Question

1. John is saving for retirement at age 65.  He doesn’t know if he should save in three large lumps, or in equal annual amounts.  Consider the two options below (a & b) and calculate which one will generate more savings at John’s 65^th year.  Interest rates are 6%
   1. He will make deposits of $20,000 at ages 45, 55 and 60 (see first timeline).  
   2. He will make annual payments of $2,000 every year between now and his 65^th year (see the second timeline).                                                                            (9 pts)

a.   35                                   45                                55                    60           65

                                                20,000                         20,000             20,000

b.   35                                   45                                55                                   65

                                                                        

       …………………..                                                  

Answer 1

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