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.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Retirement planning Hal Thomas, a 25-year-old college graduate, wishes to retire at age 65. To supplement...
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. If Hal makes end-of-year $2,000 deposits into the IRA, how much will he have accumulated in 40 years when he turns 65? If Hal decides to wait until age 35 to begin making end-of-year...
Problem No. 10 You plan to withdraw $80,000 per year for 30 years after you retire...
Problem No. 10 You plan to withdraw $80,000 per year for 30 years after you retire at age 65. You are age 25 now and want to make one deposit at end of each year for 40 years then stop depositing after 40 deposits. To accumulate enough funds to afford the 30 withdrawals, you are presented with 2 options. First is an investment with 8% annual return and second one with 6% annual return. What is the difference between the...
Creating a retirement fund  Personal Finance Problem   To supplement your​ retirement, you estimate that you need...
Creating a retirement fund  Personal Finance Problem   To supplement your​ retirement, you estimate that you need to accumulate ​$230,000 exactly 40 years from today. You plan to make​ equal, end-of-year deposits into an account paying   7% annual interest.a.  How large must the annual deposits be to create the ​$230,000 fund by the end of 40 ​years?b.  If you can afford to deposit only ​$960 per year into the​ account, how much will you have accumulated in 40 ​years? a.  The...
One person made regular deposits with a financial institution for 15 years. In the first 5...
One person made regular deposits with a financial institution for 15 years. In the first 5 years, deposits were made in the final amount of 2,000 euros. In the next 10 years, deposits will be 200 euros at the end of each month. Calculate a rate of 20% per annum with semi-annual capitalizations, or the accumulated amount collected on the day you made your last deposit.
Your goal is to have $7,500 in your bank account by the end of 12 years....
Your goal is to have $7,500 in your bank account by the end of 12 years. If the interest rate remains constant at 9% and you want to make annual identical deposits, how much will you need to deposit in your account at the end of each year to reach your goal? (Note: Round your answer for PMT to two decimal places.) $372.38 $335.14 $297.90 $409.62 If your deposits were made at the beginning of each year rather than an...
10)You have just retired with $1,000,000 in savings. This is the amount that you will be...
10)You have just retired with $1,000,000 in savings. This is the amount that you will be drawing down for the rest of your life. You expect to earn 6% and withdraw $70,000 per year. You also want to leave an inheritance of $100,000 to your favorite charity. How long can you rely on your savings? Assume that your first withdrawal will occur one year from today. Use Excel’s =NPER(RATE,PMT,PV,[FV],[TYPE]) function. RATE is 6%, PMT is $70,000, PV is $1,000,000, FV...
​(Solving for PMT of an annuity​) To pay for your​ child's education, you wish to have...
​(Solving for PMT of an annuity​) To pay for your​ child's education, you wish to have accumulated ​$11,000 at the end of 8 years. To do this you plan on depositing an equal amount into the bank at the end of each year. If the bank is willing to pay 6 percent compounded​ annually, how much must you deposit each year to reach your​ goal? To reach your​ goal, your annual deposit must be ​$nothing . ​(Round to the nearest​...
You and your spouse purchased your first home immediately after the birth of your child. You...
You and your spouse purchased your first home immediately after the birth of your child. You have lived in the home for the past 18 years, paying your mortgage on time, but otherwise struggled to accumulate savings to pay for college. Your child is off to college this fall and annual cost is estimated to be $70,000. You originally paid $450,000 for your house, which has appreciated in price at 3.5% per annum. The original mortgage was a 30 year...
Show all calculations. You must use the factors from the tables a. Steve Allen invested $12,000...
Show all calculations. You must use the factors from the tables a. Steve Allen invested $12,000 today in a fund that earns 8% interest. If the interest compounds semiannually, what amount will the investment grow to in 6 years? Answer $_____________________ b. A machine is purchased by making 6 payments of $8,000 each at the beginning of each year (starting at the time of the purchase). Assuming an annual interest rate of 10%, at what cost should the machine be...
Your goal is to have $20,000 in your bank account by the end of five years....
Your goal is to have $20,000 in your bank account by the end of five years. If the interest rate remains constant at 7% and you want to make annual identical deposits, how much will you need to deposit in your account at the end of each year to reach your goal? (Note: Round your answer for PMT to two decimal places.) $3,825.62 $3,477.84 $3,130.06 $2,434.49 If your deposits were made at the beginning of each year rather than an...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT