Calculate the terminal value of the plan

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Question - An employee contributes $16,300 to a 401(k) plan each year, and the company matches 10 percent of this annually, or $1,630. The employee can allocate the contributions among equities (earning 12 percent annually), bonds (earning 5 percent annually), and money market securities (earning 3 percent annually). The employee expects to work at the company 15 years. The employee can contribute annually along one of the three following patterns:

 

Option 1

Option 2

Option 3

Equities

60%

50%

40%

Bonds

40

45

50

Money market securities

0

5

10

 

100%

100%

100%

Required - Calculate the terminal value of the 401(k) plan for Option 2, assuming all returns and contributions remain constant over the 15 years.

Reference no: EM132796172

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