An employee contributes $16,900 to a 401(k) plan each year, and the company matches 10 percent of this annually, or $1,690. The employee can allocate the contributions among equities (earning 14 percent annually), bonds (earning 7 percent annually), and money market securities (earning 5 percent annually). The employee expects to work at the company 15 years. The employee can contribute annually along one of the three following patterns: Equities Bonds Money market securities Option 1 Option 2 70 % 30 0 100 % 60% 35 5 100% Option 3 50% 40 10 100% 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))

An employee contributes $16,900 to a 401(k) plan each year, and the company matches 10 percent of this annually, or $1,690. The employee can allocate the contributions among equities (earning 14 percent annually), bonds (earning 7 percent annually), and money market securities (earning 5 percent annually). The employee expects to work at the company 15 years. The employee can contribute annually along one of the three following patterns: Equities Bonds Money market securities Option 1 Option 2 70 % 30 0 100 % 60% 35 5 100% Option 3 50% 40 10 100% 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))

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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Your employer is now offering a matching program for employees who participate in the corporate 401(k) plan. If you contribute 6% of your gross income to the account monthly, your employer will match your contribution. If you make $4000 per month, how much will be in your account after 40 years if you can average 7% APR. A. $5,647,090.80 B. $1,259,898.25 C. $23,465.46 D. $2,823,545.40
An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $128,400 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $182 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month. What is the amount of net pay for the employee for the month of January? (Round your intermediate calculations to two decimal places.)
Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.6% * service years x final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is expected to retire at the end of 2044 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $89,000 at the end of 2024 and the company's actuary projects her salary to be $275,000 at retirement. The actuary's discount rate is 7%. At the beginning of 2025, changing economic conditions caused the actuary to reassess the applicable discount rate. It was decided that 8% is the appropriate rate. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: Calculate the effect of the change in the assumed discount rate on the PBO at the beginning of 2025 with respect to Davenport. Note: Do not round intermediate calculations. Round your final answer to…
Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28% federal income tax bracket. Each year you contribute $5,500 tax free to your individual retirement account, IRA. The account earns 7% annual interest. In addition, the amount of tax that you save each year by making these "pre-tax" contributions is invested in a taxable aggressive growth mutual fund averaging 16%. a)How much tax do you save (in $) each year by making the retirement fund contributions? b)Using Table 12-1, much will the retirement fund be worth (in $) in 30 years? (Round your answer to the nearest cent.) c) Although the income from this investment is taxable each year, using Table 12-1, how much will the "tax savings" fund be worth (in $) in 30 years? (Round your answer to the nearest cent.)
Self-employed persons can make contributions for their retirement into a special tax-deferred account called a Keogh account. Suppose you are able to contribute $10,000 into this account at the end of each year. How much will you have at the end of 30 years if the account pays 3% annual interest? (Round your answer to the nearest cent.)
Your company sponsors a 401(k) plan into which you deposit 10 percent of your $120,000 annual Income. Your company matches 75 percent of the first 10 percent of your earnings. You expect the fund to yield 12 percent next year. Assume you are currently in the 31 percent tax bracket. a. What is your annual Investment in the 401(k) plan? (Round your answer to 1 decimal place. (e.g., 32.1)) b. What is your one-year return? (Round your answer to 3 decimal places. (e.g., 32.161)) a. Annual investment b. One-year return 184.000 %
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You just graduated and started your new job. Your starting salary is $50,000/year. Your employer's 401(k) plan states that your employer will contribute 3% of your salary to your 401(k) regardless of whether you make any contributions or not. They will also match your contributions, $1-for $1, up to 4% of your salary. Please answer the following questions: Assume that this annual total contribution is made for 35 years and your 401(k) earns an average annual return of 8%. How much will you have in your account at the end of this time period? Assume Beginning of Period Contributions. Round your answer to the nearest dollar - do NOT enter any cents or your answer will be marked as "incorrect". Also, do not add $ or commas in answer.
1. Company has an plan to provide a pension plan for its one employee. They plan to start saving on 12/31/2020 and will save the same amount at the end of each year for 4 years ending at 12/31/2023. Once the money is accumulated on 12/31/2023. They will place in in an investment that will earn 9% annual interest. The company will pay $6,000 at the start of year year starting 1/1/2025 and continuing 4 more years to 1/1/2029 total of 5 payments. How much money will the company need to have collected at 1/1/2024 in order to start payming the annuity of $6,000 a year earning 9% annual interest rounded to the nearest full dollar? my answer was $30,000 or $66,6667. What am I doing wrong or how do I calculate this question? 2. If the amount of money the company sets aside is $25,000 at 12/31/2023 then if the amount the company needs to set aside every year is $5,887 starting 12/31/2020 then what interest does this account earn annually? my answer was 6% but I don't think that is correct how…
A self-employed internet security specialist deposits $2,000 at the end of every month into a simplified employee pension (SEP) account that earns 4.8% interest compounded monthly. What is the value (in dollars) of the SEP in 25 years? (Round your answer to the nearest cent.)
Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28% federal income tax bracket. Each year you contribute $4,500 tax free to your individual retirement account, IRA. The account earns 6% annual interest. In addition, the amount of tax that you save each year by making these "pre-tax" contributions is invested in a taxable aggressive growth mutual fund averaging 16%. (a)How much tax do you save (in $) each year by making the retirement fund contributions? $ 1260 (b)Using Table 12-1, much will the retirement fund be worth (in $) in 30 years? (Round your answer to the nearest cent.) $ ?
If you need $100,000 at the beginning of each year during your 18 years of returement and you can earn 6% annually during that time. What would you need to contribute at the end of each month for your 43 working years if during that time it can earn 10.8% annually?

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