Question

1. Jessica Sotomajor hopes to earn an extra $600,000 over her remaining 40-year working career by going to night school to obtain a master’s degree. If her income projection is correct, that’s an average of $15,000 more money a year. Jessica’s employer is willing to pay 75 percent, or $45,000, toward the $60,000 schooling costs, so she must pay out $15,000 of her own money.
(a) What is the forgone lost future value of her $15,000 over the 40 years at 6 percent?
(b) What would be the forgone lost future value of $60,000 over 40 years if Jessica had to pay all the costs for her master’s degree?
2. Using Equations (2.1) or (2.2), if the cost-of-living index was 132 for Chicago and 114 for San Antonio, compare the buying power of a $50,000 salary in Chicago with a $47,000 offer in San Antonio.
3. Tyler Winkle’s employer makes a matching contribution of $1200 a year to his 401(k) retirement account at work. If the dollar amount of the employer’s contribution increases 4 percent annually, how much will the employer contribute to the plan in the twentieth year from now?
4. Emily Amarrada has accepted a new job and is thinking about cashing out the $30,000 she has built up in her employer’s 401(k) plan to use to buy a new car. If, instead, she left the funds in the plan and they earn 6 percent annually for the next 30 years, how much would Emily have in her plan?



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  • CreatedNovember 26, 2014
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