) plan each year, and the company matches 10 percent of this annuall. employee can allocate the contributions among equities (earning 12 percent annually), bonds (earning 6 percent ar market securities (earning 4 percent annually). The employee expects to work at the company 15 years. The emplo annually along one of the three following patterns: Option 1 70% Option 2 60% Option 3 50% Equities Bonds 30 35 40 Money market securities 5 10 100% 100% 100% Calculate the terminal value of the 401(k) plan for each of the 3 options, assuming all returns and contributions rem the 15 years. (Do not round intermediate calculations. Round your answers to the nearest whole number. (e.g., Option 1 Option 2 Option 3
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:An employee contributes $15,700 to a 401(k) plan each year, and the company matches 10 percent of this annually, or $1,570. The
employee can allocate the contributions among equities (earning 12 percent annually), bonds (earning 6 percent annually), and money
market securities (earning 4 percent annually). The employee expects to work at the company 15 years. The employee can contribute
annually along one of the three following patterns:
Option 1
70%
Option 3
50%
Option 2
Equities
60%
Bonds
30
35
40
Money market securities
5
10
100%
100%
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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