Question

Please answer Parts C & D. The findings are below. Thank you. C. Using your findings,...

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

Homework Answers

Answer #1

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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