After 15 years of working for one employer, you transfer to a new job. During these years

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After 15 years of working for one employer, you transfer to a new job. During these years your employer contributed (that is, she diverted from your salary) $1500 each year to an account for your retirement (a fringe benefit), and you contributed a matching amount each year. The whole fund was invested at 5% during that time and the value of the account now stands at $30,000. You are now faced with two alter-natives. (I) You may leave both contributions in the fund until retirement in 35 years, during which you will get the future value of this amount at 5% interest per year. (2) You may take out the total value of "your" contributions, which is $15,000 (one-half of the total $30,000). You can do as you wish with the money you take out, but the other half will be lost as far as you are concerned. In other words, you can give up $15,000 today for the sake of getting now the other $15,000. Otherwise, you must wait 35 years more to get the accumulated value of the entire fund. Which alternative is more attractive? Explain your choice.
Future Value
Future value (FV) is the value of a current asset at a future date based on an assumed rate of growth. The future value (FV) is important to investors and financial planners as they use it to estimate how much an investment made today will be worth...
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Engineering Economic Analysis

ISBN: 9780195168075

9th Edition

Authors: Donald Newnan, Ted Eschanbach, Jerome Lavelle

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