Ron is 30 years old and is retiring at the age of 65. When he retires, he will need a monthly income of $1,270 for 10 years. If Ron contributes 5% of his monthly income to a 401(k) paying 2.75% compounded monthly, will he reach his goal for retirement given that his monthly income is $1,571.12?
If he does not make his goal then state by what amount he will need to supplement his income?
Round all answers to the nearest cent.

Ron will need to supplement his monthly contribution by 137,65

Explanation:

We can use a financial calculator to solve thos issue.

First we need to determine his monthly contribution. Which is 5% of his monthly income which is 1571,12 x 5% =78,56 monthly contribution.

Secondly we need to determine the number of periods which he contributes.

35 x 12 (converting years into months) = 420 months

Now we will work out the future value of his contributions using a financial calculator. We will use the following keystrokes on the financial calculator PMT = 78,56 N = 420 I = 2,75%/12

COMP FV = 55375,45

required amount of capital = 1270x12x10 = 152400

Now we need to calculate the difference between the 2 amounts. 152400 - 55375,45 = 97024,55

Using a financial calculator again we can determine the monthly contribution. N = 420 I = 2,75%/12 FV = 97024,55 COMP PMT

COMP PMT  = 137,65

Thus he will need to supplement his monthly contribution by 137,65 to get to the required amount of monthly income from 65 onwards. (answer may differ by a dollar or two due to rounding)

answer; i believe the correct answer is (a) purchase of treasury stock;