Steven is contributing to his 401(k) retirement plan. He contributes $3100 per year. His employer matches...

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Finance

Steven is contributing to his 401(k) retirement plan. Hecontributes $3100 per year. His employer matches 50% of hiscontribution. If Steven can earn a 6% rate of return, how much(approximately) will he have in his account after 6years?(Round your answer).
$18433.
$32435.
$30806.
$28572.

Answer & Explanation Solved by verified expert

3.9 Ratings (380 Votes)

The question is solved by first calculating the future value of Steven’s contribution.

Information provided:

Annual contribution= $3,100

Time= 6 years

Interest rate= 6%

Enter the below in a financial calculator to compute the future value:

PMT= 3,100

N= 6

I/Y= 6

Press the CPT key and FV to compute the future value.

The value obtained is 21,623.50.

Thus, the future value in 6 years of Steve’s contribution is $21,623.50.

Employer’s contribution= 0.50*$21,623.50

= $10,811.74.

Therefore, the amount in the account in 6 years:

= $21,623.50 + $10,811.74

= $32,435.24.

Thus, the answer is option b.

In case of any query, kindly comment on the solution.

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Transcribed Image Text

Steven is contributing to his 401(k) retirement plan. Hecontributes $3100 per year. His employer matches 50% of hiscontribution. If Steven can earn a 6% rate of return, how much(approximately) will he have in his account after 6years?(Round your answer).$18433.$32435.$30806.$28572.