Question
In: Finance
Hal Thomas, a 30-year-old college graduate, wishes to retire at age 65. To supplement other sources...
Hal Thomas, a 30-year-old college graduate, wishes to
retire at age 65. To supplement other sources of retirement
income, he can deposit $2,400 each year into a tax-deferred
individual retirement arrangement (IRA). The IRA will earn a
return of 13% over the next 35 years.
a.If Hal makes end-of-year $2,400 deposits into the IRA, how
much will he have accumulated in 35 years when he turns
65?
b.If Hal decides to wait until age 40 to begin making
end-of-year $2,400 deposits into the IRA, how much will he have
accumulated when he retires 25 years later?
Solutions
Expert Solution
The fund accumulated in IRA can be calculated using excel's FV function.
FV(Rate,NPER,PMT,PV,TYPE)
Rate = 13%
NPER = 35 (for case (a)) & 25 (for case (b))
PMT = $2,400
PV = 0 (as there is no value in the fund as of now)
TYPE = 0 (which indicates end of the period)
See the image below
jeff jeffy answered 1 month agoRelated Solutions
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