Assume you want to retire early at age 52. You plan to save using one of the following two strategies: (1) save $4,500 a year in an IRA beginning when you are 27 and ending when you are 52 (25 years) or (2) wait until you are 37 to start saving and then save $7,500 per year for the next 15 years. Assume you will earn the historic stock market average of 14% per year (Click the icon to view the future value annuity factor table.) (Click the icon to view the present value annuity factor table.) Read the requirements (Click the icon to view the future value factor table.) (Click the icon to view the present value factor table.) Requirement 1. How much out-of-pocket cash will you invest under the two options? Calculate how much out-of-pocket cash you will invest under the two options. Option 1: Requirements 1. How much out-of-pocket cash will you invest under the two options? 2. How much savings will you have accumulated at age 52 under the two options? 3. Explain the results. 4. If you let the savings continue to grow for ten more years (with no further out-of-pocket investments), under each scenario, what will the investment be worth when you are age 62? Reference Future Value of Annuity of $1 Periods 1% 2% 3% 4% 5% 6% Period 1 1.000 1.000 1.000 1.000 1.000 1.000 8% 10% 12% 1.000 1.000 1.000 14% 16% 18% 20% 1.000 1.000 1.000 1.000 Period 2 2010 2020 2030 2.040 2.050 2.060 2.080 2.100 2.120 2.140 2.160 2.180 2.200 Period 3 3.030 3.060 3.091 3.122 3.153 3.184 3.246. 3.310 3.374 3.440 3.506 3.572 3.640 Period 4 4.060 4.122 4.184 4.246 4.310 4.375 4.506 4.641 4.779 4.921 5.066 5.215 5.368 Period 5 5.101 5.204 5.309 5.416 5.526 5,637 5.867 6.105 6.353 6.610 6.877 7.154 7.442 Period 6 6.152 6.308 6.468 6.633 6.802 6.975 7.336 7.716 8.115 8.536 8.977 9.442 9.930 Period 7 7.214 Period 9 Period 10 Period 11 Period 12 Period 14 Period 15 11.567 12.169 12.808 13.486 12.683 13.412 14.192 15.026 Period 13 13.809 14.680 15.618 16 627 14.947 15.974 17.086 18 292 19.599 16.097 17 293 18.599 20.024 21.579 7.434 7.662 7.898 Period 8 8.286 8.583 8.892 9.214 9.549 9.897 9.369 9.755 10.159 10.583 11.027 11.491 10.462 10.950 11.464 12.006 12.578 13.181 14.207 14.972 8.142 8.394 8.923 9.487 10.089 10.730 11.414 12.142 12.916 10.637 11.436-12.300 13.233 14.240 15.327 16.499 12.488 13.579 14.776 16.085 17.519 19.086 20.799 14 487 15.937 17.549 19.337 21.321 23.521 25.959 16.645 18 531 20.655 23.045 25.733 28.755 32.150 15.917 16.870 18.977 21.384 24.133 27.271 30.850 34.9311 39.581 17.713 18.882 21.495 24.523 28.029 32.089 36.786 42.219 48.497 21.015 24.215 27 975 32 393 37.581 43.672 50.818 59.196 23.276 27.152 31.772 37.280 43.842 51.660 60.965 72 035 Period 20 Period 25 Period 30 Period 40 22.019 24.297 26.870 29.778 33.066 36.786 45.762 28 243 32.030 36.459 41.646 47.727 54.865 73.106 98.347 133.334 181.871 34.785 40.568 47.575 56.085 66.439 79.058 113.283 164.494 241.333 356.787 530.312 790.948 1,181.882 48 886 60.402 75.401 95.026 120 800 154.762 259.057 442 593 767 091 1,342.025 2,360.757 4,163.213 7,343 858 57 275 72.052 91.025 115.380 146.628 186.688 249.214 342.603 471.981 - 39 Reference Present Value of Annuity of $1 Periods 1% 2% 3% 4% 0.980 0.971 0.962 4.853 1.942 1.913 1.886. 