Your company sponsors a 401(k) plan into which you deposit 10 percent of your $120,000 annual Income. Your company matches 75 percent of the first 10 percent of your earnings. You expect the fund to yield 12 percent next year. Assume you are currently in the 31 percent tax bracket. a. What is your annual Investment in the 401(k) plan? (Round your answer to 1 decimal place. (e.g., 32.1)) b. What is your one-year return? (Round your answer to 3 decimal places. (e.g., 32.161)) a. Annual investment b. One-year return 184.000 %

Your company sponsors a 401(k) plan into which you deposit 10 percent of your $120,000 annual Income. Your company matches 75 percent of the first 10 percent of your earnings. You expect the fund to yield 12 percent next year. Assume you are currently in the 31 percent tax bracket. a. What is your annual Investment in the 401(k) plan? (Round your answer to 1 decimal place. (e.g., 32.1)) b. What is your one-year return? (Round your answer to 3 decimal places. (e.g., 32.161)) a. Annual investment b. One-year return 184.000 %

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28% federal income tax bracket. Each year you contribute $5,500 tax free to your individual retirement account, IRA. The account earns 7% annual interest. In addition, the amount of tax that you save each year by making these "pre-tax" contributions is invested in a taxable aggressive growth mutual fund averaging 16%. a)How much tax do you save (in $) each year by making the retirement fund contributions? b)Using Table 12-1, much will the retirement fund be worth (in $) in 30 years? (Round your answer to the nearest cent.) c) Although the income from this investment is taxable each year, using Table 12-1, how much will the "tax savings" fund be worth (in $) in 30 years? (Round your answer to the nearest cent.)
A trust notifies you that you are entitled a grant that would give you annual payments of $6,200 per year in perpetuity. The first payment will be made to you three years later (at the end of year 3). The annual interest rate is 10% (APR). What is the present value of the grant? A. 56,363.64 B. 46,581.52 C. 51,239.67 D. 62,000.00
4) Ashley deposits $500 into an investment fund each January 1 starting in 2005 and continuing to 2014 inclusive. If the fund has an average annual growth rate of ji = 10%, how much will be in her account on January 1, 2019?
f you saved your tax refund $14,089.39, quit buying vendor coffee for one year $12,522.23, and decided to contribute $5,040 (you saved $420 per month) in your Roth IRA, how much would you have for retirement if you could invest these savings at 7% compounded annually for 30 years for this one year of savings? (Use the Table 12.1 provided.) Note: Round your answer to two decimal places. Amount saved for Retirement
Suppose you just won the state lottery, and you have a choice between receiving $2,515,000 today or a 20-year annuity of $220,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes. O a. 6.88% O b. 12.96% O c. 6.04% O d. 5.69% O e. 8.75%
Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28% federal income tax bracket. Each year you contribute $4,500 tax free to your individual retirement account, IRA. The account earns 6% annual interest. In addition, the amount of tax that you save each year by making these "pre-tax" contributions is invested in a taxable aggressive growth mutual fund averaging 16%. (a)How much tax do you save (in $) each year by making the retirement fund contributions? $ 1260 (b)Using Table 12-1, much will the retirement fund be worth (in $) in 30 years? (Round your answer to the nearest cent.) $ ?
Second Best Insurance company is advertising a new product to retirees looking to invest their 401(K) retirement accumulations. The idea is this: give us, Second Best, the lump sum of $660 today and we'll then give you, the retiree, an annuity of $320 to be received at the end of each year, beginning one year from today, for 5 consecutive years. From the standpoint of the retiree, calculate the NPV of this product if the required rate of return is 14%.
Assume that you own an annuity that will pay you $14,000 per year for 12 years, with the first payment being made today. You need money today to start a new business, and your uncle offers to give you $125,000 for the annuity. If you sell it, what rate of return would your uncle earn on his investment? a. 11.20% b. 4.46% c. 4.87% d. 20.01% e. 5.90%
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