Assume 360-day year and 30-day month in your analysis.

Your clients (a married couple), both turn 38 today, have diligently run their family business for 12 years and have paid off all of their debts. Recently, their business has grown into a stable stage that generates a growing income stream for the family. From your initial consultation with your clients, you learn that they plan to retire on the day they turn 62. Their family income is $15,000*4.1333 at the end of six months from today, and they expect their family income will grow at a steady rate of 1.5% semi-annually until they retire. To prepare for retirement, your clients deposit 12% of their semi-annual income in a tax deferred SEP IRA account that generates an annual rate of return of 9.6%, compounded monthly.

A. Determine (with precise explanation) the cash flows pattern of the semi-annual contributions to the SEP IRA account;

B. calculate and precisely explain the correct choice of interest rate, i.e., EAR/EPR/PER, that you should use in the analysis.

C. Also, calculate the SEP IRA account balance upon their retirement.

D. Then, verify your work on the SEP IRA account balance with the formula approach.