Question

Trent is 25 years old and works for a company that matches his 401(k) contribution up to 5%. the interest rate for his 401(k) is 7.3%. if he puts away 10% of his $32,000 salary every year, how much would he have saved in 10 years? round your answer to the nearest cent.
a. $67,266.16
b. $72,176.59
c. $33,250.60
d. $35,677.89

Answer 1

How much would he have saved in 10 years?—By answering the question, you are trying to find out the future value. (Fv)

Trent puts away 10% of his $32,000 (each year) while the company will provide the half which costs $1,600 = providing an amount of $4800 each year.

Fv = Future Value

Pmt = repeated payments

R = interest rate

N = number of payment periods (total)

--

Formula:

Fv = Pmt (1 + r/n)^(nt) – 1 / (r/n)

Solution:

Fv = 4800 (1 + 0.073/1)^(1x10) – 1 (0.073/1)

Fv = $67,266.16

Answer: Letter A