Question

In: Finance

Consider that you are 40 years old and have just changed to a new job. You...

Consider that you are 40 years old and have just changed to a new job. You have $141,000 in the retirement plan from your former employer. You can roll that money into the retirement plan of the new employer. You will also contribute $6,300 each year into your new employer’s plan.

If the rolled-over money and the new contributions both earn an 7 percent return, how much should you expect to have when you retire in 25 years? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Solutions

Expert Solution

Value of investments in 25 Years

$ 11,63,736.94

Working:

Step-1:Calculation of Future Value of $ 141,000

Future Value of Present Value

Present Value x Fuure Value of 1

$ 1,41,000

5.42743

$ 7,65,268.00

Workking:

Future Value of 1

(1+i)^n

Where,

(1+0.07)^25

5.42743

Step-2:Calculation of future value of annual contribution

Future Value of annual contribution

Annual contribution x future value of annuity of 1

$ 6,300

63.24904

$ 3,98,468.94

Working:

Future Value of annuity of 1

(((1+i)^n)-1)/i

Where,

(((1+0.07)^25)-1)/0.07

63.24904

Step-3:Calculation of future value of total investment

Future Value of total Investments

$ 7,65,268.00

$ 3,98,468.94

$ 11,63,736.94

jeff jeffy answered 1 year ago

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