2.884 2.829 2.775 3.808 3.717 3.630 4.713 4.580 4 452 5.795 Period 1 0.990 1.970 Period 21 Period 3 2.941 Period 4 3.902 Period 5 Period 6 5.601 5.417 5.242 Period 7 6.728 6.472 6.230 6.002 Period 8 7.652 7.325 7.020 6.733 Period 9 8.566 8.162 7.786 7.435 Period 10 9.471 8.983 8.530 8.111 Period 11 10.368 9.787 9.253 8.760 8.306 7.887 7.139 6.495 5.938 Period 12 11.255 10.575 9.954 9.385 8.863 8.384 7.536 6.814 6.194 Period 13 12 134 11.348 10.635 9.986 9.394 8.853 7.904 7.103 6.424 Period 14 13.004 12.106 11 296 10.563 9.899 9.295 8.244 Period 15 13 865 12.849 11.938 11.118 10.380 9.712 Period 20 18.046 16 351 14 877 13.590 12 462 11 470 9.818 8.514 7 469 Period 25 22.023 19.523 17 413 15.622 14.094 12.783 10.675 9.077 7.843 Period 30 25.808 22 396 19.600 17 292 15.372 13.765 11.258 9.427 8.055 Period 40 32.835 27 355 23.115 19.793 17.159 15.046 11.925 9.779 8.244 4.212 3.993 3.791 3.605 5.076 4.917 4.623 4.355 4.111 5.786 5.582 5.206 4.868 4.564 6.463 6.210 5.747 5.335 4.968 7.108 6.802 6.247 5.759 5.328 7.722 7.360 6.710 6.145 5.650 12% 5% 10% 6% 8% 0.952 0.943 0.926 0.909 0.893 1.859 1.833 1.783 1.736 1.690. 2.723 2.673 2.577 2.487 2.402 3.546 4.329 14% 16% 18% 20% 0.877 0.862 0.847 0.833 1.605 1.647 1.566 1.528 2.322 2.246 2.174 2.106 3.465 3.312 3.170 3.037 2.914 2.798 2.690 2.589 3.433 3.274 3.127 2.991 3.889 3.685 3.498 3.326 4.288 4.039 3.812 3.605 4.639 4.344 4.078 3.837 4.946 4.607 4.303 4.031 5.216 4.833 4.494 4.192 5.453 5.029 4.656 4.327 5.660 5.197 4.793 4.439 5.842 5.342 4.910 4.533 7.367 6.628 6.002 5.468 5.008 4.611 8.559 7.606 6.811 6.142 5.575 5.092 4.675 6.623 5.929 5.353 4.870 6.873) 6.097 5.467 4.948 7.003 6.177 5.517 4.979 7.105 6.233 5.548 4.997 X Reference Future Value of $1 Periods Period 1 1% 2% 3% 4% 5% 1.010 1.020 1.030. 1.040 Period 2 1.020 Period 3 1.030 Period 4 1.041 Period 5 1.051 Period 6 1.062 Period 7 1.072 1.149 Period 8 1.083 1.172 Period 9 1.094 1.195 Period 10 1.105 1.219 1.126 1.040 1.061 1.082 1.061 1.093 1.125 1.082 1.126. 