An employee contributes $ 15,000 to a 401(k) plan each year, and the company matches 10 percent of this annually, or $ 1,500. The employee can allocate the contributions among equities (earning 12 percent annually), bonds (earning 5 percent annually), and money market securities (earning 3 percent annually). The employee expects to work at the company 20 years. The employee can contribute annually along one of the three following patterns:

Calculate the terminal value of the 401(k) plan for each of the 3 options, assuming all returns and contributions remain constant over the 20years.

Option Option 2 Option 3 40% 50 10 100% Equities Bonds 60% 40 50% 45 Money market securities 0 1 00% 100%