Chapter 5: Time Value of Money Congratulations! Today is your 21st birthday. You

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Chapter 5: Time Value of Money

Congratulations! Today is your 21st birthday. You just started working full-time, earning $100,000 per year. Your goal is to have $5 million in your 401(k) plan by your 61st birthday (i.e., 40 years from today). Assume 3% inflation per year. If you can earn 10% per year annualized in an S&P 500 mutual fund, after all expenses, inside a 401(k) with a dollar for dollar match up to 10% of your income, how much would you need to save each month to have that $5 million:

(a) If that $5 million is in future nominal dollars;

(b) If that $5 million is in today

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