Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)

15th Edition

ISBN: 9780134476315

Author: Chad J. Zutter, Scott B. Smart

Publisher: PEARSON

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Textbook Question

Chapter 5, Problem 5.22P

Learning Goal 3

P5-22 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 end-of-year 52,000 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 $2,000 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 sixty-fifth year.
d. Rework parts a, b, and c, assuming that Hal makes all deposits at the beginning, rather than 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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Chapter 5, Problem 5.21P

Chapter 5, Problem 5.23P

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Chapter 5 Solutions

Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)

Ch. 5.1 - What is the difference between future value and...Ch. 5.1 - Define and differentiate among the three basic...Ch. 5.2 - Prob. 5.3RQ Ch. 5.2 - Prob. 5.4RQ Ch. 5.2 - Prob. 5.5RQ Ch. 5.2 - Prob. 5.6RQ Ch. 5.2 - Prob. 5.7RQ Ch. 5.3 - What is the difference between an ordinary annuity...Ch. 5.3 - What are the most efficient ways to calculate the...Ch. 5.3 - How can the formula for the future value of an...

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Solution Summary: The author explains the formula for calculating future value, which refers to present amount at a future date.

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