14. Hal Thomas, a 25-year-old college graduate, wishes to retire at age 65. To supplement other sources of retirement income, he can deposit $2,000 each year into a tax-deferred individual retirement arrangement (IRA). The IRA will be invested to earn an annual return of 10%, which is assumed to be attainable over the next 40 years. Question: If Hal decides to wait until age 35 to begin making $2,000 deposits into the IRA at the beginning of each year, how much will he have accumulated by the end of his 65th year?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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14. Hal Thomas, a 25-year-old college graduate, wishes to retire at age 65. To
supplement other sources of retirement income, he can deposit $2,000 each year into
a tax-deferred individual retirement arrangement (IRA). The IRA will be invested to
earn an annual return of 10%, which is assumed to be attainable over the next 40
years.
Question: If Hal decides to wait until age 35 to begin making $2,000 deposits into
the IRA at the beginning of each year, how much will he have accumulated by the
end of his 65th year?
Transcribed Image Text:14. Hal Thomas, a 25-year-old college graduate, wishes to retire at age 65. To supplement other sources of retirement income, he can deposit $2,000 each year into a tax-deferred individual retirement arrangement (IRA). The IRA will be invested to earn an annual return of 10%, which is assumed to be attainable over the next 40 years. Question: If Hal decides to wait until age 35 to begin making $2,000 deposits into the IRA at the beginning of each year, how much will he have accumulated by the end of his 65th year?
15. An insurance agent is trying to sell you an immediate-retirement annuity, which
for a single amount paid today will provide you with $12,000 at the end of each year
for the next 25 years. You currently earn 9% on low-risk investments comparable to
the retirement annuity. Assuming all other factors are constant, what is the most you
would pay for this annuity?
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Transcribed Image Text:15. An insurance agent is trying to sell you an immediate-retirement annuity, which for a single amount paid today will provide you with $12,000 at the end of each year for the next 25 years. You currently earn 9% on low-risk investments comparable to the retirement annuity. Assuming all other factors are constant, what is the most you would pay for this annuity? • Previous Next
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