Terminal value of 401(k) plan for 3 options.

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Answer 1

Question

Chapter 18, Problem 11P

Summary Introduction

To determine: Terminal value of 401(k) plan for 3 options.

Expert Solution & Answer

Explanation of Solution

Note: Assume all the contributions and returns are remains constant over 20 years.

Option: 1

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)=16,500 (0.6){[(1+ 0.12)20−1]0.12} + 16,500(0.4){[(1+0.05)20−10.05]} = $931,554

Option: 2

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)+(Contribution×%Money market securities×(1+r)n−1r)=16,500 (0.5){[(1+ 0.12)20−1]0.12} + 16,500(0.45){[(1+0.05)20−10.05]} +16,500(0.05){[(1+0.03)20−10.03]} =$862,115

Option: 3

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)+(Contribution×%Money market securities×(1+r)n−1r)=16,500 (0.4){[(1+ 0.12)20−1]0.12} + 16,500(0.5){[(1+0.05)20−10.05]} +16,500(0.1){[(1+0.03)20−10.03]} =$792,676

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Students have asked these similar questions

Woolard Supplies (a sole proprietorship) has taxable income in 2024 of $240,000 before any depreciation deductions (§179, bonus, or MACRS) and placed some office furniture into service during the year. The furniture does not qualify for bonus depreciation. (Use MACRS Table 1, Table 2, Table 3, Table 4, and Table 5.) Asset Placed In Service Basis Office furniture (used) March 20 $ 1,400,000 If Woolard elects the maximum amount of §179 for the year, what is the amount of deductible §179 expense for the year? What is the total depreciation that Woolard may deduct in 2024? What is Woolard's §179 carryforward amount to next year, if any?

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Answer 2

Question

Chapter 18, Problem 11P

Summary Introduction

To determine: Terminal value of 401(k) plan for 3 options.

Expert Solution & Answer

Explanation of Solution

Note: Assume all the contributions and returns are remains constant over 20 years.

Option: 1

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)=16,500 (0.6){[(1+ 0.12)20−1]0.12} + 16,500(0.4){[(1+0.05)20−10.05]} = $931,554

Option: 2

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)+(Contribution×%Money market securities×(1+r)n−1r)=16,500 (0.5){[(1+ 0.12)20−1]0.12} + 16,500(0.45){[(1+0.05)20−10.05]} +16,500(0.05){[(1+0.03)20−10.03]} =$862,115

Option: 3

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)+(Contribution×%Money market securities×(1+r)n−1r)=16,500 (0.4){[(1+ 0.12)20−1]0.12} + 16,500(0.5){[(1+0.05)20−10.05]} +16,500(0.1){[(1+0.03)20−10.03]} =$792,676

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Answer 3

Question

Chapter 18, Problem 11P

Summary Introduction

To determine: Terminal value of 401(k) plan for 3 options.

Expert Solution & Answer

Explanation of Solution

Note: Assume all the contributions and returns are remains constant over 20 years.

Option: 1

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)=16,500 (0.6){[(1+ 0.12)20−1]0.12} + 16,500(0.4){[(1+0.05)20−10.05]} = $931,554

Option: 2

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)+(Contribution×%Money market securities×(1+r)n−1r)=16,500 (0.5){[(1+ 0.12)20−1]0.12} + 16,500(0.45){[(1+0.05)20−10.05]} +16,500(0.05){[(1+0.03)20−10.03]} =$862,115

Option: 3

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)+(Contribution×%Money market securities×(1+r)n−1r)=16,500 (0.4){[(1+ 0.12)20−1]0.12} + 16,500(0.5){[(1+0.05)20−10.05]} +16,500(0.1){[(1+0.03)20−10.03]} =$792,676

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Answer 4

Question

Chapter 18, Problem 11P

Summary Introduction

To determine: Terminal value of 401(k) plan for 3 options.

Expert Solution & Answer

Explanation of Solution

Note: Assume all the contributions and returns are remains constant over 20 years.

