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 12% per year. (Click the icon to view the future value annuity factor table.) (Click the icon to view the future value factor table.) (Click the icon to view the present value annuity factor table.) (Click the icon to view the present value factor table.) Read the requirements. 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? Print Done 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: $ Option 2: $ Requirement 2. How much savings will you have accumulated at age 52 under the two options? Calculate the total amount of savings that you will have accumulated at age 52 under the two options. (Round the savings to the nearest dollar amount.) Option 1: $ Option 2: $ Requirement 3. Explain the results. grows substantially larger over time. This is due to the fact that the savings are invested so time does the The strategy involving work. Requirement 4. If you were to 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? Calculate the total amount of savings at age 62, with no further out-of-pocket investments, under each scenario. (Round the savings to the nearest dollar amount.) Option 1: $ Option 2: $ Reference Present Value of $1 16% 0.862 0.743 0.641 0.552 0.476 18% 0.847 0.718 0.609 0.516 0.437 20% 0.833 0.694 0.579 0.482 0.402 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 0.877 Period 2 0.980 0.961 0.943 0.925 0.907 0.890 0.857 0.826 0.797 0.769 Period 3 0.971 0.942 0.915 0.889 0.864 0.840 0.794 0.751 0.712 0.675 Period 4 0.961 0.924 0.888 0.855 0.823 0.792 0.735 0.683 0.636 0.592 Period 5 0.951 0.906 0.863 0.822 0.784 0.747 0.681 0.621 0.567 0.519 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.630 0.564 0.507 0.456 Period 7 0.933 0.871 0.813 0.760 0.711 0.665 0.583 0.513 0.452 0.400 Period 8 0.923 0.853 0.789 0.731 0.677 0.627 0.540 0.404 0.351 Period 9 0.914 0.837 0.766 0.703 0.645 0.592 0.500 0.424 0.361 0.308 Period 10 0.905 0.820 0.744 0.676 0.614 0.558 0.463 0.386 0.322 0.270 Period 110.896 0.804 0.722 0.650 0.585 0.527 0.429 0.350 0.287 0.237 Period 120.887 0.788 0.701 0.625 0.557 0.497 0.397 0.319 0.257 0.208 Period 130.879 0.773 0.681 0.601 0.530 0.469 0.368 0.290 0.229 0.182 Period 14 0.870 0.758 0.661 0.577 0.505 0.442 0.340 0.263 0.205 0.160 Period 15 0.861 0.743 0.642 0.555 0.481 0.417 0.315 0.239 0.183 0.140 0.467 0.410 0.370 0.335 0.354 0.314 0.279 0.305 0.266 0.233 0.263 0.225 0.194 0.227 0.191 0.162 0.1950.162 0.135 0.168 0.137 0.112 0.145 0.116 0.093 0.125 0.099 0.078 0.084 0.065 0.108 Period 200.820 0.673 Period 25 0.780 0.610 Period 30 0.742 0.552 Period 40 0.672 0.453 0.554 0.478 0.412 0.307 0.456 0.375 0.308 0.208 0.377 0.312 0.215 0.295 0.233 0.146 0.231 0.174 0.099 0.142 0.097 0.046 0.149 0.092 0.057 0.022 0.104 0.073 0.059 0.038 0.033 0.020 0.011 0.005 0.051 0.024 0.012 0.003 0.037 0.016 0.007 0.001 0.026 0.010 0.004 0.001 Print Done Reference Future Value of $1 Periods Period 1 Period 2 Period 3 Period 4 Period 5 1% 1.010 1.020 1.030 1.041 1.051 2% 1.020 1.040 1.061 1.082 1.104 3% 1.030 1.061 1.093 1.126 1.159 4% 1.040 1.082 1.125 1.170 1.217 5% 1.050 1.103 1.158 1.216 1.276 6% 1.060 1.124 1.191 1.262 1.338 8% 1.080 1.166 1.260 1.360 1.469 10% 1.100 1.210 1.331 1.464 1.611 12% 1.120 1.254 1.405 1.574 1.762 14% 1.140 1.300 1.482 1.689 1.925 16% 1.160 1.346 1.561 1.811 2.100 18% 1.180 1.392 1.643 1.939 2.288 20% 1.200 1.440 1.728 2.074 2.488 Period 6 Period 7 Period 8 Period 9 Period 10 1.062 1.072 1.083 1.094 1.105 1.126 1.149 1.172 1.195 1.219 1.194 1.230 1.267 1.305 1.344 1.265 1.316 1.369 1.423 1.480 1.340 1.407 1.477 1.551 1.419 1.504 1.594 1.689 1.791 1.587 1.714 1.851 1.999 1.772 1.949 2.144 2.358 2.436 2.826 3.278 3.803 4.411 2.700 3.185 3.759 4.435 5.234 2.986 3.583 4.300 5.160 6.192 1.629 2.159 2.594 1.974 2.211 2.476 2.773 3.106 3.479 3.896 4.363 4.887 5.474 2.195 2.502 2.853 3.252 3.707 4.226 4.818 5.492 6.261 7.138 Period 11 Period 12 Period 13 Period 14 Period 15 1.116 1.127 1.138 1.149 1.161 1.243 1.26 1.294 1.319 1.346 1.384 1.426 1.469 1.513 1.558 1.539 1.601 1.665 1.732 1.801 1.710 1.796 1.886 1.980 2.079 1.898 2.332 2.012 