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Only answers question 5 I have provided answers to questions 1-4

5.) Give Johns current life situations and age, which alternative(s) do you suggest he select?

And explain why you suggest so.

CASE 01: Retirement Plan and Investment Choices -

Bens 22-year-old son John has just accepted a job with Biomedical Research Institute (BRI), a

firm specializing in biomedical sciences and cutting-edge genetic technologies. BRI offers

employees a 401(k) plan to which employees may contribute a maximum of 6% of their salary.

BRI will match $0.50 for every dollar contributed to the retirement plan by employee. Johns

starting salary is $34,000, so he could contribute up to $2,040 and BRI would contribute an

additional $1,020. If John did decide to contribute to the plan, he has the following choices of

funds, all managed by XYZ Investments. He may select any combination of the funds and

change the selection quarterly.

1.) If John participates and the 401(k) earns 10% annually, how much will he have accumulated in 45 years (to age 67) even if his salary does not change?

By the end of the Year, 45 total amount is $2,199,848.80

2. ) If he does not participate and annually saves $2,040 on his own, how much will he have accumulated if he earns 10% (before tax) and is in the 20% federal income tax bracket?

By the end of the Year, 45 total amount is $788,471.46

3. ) If he retires at age 67, given the amounts in (1) and (2), how much can John withdraw and spend each year for 20 years from each alternative? Assume he continues to earn 10% (before tax) and remains in the 20% federal income tax bracket.

With 401 (k) he can spend each year $244, 059.46

WIthout 401(k) and only John's contribution $80,307.56

4. If his salary grows, what impact will the increase on the 401(k) plan? To illustrate the

effect on his accumulated funds assume a $5,000 increment every five years so that he is

earning $74,000 in years 41-45 (ages 63-67).

By the end of year 45 with an increase in salary, he will have $4,787,906.21 in his 401(k) plan.

Question 5:

Give Johns current life situations and age, which alternative(s) do you suggest he select?

And explain why you suggest so.

TABLE 01: Return 13% 12 Standard Deviation of Return 20% 10 0.3 0.9 40 Beta 0.7 1.1 1.5 0.3 0.4 0.0 a. USVF b. RTF C. GE d. GBF e. HYD f. ME 0.6 00 0.2 10 12 0.3 - N 0.0

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