Option: 1

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)=16,500 (0.6){[(1+ 0.12)20−1]0.12} + 16,500(0.4){[(1+0.05)20−10.05]} = $931,554

Option: 2

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)+(Contribution×%Money market securities×(1+r)n−1r)=16,500 (0.5){[(1+ 0.12)20−1]0.12} + 16,500(0.45){[(1+0.05)20−10.05]} +16,500(0.05){[(1+0.03)20−10.03]} =$862,115

Option: 3

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)+(Contribution×%Money market securities×(1+r)n−1r)=16,500 (0.4){[(1+ 0.12)20−1]0.12} + 16,500(0.5){[(1+0.05)20−10.05]} +16,500(0.1){[(1+0.03)20−10.03]} =$792,676

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Answer 5

Chapter 18, Problem 11P

Summary Introduction

To determine: Terminal value of 401(k) plan for 3 options.

Expert Solution & Answer

Explanation of Solution

Note: Assume all the contributions and returns are remains constant over 20 years.

Option: 1

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)=16,500 (0.6){[(1+ 0.12)20−1]0.12} + 16,500(0.4){[(1+0.05)20−10.05]} = $931,554

Option: 2

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)+(Contribution×%Money market securities×(1+r)n−1r)=16,500 (0.5){[(1+ 0.12)20−1]0.12} + 16,500(0.45){[(1+0.05)20−10.05]} +16,500(0.05){[(1+0.03)20−10.03]} =$862,115

Option: 3

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)+(Contribution×%Money market securities×(1+r)n−1r)=16,500 (0.4){[(1+ 0.12)20−1]0.12} + 16,500(0.5){[(1+0.05)20−10.05]} +16,500(0.1){[(1+0.03)20−10.03]} =$792,676

Answer 6

Chapter 18, Problem 11P

Summary Introduction

To determine: Terminal value of 401(k) plan for 3 options.

Expert Solution & Answer

Explanation of Solution

Note: Assume all the contributions and returns are remains constant over 20 years.

Option: 1

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)=16,500 (0.6){[(1+ 0.12)20−1]0.12} + 16,500(0.4){[(1+0.05)20−10.05]} = $931,554

Option: 2

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)+(Contribution×%Money market securities×(1+r)n−1r)=16,500 (0.5){[(1+ 0.12)20−1]0.12} + 16,500(0.45){[(1+0.05)20−10.05]} +16,500(0.05){[(1+0.03)20−10.03]} =$862,115

Option: 3

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)+(Contribution×%Money market securities×(1+r)n−1r)=16,500 (0.4){[(1+ 0.12)20−1]0.12} + 16,500(0.5){[(1+0.05)20−10.05]} +16,500(0.1){[(1+0.03)20−10.03]} =$792,676

Answer 7

Chapter 18, Problem 11P

Summary Introduction

To determine: Terminal value of 401(k) plan for 3 options.

Answer 8

Expert Solution & Answer

Explanation of Solution

Note: Assume all the contributions and returns are remains constant over 20 years.

Option: 1

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)=16,500 (0.6){[(1+ 0.12)20−1]0.12} + 16,500(0.4){[(1+0.05)20−10.05]} = $931,554

Option: 2

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)+(Contribution×%Money market securities×(1+r)n−1r)=16,500 (0.5){[(1+ 0.12)20−1]0.12} + 16,500(0.45){[(1+0.05)20−10.05]} +16,500(0.05){[(1+0.03)20−10.03]} =$862,115

Option: 3

Terminal value=(Contribution and return×%Equity×(1+r)n−1r)+(Contribution and return×%Bonds×(1+r)n−1r)+(Contribution×%Money market securities×(1+r)n−1r)=16,500 (0.4){[(1+ 0.12)20−1]0.12} + 16,500(0.5){[(1+0.05)20−10.05]} +16,500(0.1){[(1+0.03)20−10.03]} =$792,676