Please answer Parts C & D. The findings are below. Thank you.
C. Using your findings, 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. Discuss the effect of beginning-of-year deposits on the future
value accumulated by the end of Hal’s sixty-fifth
year.
Annual Deposit (PMT) | 2,000 |
Return (RATE) | 10% |
Years (NPER) | 40 |
Amount Accumulated | $885,185.11 |
Annual Deposit (PMT) | 2,000 |
Return (RATE) | 10% |
Years (NPER) | 30 |
Amount Accumulated | ($328,988.05) |
Annual Deposit (PMT) | 2000 |
Return (RATE) | 10% |
Years (NPER) | 40 |
Amount Accumulated | $973,703.62 |
Annual Deposit (PMT) | 2000 |
Return (RATE) | 10% |
Years (NPER) | 30 |
Amount Accumulated | $361,886.85 |
1.
We see that delaying deposits lead to lower accumulated value. The
impact of delay is significant as firstly there have been lesser
deposits due to delay and secondly the deposits had lesser
compounding benefit due to lesser time
2.
We see that beginning of year deposits lead to higher accumulated
value. Beginning of year deposits compound the value for one extra
period hence by depositing beginning of year you will get interest
on the entire amount for one extra year. As the amount accumulated
becomes large, interest for one extra period is also significant.
Therefore, we see some impact.
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