1.170 1.104 1.159 1.217 1.194 1.265 1.331 1.230 1.316 1.267 1.369 1.305 1.423 1.344 1.480 1.999 2.358 2.773 2.159 2.594 3.106 6% 8% 10% 12% 14% 1.050 1.060 1.080 1.100 1.120 1.140 1.160 1.180 1.103 1.124 1.166 1.210 1.254 1.300 1.346 1.392 1.158 1.191 1.260 1.405 1.482 1.561 1.643 1.728 1.216 1.262 1.360 1.464 1.574 1.689 1.811 1.276 1.338 1.469 1.611 1.762 1.925 2.100 1.340 1.419 1.587 1.772 1.974 2.195 2.436 1.407 1.504 1.714 1.949 1.477 1.594 1.851 2.144 2.476 1.551 1.689 1.629 1.791 16% 18% 20% 1.200 1.440 1.939 2.074 2.288 2.488 2.700 2.986 2.211 2.502 2.826 3.185 3.583 2.853 3.278 3.759 4.300 3.252 3.803 4.435 5.160 3.707 4.411 5.234 6.192 Period 11 1.116 1.243 1.384 1.539 Period 12 1.127 1.268 1.426 1.601 1.710 1.796 2012 1.898 2.332 2.853 3.479 4.226 5.117 6.176 7.430 Period 13 1.138 Period 14 1.149 Period 15 1.161 1.294 1.469 1.665 1.319 1.513 1.732 1.346 1.558 1.801 2518 3.138 2.720 3.452 4.363 2937 3.797 4.887 3.172 4.177 5.474 3.896 4.818 5.936 7.288 8.916 Period 20 1.220 1.486 Period 25 1.282 1.641 1.806 2.094 Period 30 1.348 1.811 2.427 3.243 Period 40 1.489 2.208 3.262 4.801 1.886 2.133 1.980 2.261 6.261 7.988 10.147 2.079 2.397 7.138 9.266 2.191 2.653 3.207 4.661 6.727 9.646 13.743 19.461 27.393 2.666 3.386 4.292 6.848 10.835 17.000 26.462 40.874 62.669 95.396 4.322 5.743 10.063 17.449 29.960 50.950 85.850 143.371 237.376 7.040 10.286 21.725 45.259 93.051 188.884 378.721 750.378 1,469.772 5.492 6.886 8.599 10.699 12.839 11.974 15.407 38.338 as Reference Present Value of $1 Periods 1% 2% 3% 4% Period 1 0990 0.980 0.971 0.962 Period 2 0.980 0.961 0.943 Period 3 Period 4 Period 5 0.971 0.942 0.925 0.915 0.889 0.961 0.951 0.784 0.747 Period 6 0942 Period 7 0.933 Period 8 0.923 Period 9 0914 Period 10 0.905 Period 11 0.896 Period 12 0.887 Period 13 0.879 Period 14 0.870 Period 15 0.861 0.804 0.722 0.650 0.788 0.701 0.625 0.773 0.681 0.601 0.530 0.469 0.758 0.661 0.577 0.505 0.442 0.340 0.263 20% 5% 6% 8% 18% 10% 12% 14% 16% 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 0.907 0.890 0.857 0.826 0.797 0.769 0.743 0.718 0.694 0.864 0.840 0.794 0.751 0.712 0.675 0.641 0609 0.579 0.924 0.888 0.855 0.823 0.792 0.735 0.683 0.636 0.592 0.552 0.516 0.482 0.906 0.863 0.822 0.681 0.621 0.567 0.519 0.476 0.437 0.402 0.888 0.837 0.790 0.746 0.705 0.630 0.564 0.507 0.456 0.410 0.370 0.335 0.871 0.813 0.760 0.711 0.665 0.583 0.513 0.452 0.400 0.354 0.314 0.279 0.853 0.789 0.731 0.677 0.627 0.540 0.467 0.404 0.351 0.305 0.266 0.233 0.837 0.766 0.703 0.645 0.592 0.500 0.424 0.361 0.308 0.263 0.225 0.194 0.820 0.744 0.676 0.614 0.558 0.463 0.386 0.322 0.270 0.227 0.191 0.162 0.585 0.527 0.429 0.350 0.287 0.237 0.195 0.162 0.135 0.557 0.497 0.397 0.319 0.257 0.208 0.168 0.137 0.112 0.368 0.290 0.229 0.182 0.145 0.116 0.125 0.099 0.093 0.205 0.160 0.078 0.743 0.642 0.555 0.481 0.417 0.315 0239 0.183 0.140 0.108 0.084 0.065 Period 20 0.820 0.673 0.554 0.456 Period 25 0.780 0.610 0.478 0.375 0.295 Period 30 0742 0.552 0.412 0.308 0.231 0.174 0.099 0.057 Period 40 0.672 0.453 0.307 0208 0142 0.097 0.046 0.022 0.011 0.377 0.312 0.215 0.149 0.104 0.073 0.051 0.037 0.026 0.233 0.146 0.092 0.059 0.038 0.024 0.016 0.010 0.033 0.020 0.012 0.007 0.004 0.005 0.003 0.001 0.001 - X