In: Finance
An employee contributes $16,700 to a 401(k) plan each year, and
the company matches 10 percent of this annually, or $1,670. The
employee can allocate the contributions among equities (earning 14
percent annually), bonds (earning 6 percent annually), and money
market securities (earning 4 percent annually). The employee
expects to work at the company 20 years. The employee can
contribute annually along one of the three following
patterns:
Option 1 | Option 2 | Option 3 | ||||||||||
Equities | 70 | % | 60 | % | 50 | % | ||||||
Bonds | 30 | 35 | 40 | |||||||||
Money market securities | 0 | 5 | 10 | |||||||||
100 | % | 100 | % | 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))