Amount of Annuity $ 1,500 Interest rate 7% Deposit Periods (years) 8

Calculate the future value of the annuity, assuming that it is

(1) An ordinary annuity. Round to nearest cent

Hal Thomas, a 35-year-old college graduate, wishes to retire at age 65. To supplement other sources of retirement income, he can deposit $2,300

each year into a tax-deferred individual retirement arrangement (IRA). The IRA will earn a return of 14% over the next 30 years.

1) If Hal makes annual end-of-year $2,300 deposits into the IRA, how much will he have accumulated by the end of his 65th year? Round to nearest cent

2) If Hal decides to wait until age 45 to begin making annual end-of-year $2,300 deposits into the IRA, how much will he have accumulated by the end of his 65th year?

3) Using your findings in parts a and b, discuss the impact of delaying making deposits into the IRA for 10 years (age 35- age 45) on the amount accumulated by the end of Hal's 65th year

a) By delaying the deposits by 10 years, Hal is having a large capital gain. This gain is due to both the saved deposits of $23,000 (2,300X10 years) and the gained compounding of interest on all of the money not deposited for 10 years

OR

b) .By delaying the deposits by 10 years, Hal is incurring a significant opportunity cost. This cost is due to both the lost deposits of $23,000 and the lost compounding of interest on all of teh money for 10 years.