Joe's starting salary as a mechanical engineer is around $70,000. Joe is planning to place a...
Joe's starting salary as a mechanical engineer is around $70,000. Joe is planning to place a total of 12% of his salary each year in the mutual fund. Joe expects a 3% salary increase each year for the next 25 years of employment. If the mutual fund will average 7% annual return over the course of his career, what can Joe expect at retirement?
The amount Joe can expect at retirement is $__________ thousand. (Round to the nearest whole number.)
Homework Answers
Salary = 70000
Payment at EOY 1 = 70000*12%/100 = 8400
P = 8400*[1-(1+G)^N(1+I)^-N/I-G]
= 8400[1-(1+0.03)^25(1+0.07)^-25/0.07-0.03]
= 8400*[1-(2.09378)(0.18425)/0.04]
= 8400*[1-0.38578/0.04]
= 8400*15.3555
= 128986.2
The future worth = 128986.2*(1+0.07)^25
= 128986.2*5.42743
= 700064
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