Question

In: Finance

Ans: _____________________ You just graduated from Notre Dame de Namur University (2020) and accepted a job...

Ans: _____________________

  1. You just graduated from Notre Dame de Namur University (2020) and accepted a job with Facebook in their Finance department. Your salary is $50,000 per year. You are considering investing $500 per month in your company’s 401K and given your risk profile your targeted rate of return is 4.5 percent. What will be the value of your 401K in 35 years (2055)?

Additional 2 bonus points...

Joe, a colleague of yours decided to wait for five years to begin setting aside $500 per month until 2055. His risk profile is like yours, 4.5%. How much will Joe have in 30 years (2055)?

And...”what’s the moral of this story>?

Ans: _______________________

The moral is: _____________________

Solutions

Expert Solution

Value of your 401K in 35 years is calculated using FV function in Excel :

rate = 4.5%/12 (converting annual rate into monthly rate)

nper = 35 * 12 (total number of monthly deposits = number of years * 12)

pmt = -500 (Monthly deposit. This is entered with a negative sign because it is a cash outflow)

FV is calculated to be $508,870.98

Value of your 401K in 35 years is $508,870.98

Value of Joe's 401K in 30 years is calculated using FV function in Excel :

rate = 4.5%/12 (converting annual rate into monthly rate)

nper = 30 * 12 (total number of monthly deposits = number of years * 12)

pmt = -500 (Monthly deposit. This is entered with a negative sign because it is a cash outflow)

FV is calculated to be $379,693.07

The moral of this story is that if you start investing earlier, you will have a much higher ending value of your investments due to the effect of compounding

jeff jeffy answered 1 hour ago
Next > < Previous

Related Solutions

Derek and Meagan Jacoby recently graduated from State University and Derek accepted a job in business...
Derek and Meagan Jacoby recently graduated from State University and Derek accepted a job in business consulting while Meagan accepted a job in computer programming. Meagan inherited $32,000 from her grandfather who recently passed away. The couple is debating whether they should buy or rent a home. They located a rental home that meets their needs. The monthly rent is $2,350. They also found a three-bedroom home that would cost $112,000 to purchase. The Jacobys could use Meagan’s inheritance for...
Derek and Meagan Jacoby recently graduated from State University and Derek accepted a job in business...
Derek and Meagan Jacoby recently graduated from State University and Derek accepted a job in business consulting while Meagan accepted a job in computer programming. Meagan inherited $36,000 from her grandfather who recently passed away. The couple is debating whether they should buy or rent a home. They located a rental home that meets their needs. The monthly rent is $2,450. They also found a three-bedroom home that would cost $136,000 to purchase. The Jacobys could use Meagan’s inheritance for...
Derek and Meagan Jacoby recently graduated from State University and Derek accepted a job in business...
Derek and Meagan Jacoby recently graduated from State University and Derek accepted a job in business consulting while Meagan accepted a job in computer programming. Meagan inherited $75,000 from her grandfather who recently passed away. The couple is debating whether they should buy or rent a home. They located a rental home that meets their needs. The monthly rent is $2,250. They also found a three-bedroom home that would cost $475,000 to purchase. The Jacobys could use Meagan’s inheritance for...
You just graduated college with your Bachelors Degree and accepted a job offer at your dream...
You just graduated college with your Bachelors Degree and accepted a job offer at your dream company. You decided to celebrate by purchasing the vehicle of your dreams. Pictured is a Dodge Challenger HellCat see picture above for $58,995). You have a 720 credit score, therefore you were able to get a 5% interest rate on a 7 year loan. You will be making monthly payments. Using Excel, prepare a professional amortization schedule for the entire 7 years. It must...
Paul Jordan has just graduated from high school and has accepted the job of help desk...
Paul Jordan has just graduated from high school and has accepted the job of help desk specialist in the home office of the DurandOil Co. As a customer service representative at the help desk, Paul answers customer questions by phone, fax, e-mail, and web-based technologies. Software is provided to assist help desk specialists in quickly finding answers to commonly asked questions about aboutparticular products and services. It is your plan, as administrative manager, to have each worker, such as Paul,...
Suppose you have just graduated Harvard and accepted a job with a $100,000 salary. Your 401(K)...
Suppose you have just graduated Harvard and accepted a job with a $100,000 salary. Your 401(K) will be maxed at 5% employee contribution and 1-1 employer match. You will work for exactly the next 45 years (for simplicity assume your salary is unchanged). At your 5 year review you will receive a one-time $20,000 bonus which you will deposit in your retirement plan. You will live exactly 25 years after you retire. You plan to leave $200,000 to Harvard to...
Grady​ Zebrowski, age​ 25, just graduated from​ college, accepted his first job with a ​$45 comma...
Grady​ Zebrowski, age​ 25, just graduated from​ college, accepted his first job with a ​$45 comma 000 ​salary, and is already looking forward to retirement in 40 years. He assumes a 3.5 percent inflation rate and plans to live in retirement for 20 years. He does not want to plan on any Social Security benefits. Assume Grady can earn a 6 percent rate of return on his investments prior to retirement and a 6 percent rate of return on his...
Grady​ Zebrowski, age​ 25, just graduated from​ college, accepted his first job with a $47,000 ​salary,...
Grady​ Zebrowski, age​ 25, just graduated from​ college, accepted his first job with a $47,000 ​salary, and is already looking forward to retirement in 40 years. He assumes a 2.1 percent inflation rate and plans to live in retirement for 20 years. He does not want to plan on any Social Security benefits. Assume Grady can earn a 9 percent rate of return on his investments prior to retirement and a 5 percent rate of return on his investments​ post-retirement...
Congratulations! You have just graduated from your University. Your first day on your new job involves...
Congratulations! You have just graduated from your University. Your first day on your new job involves a lot of paperwork including your decision to participate in the company 401K plan. First, should you participate? Second, describe the benefits of diversification if any including adding international stocks to your investment portfolio? You must include a full explanation to support your answer.
NAME Resolving Ethical Business Challenges Charlie just graduated from Michigan University and landed a job as...
NAME Resolving Ethical Business Challenges Charlie just graduated from Michigan University and landed a job as a copywriter at Fletcher, Alexander, and Burgess (FAB) Advertising assigned to one of the subsidiary accounts of Delicious Uber Bacon Ingredients Extraordinaire Corporation. This conglomerate was primarily a food processing manufacturer beginning one hundred years ago with pork in the Midwest. Overall corporate sales of beef, chicken, pork, and seafood were more than $ million each year. FAB considered many advertising options and opted...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT