Calculate the terminal value of the 401(k) plan for each of the 3 options, assuming all returns and contributions remain constant over the 20 years. (Do not round intermediate calculations. Round your answers to the nearest whole number. (e.g., 32))
Calculate the terminal value of the 401(k) plan for each of the 3 options, assuming all returns and contributions remain constant over the 20 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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Transcribed Image Text:An employee contributes $15,900 to a 401(k) plan each year, and the company matches 10 percent of this annually, or $1,590. The
employee can allocate the contributions among equities (earning 12 percent annually), bonds (earning 4 percent annually), and money
market securities (earning 2 percent annually). The employee expects to work at the company 20 years. The employee can contribute
annually along one of the three following patterns:
Equities
Bonds
Money market securities
Option 1
70%
30
0
100%
Option 1
Option 2
Option 3
Option 2
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 20 years. (Do not round intermediate calculations. Round your answers to the nearest whole number. (e.g., 32))
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