Right after graduating from LSU, you get your dream - job with a starting salary $100,000 annually (paid at the end of each year), which is expected to grow by 6% every year. You plan to stay in that job for 30 years and then retire. You choose to contribute to a 401K 15% of your annual salary (along with your employer's contributions). 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.

Right after graduating from LSU, you get your dream - job with a starting salary $100,000 annually (paid at the end of each year), which is expected to grow by 6% every year. You plan to stay in that job for 30 years and then retire. You choose to contribute to a 401K 15% of your annual salary (along with your employer's contributions). 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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Your goal is to retire in 20 years. You plan to start on this path by saving $200 a month. If you earn 6% annually (using monthly compounding), how much will you have saved in 20 years? Right before you started saving, you were notified by your auto insurance company that you will receive a discount of $20 a month on your auto premium because of your impeccable driving record. If you chose to put those savings towards your retirement goal each month, how much would your retirement account be worth if you save $220 a month for 20 years with an annual return of 6% (compounded monthly)? Please discuss your thoughts on the impact of saving an additional $20 a month over 20 years.
Your employer automatically puts 5 percent of your salary into a 401(k) retirement account each year. The account earns 8% interest. Suppose you just got the job, your starting salary is $50000, and you expect to receive a 3% raise each year. For simplicity, assume that interest earned and your raises are given as nominal rates and compound continuously. Find the value of your retirement account after 35 years Value = $
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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Assume that you will have a 10-year, $20,000 loan to repay when you graduate from college next month. The loan, plus 10 percent annual interest on the unpaid balance, is to be repaid in 10 annual installments of $3,255 each, beginning one year after you graduate. You have accepted a well-paying job and are considering an early settlement of the entire unpaid balance in just three years (immediately after making the third annual payment of $3,255). Prepare an amortization schedule showing how much money you will need to save to pay the entire unpaid balance of your loan three years after your graduation. (Round your answers to the nearest dollar amount. Enter all amounts as positive numbers.) Interest Period Date of Graduation Year 1 Year 2 Year 3 Annual Payment Annual Interest Expense @10% a. Actual net-of-tax interest cost b. Effective interest rate Reduction in Unpaid Balance Unpaid Balance One of the advantages of borrowing is that interest is deductible for income tax purposes. a.…
Assume that you will have a 10-year, $10,000 loan to repay when you graduate from college next month. The loan, plus 8 percent annual interest on the unpaid balance, is to be repaid in 10 annual installments of $1,490 each, beginning one year after you graduate. You have accepted a wellpaying job and are considering an early settlement of the entire unpaid balance in just three years (immediately after making the third annual payment of $1,490). Prepare an amortization schedule showing how much money you will need to save to pay the entire unpaid balance of your loan three years after your graduation. (Round amounts to the nearest dollar.)
After graduation, you plan to work for Dynamo Corporation for 12 years and then start your own business. You expect to save and deposit $8,000 a year for the first 6 years (t = 1 through t = 6) and $16,000 annually for the following 6 years (t = 7 through t = 12). The first deposit will be made a year from today. In addition, your grandfather just gave you a $40,000 graduation gift which you will deposit immediately (t = o). If the account earns 9% compounded annually, how much will you have when you start your business 12 years from now? a. $324,529 b. $344,653 c. $333,819 d. $293,067 e. $342,904
Darnell Johnson wants to know if he can retire in 35 years at age 60, when he plans to do a lot of fishing. Assume the deposit into his retirement account averages $3800 at the end of each year and that the funds earn 6% per year. find amount of annuity and the interest earned.
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When you begin your new job, your employer says they will match any 401k deposits you make by 50% up to 5% of your overall salary annually. When you start your new job as a college grad, you will make $50400 per year and you decide to take full advantage of the matching by depositing 5% of your monthly salary every month. a) How much will YOU be depositing in the 401k each month from your salary? $ b) How much will YOUR EMPLOYER be depositingin the 401k each month? c) How much TOTAL will be deposited into your 401k each month? $ d) How much will you have in the account in 35 years if it pays 7.5% APR? $ e) How much total money will you put into the account after 35 years? $ f) How much total will the employer have put into the account after 35 years? $ g) How much total interest will you earn? $ h) If you choose NOT to take advantage of depositing money into the 401k because you feel you need that money to pay bills now, how much money will you be losing from your employer and interest…
At 24, you finish college and are fortunate enough to have a job waiting for you. Your first job has a starting salary of $75,000 per year. This salary is expected to increase by $5,000 each year. You decide to start saving for retirement right away. Each year you invest 5% of the year’s salary in an account that earns 10% interest, compounded yearly. For simplicity, assume the deposit is made at the END of each year (so if age 24 is t = 0, then the first deposit will be at age 25). If you continue to save in this manner, how much will be in your retirement account immediately after you make the deposit at age 45?
Assume you start a new job and you'll make $100,000/year and will be paid 2x month (equal payments) To save for retirement you'll contribute 10% of every paycheck to your 401(k) where you'll buy stock and bonds and stuff that have an annual return of 7.2%. After working for 48 years, what will this 401K retirement account be worth?

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