CHAPTER 5 Time Value of Money 203 Personal Finance Problem Retirement planning 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 earn a 10% return over the next 40 years. a. If Hal makes annual end-of-year $2,000 deposits into the IRA, how much will he have accumulated by the end of his sixty-fiftheyear? b. If Hal decides to wait until age 35 to begin making annual end-of-year $2,000 deposits into the IRA, how much will he have accumulated by the end of his c. Using your findings in parts a and b, discuss the impact of delaying making deposits into the IRA for 10 years (age 25 to age 35) on the amount accumulated by the end of Hal's sixty-fifth year. d. Rework parts a, b, and e, 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 sixty-fifth year.
CHAPTER 5 Time Value of Money 203 Personal Finance Problem Retirement planning 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 earn a 10% return over the next 40 years. a. If Hal makes annual end-of-year $2,000 deposits into the IRA, how much will he have accumulated by the end of his sixty-fiftheyear? b. If Hal decides to wait until age 35 to begin making annual end-of-year $2,000 deposits into the IRA, how much will he have accumulated by the end of his c. Using your findings in parts a and b, discuss the impact of delaying making deposits into the IRA for 10 years (age 25 to age 35) on the amount accumulated by the end of Hal's sixty-fifth year. d. Rework parts a, b, and e, 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 sixty-fifth 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
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Transcribed Image Text:CHAPTER 5
Time Value of Money
203
Personal Finance Problem
22 Retirement planning 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
earn a 10% return over the next 40 years.
a. If Hal makes annual end-of-year $2,000 deposits into the IRA, how much will he
have accumulated by the end of his sixty-fiftheyear?
b.
Personal Finance Problem.
5-23 Value of a retirement annuity
Hal decides to wait until age 3.5 to begin making annual end-of-year $2.000
deposits into the IRA, how much will he have accumulated by the end of his
c. Using your findings in parts a and b, discuss the impact of delaying making
deposits into the IRA for 10 years (age 25 to age 35) on the amount accumulated
by the end of Hal's sixty-fifth year.
d. Rework parts a, b, and e, assuming that Hal makes all deposits at the beginning.
c,
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 sixty-fifth year
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