You started your first job after graduating from college. Your company offers a retirement plan for which the company contributes 50 percent of what you contribute each year. You expect to contribute $2,000 per year from your salary. You decide to invest the contributions in assets that you expect to earn 10 percent per year. If you plan to retire in 40 years, how big will you expect that retirement account to be?
A) $442,592.56
B) $885,185.11
C) $1,327,777.67
D) $1,527,787.70

Question

Quizplus · Accepted Answer

The future value of an annuity formula is used to calculate the expected retirement account value: FV = P * [((1 + r)^n - 1) / r]. Here, P = $3,000 (your $2,000 contribution plus $1,000 from the company), r = 0.10, and n = 40. Plugging in these values gives approximately $1,327,777.67.

You Started Your First Job After Graduating from College