a)
The value of the account of new employee after 10 years.
a)
Answer to Problem 10P
The value of the account after 10 years will be $64913.
Explanation of Solution
He puts 4% percent of his salary into her new account and her employer will put 3% of her salary to her retirement account, so her account can be accounted as:
Year | Salary(increasing 2.5% every year) | Employee commitment | Employer commitment | Total contribution of employee and employer |
0 | 65000 | 2600 | 2600 | 5200 |
1 | 66625 | 2665 | 2665 | 5330 |
2 | 68291 | 2732 | 2732 | 5463 |
3 | 69998 | 2800 | 2800 | 5600 |
4 | 71748 | 2870 | 2870 | 5740 |
5 | 73542 | 2942 | 2942 | 5883 |
6 | 75380 | 3015 | 3015 | 6030 |
7 | 77265 | 3091 | 3091 | 6181 |
8 | 79196 | 3168 | 3168 | 6336 |
9 | 81176 | 3247 | 3247 | 6494 |
10 | 83205 | 3328 | 3328 | 6656 |
Total | 64913 |
The value of the account after 10 years will be $64913.
Introduction: Retirement account is an investing tool that an individual uses to save his earnings for retirement. Some percentage of the annual earning of the employee is deposited into retirement account while same amount is also deposited by employer in the retirement account. As the salary increase annually due to increment the amount of deposit by both employer and employee also increase likewise.
b)
The value of employer’s matching fund.
b)
Answer to Problem 10P
The value of employer’s matching fund will be $32458
Explanation of Solution
Year | Salary(increasing 2.5% every year) | Employer commitment |
0 | 65000 | 2600 |
1 | 66625 | 2665 |
2 | 68291 | 2732 |
3 | 69998 | 2800 |
4 | 71748 | 2870 |
5 | 73542 | 2942 |
6 | 75380 | 3015 |
7 | 77265 | 3091 |
8 | 79196 | 3168 |
9 | 81176 | 3247 |
10 | 83205 | 3328 |
Total | 32458 |
The value of employer’s matching fund will be $32458
Introduction: Retirement account is an investing tool that an individual uses to save his earnings for retirement. Some percentage of the annual earning of the employee is deposited into retirement account while same amount is also deposited by employer in the retirement account. As the salary increase annually due to increment the amount of deposit by both employer and employee also increase likewise.
c)
The value of the account of new employee after 40 years.
c)
Answer to Problem 10P
The value of the account after 40 years will be $364444
Explanation of Solution
Year | Salary(increasing 2.5% every year) | Employee commitment (4% of salary) | Employer commitment (4% of salary) | Total contribution of employee and employer |
0 | 65000 | 2600 | 2600 | 5200 |
1 | 66625 | 2665 | 2665 | 5330 |
2 | 68291 | 2732 | 2732 | 5463 |
3 | 69998 | 2800 | 2800 | 5600 |
4 | 71748 | 2870 | 2870 | 5740 |
5 | 73542 | 2942 | 2942 | 5883 |
6 | 75380 | 3015 | 3015 | 6030 |
7 | 77265 | 3091 | 3091 | 6181 |
8 | 79196 | 3168 | 3168 | 6336 |
9 | 81176 | 3247 | 3247 | 6494 |
10 | 83205 | 3328 | 3328 | 6656 |
11 | 85285 | 3411 | 3411 | 6822 |
12 | 84717 | 3497 | 3497 | 6993 |
13 | 89603 | 3584 | 3584 | 7168 |
14 | 91843 | 3673 | 3673 | 7347 |
15 | 94139 | 3765 | 3765 | 7531 |
16 | 96492 | 3860 | 3860 | 7719 |
17 | 98905 | 3956 | 3956 | 7912 |
18 | 101377 | 4055 | 4055 | 8110 |
19 | 103912 | 4156 | 4156 | 8312 |
20 | 106510 | 4260 | 4260 | 8520 |
21 | 109172 | 4367 | 4367 | 8733 |
22 | 111902 | 4476 | 4476 | 8952 |
23 | 114699 | 4587 | 4587 | 9174 |
24 | 117567 | 4703 | 4703 | 9406 |
25 | 120506 | 4820 | 4820 | 9640 |
26 | 123519 | 4941 | 4941 | 9882 |
27 | 126607 | 5064 | 5064 | 10128 |
28 | 129772 | 5191 | 5191 | 10382 |
29 | 133016 | 5321 | 5321 | 10641 |
30 | 136341 | 5453 | 5453 | 10907 |
31 | 139750 | 5590 | 5590 | 11180 |
32 | 143244 | 5730 | 5730 | 11460 |
33 | 146825 | 5873 | 5873 | 11746 |
34 | 150495 | 6020 | 6020 | 12040 |
35 | 154258 | 6170 | 6170 | 12340 |
36 | 158114 | 6325 | 6325 | 12649 |
37 | 162067 | 6482 | 6482 | 12965 |
38 | 166119 | 6645 | 6645 | 13290 |
39 | 170272 | 6810 | 6810 | 13620 |
40 | 174529 | 6981 | 6981 | 13962 |
Total | 364444 |
The value of the account after 40 years will be $364444
Introduction: Retirement account is an investing tool that an individual uses to save his earnings for retirement. Some percentage of the annual earning of the employee is deposited into retirement account while same amount is also deposited by employer in the retirement account. As the salary increase annually due to increment the amount of deposit by both employer and employee also increase likewise.
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