2.518 2.133 2.720 2.261 2.937 2.397 3.172 2.853 3.138 3.452 3.797 4.177 5.117 5.936 6.886 7.988 9.266 6.176 7.288 8.599 10.147 11.974 7.430 8.916 10.699 12.839 15.407 1.486 1.641 Period 20 Period 25 Period 30 Period 40 1.220 1.282 1.348 1.489 1.806 2.094 2.427 3.262 2.191 2.666 3.243 4.801 2.653 3.386 4.322 7.040 3.207 4.661 6.727 9.646 13.743 19.461 27.393 38.338 4.292 6.848 10.835 17.000 26.462 40.874 62.669 95.396 5.743 10.063 17.449 29.960 50.950 85.850 143.371 237.376 10.286 21.725 45.259 93.051 188.884 378.721 750.378 1,469.77 1.811 2.208 Print Done | Reference Reference 16% 0.862 1.605 2.246 2.798 3.274 18% 0.847 1.566 2.174 2.690 3.127 20% 0.833 1.528 2.106 2.589 2.991 Present Value of Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% Period 1 0.990 0.980 0.971 0.962 0.9520.943 0.926 0.909 0.893 0.877 Period 2 1.970 1.942 1.913 1.886 1.859 1.833 1.783 1.736 1.6901.647 Period 3 2.941 2.884 2.829 2.775 2.723 2.673 2.577 2.487 2.4022.322 Period 4 3.902 3.808 3.717 3.630 3.546 3.465 3.312 3.170 3.037 2.914 Period 5 4.853 4.713 4.580 4.452 4.329 4.212 3.993 3.791 3.605 3.433 Period 6 5.795 5.601 5.417 5.2425.076 4.917 4.623 4.355 4.111 3.889 Period 7 6.728 6.472 6.230 6.002 5.786 5.582 5.206 4.868 4.564 4.288 Period 8 7.652 7.325 7.020 6.733 6.463 6.210 5.747 5.335 4.968 4.639 Period 9 8.566 8.162 7.786 7.435 7.108 6.8026.247 5.759 5.328 4.946 Period 10 9.471 8.983 8.530 8.111 7.722 7.360 6.710 6.145 5.6505.216 Period 11 10.368 9.787 9.253 8.760 8.3067.887 7.139 6.495 5.938 5.453 Period 12 11.255 10.575 9.954 9.385 8.863 8.384 7.536 6.814 6.194 5.660 Period 13 12.134 | 11.348 10.635 9.986 9.394 8.853 7.904 7.103 6.424 5.842 Period 14 | 13.004 12.106 | 11.296 10.563 9.899 9.295 8.244 7.367 | 6.628 6.002 Period 15 13.865 12.849 11.938 11.118 10.380 9.7128.559 7.606 6.811 6.142 Period 2018.046 16.351 14.877 13.590 12.462 11.470 9.818 8.514 7.469 6.623 Period 25 22.023 19.523 17.413 15.622 14.094 12.783 10.675 9.077 7.843 6.873 Period 30 25.808 22.396 19.600 17.292 15.372 13.765 11.258 9.427 8.055 7.003 Period 40 32.835 27.355 23.115 19.793 17.159 15.046 11.925 9.779 8.244 7.105 3.685 4.039 4.344 4.607 4.833 3.498 3.812 4.078 4.303 4.494 3.326 3.605 3.837 4.031 4.192 5.029 5.197 5.342 5.468 5.575 4.656 4.793 4.910 5.008 5.092 4.327 4.439 4.533 4.611 4.675 5.929 6.097 6.177 6.233 5.353 5.467 5.517 5.548 4.870 4.948 4.979 4.997 Print Done Reference Future Value of Annuity of $1 Periods Period 1 Period 2 Period 3 Period 4 Period 5 14% 1.000 2.140 3.440 4.921 6.610 16% 1.000 2.160 3.506 5.066 6.877 18% 1.000 2.180 3.572 5.215 7.154 Period 6 Period 7 Period 8 Period 9 Period 10 1% 2% 3% 4% 5% 6% 8% 10% 12% 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2.010 2.020 2.030 2.040 2.050 2.060 2.080 2.100 2.120 3.030 3.060 3.091 3.122 3.153 3.184 3.246 3.310 3.374 4.060 4.122 4.184 4.246 4.310 4.375 4.506 4.641 4.779 5.101 5.204 5.309 5.416 5.526 5.637 5.867 6.105 6.353 6.152 6.308 6.468 6.633 6.802 6.975 7.336 7.716 8.115 7.214 7.434 7.662 7.898 8.142 8.394 8.923 9.487 10.089 8.286 8.583 8.892 9.214 9.549 9.897 10.637 11.436 12.300 9.369 9.755 10.159 10.583 11.027 11.491 12.488 13.579 14.776 10.462 10.950 11.464 12.006 12.578 13.181 | 14.487 | 15.937 17.549 11.567 12.169 12.808 13.486 14.207 14.972 | 16.645 18.531 20.655 12.683 13.412 14.192 15.026 15.917 16.870 18.977 21.384 24.133 13.809 14.680 15.618 16.627 17.713 18.882 21.495 24.523 28.029 14.94715.974 17.086 18.292 | 19.599 21.015 24.215 27.975 32.393 16.097 | 17.293 18.599 20.024 21.579 23.276 27.152 31.772 37.280 8.536 10.730 13.233 16.085 19.337 8.977 11.414 14.240 17.519 21.321 9.442 12.142 15.327 19.086 23.521 Period 11 Period 12 Period 13 Period 14 Period 15 23.045 27.271 32.089 37.581 43.842 25.733 30.850 36.786 43.672 51.660 28.755 34.931 42.219 50.818 60.965 Period 20 22.019 24.297 26.870 29.778 33.066 36.786 45.762 57.275 72.052 91.025 115.380 146.628 Period 25 28.243 32.030 36.459 41.646 47.727 54.865 73.106 98.347 133.334 181.871 249.214 342.603 Period 30 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 Period 40 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 Print Done