Question

You started your first job after graduating from college. Your company offers a retirement plan for which the companycontributes 25% of what you contribute each year. You expect to contribute $5,000 per year from your salary. You decideto invest the contributions in assets that you expect to earn 8% per year. If you plan to retire in 35 years, how big will youexpect that retirement account to be?A. $861,584.02B. $921,597.31C. $972,110.74D. $1,076,980.02

Answer 1

Answer:

The correct answer is D.

Explanation:

Giving the following information:

Annual deposit= 5,000*1.25= $6,250

n= 35 years

i= 0.08 annual

To calculate the future value of the retirement plan, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {6,250*[(1.08^35)-1]}/0.08= }$1,076,980.02