Problem 4: Planning for Life Right after graduating from LSU, you get your dream-job with a starting salary 100,0008 annually that is expected to grow by 5% every year. You plan to stay in that position for 30 years and then retire. You choose to contribute to a 401K, which along with your employer's contributions will receive 15% of your annual salary. Your 401K is expected to make an annual return of 10% until you retire. Assume annual payments and annual compounding. 1. Estimate your final annual salary before retirement. 2. Estimate how much money you would have in your 401K by the time your retire (t = 30). 3. At retirement, you decide to draw an annuity for the next 25 years by placing your funds in an account that earns a guaranteed 5% per year. Estimate your annual pension.
Problem 4: Planning for Life Right after graduating from LSU, you get your dream-job with a starting salary 100,0008 annually that is expected to grow by 5% every year. You plan to stay in that position for 30 years and then retire. You choose to contribute to a 401K, which along with your employer's contributions will receive 15% of your annual salary. Your 401K is expected to make an annual return of 10% until you retire. Assume annual payments and annual compounding. 1. Estimate your final annual salary before retirement. 2. Estimate how much money you would have in your 401K by the time your retire (t = 30). 3. At retirement, you decide to draw an annuity for the next 25 years by placing your funds in an account that earns a guaranteed 5% per year. Estimate your annual pension.
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:Problem 4: Planning for Life
Right after graduating from LSU, you get your dream-job with a starting salary 100,000$ annually
that is expected to grow by 5% every year. You plan to stay in that position for 30 years and then
retire. You choose to contribute to a 401K, which along with your employer's contributions will
receive 15% of your annual salary. Your 401K is expected to make an annual return of 10% until
you retire. Assume annual payments and annual compounding.
1. Estimate your final annual salary before retirement.
2. Estimate how much money you would have in your 401K by the time your retire (t = 30).
3. At retirement, you decide to draw an annuity for the next 25 years by placing your funds in
an account that earns a guaranteed 5% per year. Estimate your annual pension.
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