Question
In: Finance
Hal Thomas, a 25-year-old college graduate, wishes to retire at age 65. To supplement other sources...
Hal Thomas, a 25-year-old college graduate, wishes to
retire at age 65. To supplement other sources of retirement
income, he can deposit $2400 each year into a tax-deferred
individual retirement arrangement (IRA). The IRA will earn a
return of 12% over the next 40 years.
a. If Hal makes end-of-year $2400 deposits into the IRA,
how much will he have accumulated in 40 years when he turns
65?
b. If Hal decides to wait until age 35 to begin making
end-of-year $2400 deposits into the IRA, how much will he have
accumulated when he retires 30 years later?
c. Using your findings in parts a and b, discuss the impact
of delaying deposits into the IRA for 10 years (age 25 to age 35
) on the amount accumulated by the end of Hal's 65th year.
d. Rework parts a, b, and c assuming that Hal makes all
deposits at the beginning, rather than the end, of each year.
Discuss the effect of beginning-of-year deposits on the future
value accumulated by the end of Hal's 65th year.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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