ABC Manufacturing Limited has a retirement plan that matches all contributions on a one to two basis. That is if you contribute $4,000 per year, then ABC will add $2,000 to make it $6,000. ABC guarantees 7.8461% annual rate of return compounded semiannually. Iris Cen is 20 years old works as a Financial Analyst at ABC. She is wondering whether she should take advantage of the ABC's retirement plan or whether she should do it herself. If she does it herself then she can earn 10.5733% per year compounded semiannually on her $4,000 annual contributions (ABC will not make any contribution to do it herself plan). Assume contributions will start two years from today and will be made every year till retirement. 

If Iris wants to retire 30 years from today determine which plan will worth more at retirement (ABC's retirement plan or do it herself plan)?

Answer rating: 100% (QA)

Lets first calculate the future value of Iriss contributions and ABCs matching contributions separat... View the full answer