John is saving for retirement at age 65. He doesn't know if he should save in three large lumps (inheritance from his three uncles), or in equal annual amounts from his paychecks. Consider the two options below (a & b) and calculate which one will generate more savings at John's 65th year. Interest rates are 6% a) He will make 3, $25,000 deposits at ages 45, 55 and 60. b) He will make annual payments of $2,100 every year for the next 30 year.
John is saving for retirement at age 65. He doesn't know if he should save in three large lumps (inheritance from his three uncles), or in equal annual amounts from his paychecks. Consider the two options below (a & b) and calculate which one will generate more savings at John's 65th year. Interest rates are 6% a) He will make 3, $25,000 deposits at ages 45, 55 and 60. b) He will make annual payments of $2,100 every year for the next 30 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
Section: Chapter Questions
Problem 1PS
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John is saving for retirement at age 65. Use the fowlloing information to answer a). And b).
Transcribed Image Text:John is saving for retirement at age 65. He doesn't know if he should save in three
large lumps (inheritance from his three uncles), or in equal annual amounts from his
paychecks. Consider the two options below (a & b) and calculate which one will
generate more savings at John's 65th year. Interest rates are 6%
a) He will make 3, $25,000 deposits at ages 45, 55 and 60.
b) He will make annual payments of $2,100 every year for the next 30 year.
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