Assume you want to retire early at age 52. You plan to save using one of the following two strategies: (1) save $5,100 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 $8,500 per year for the next 15 years. Assume you will earn the historic stock market average of 10% per year.

Future Value of Annuity of $1 Periods 10% 14% 18% 10002.03031224310563 000003.374 1000.00 3310 .79610 1000 40 3.1534375 5861 1.000 10002.0 3,50652151442 1.000 .010 3.0604.1845416 1014.122 30912040 5.309 56374.5063.310 2120 5.8674.641 6.353 4.9213.5062180 6.877 2.020 2.050 2.060 2.200 3.440 3.030 3.572 5.066 5.368 4.246 5.204 5.526 6.975 8.394 7.336 8.923 9.930 6.152 6.308 6.468 6.633 6.802 7.716 8.536 8.977 9.442 9.487 11.436 12.300 10.15910.583 11.027 11.4912.48813.57914.776 16.0857.5199.086 20.799 7.214 8.286 7.434 7.662 7.898 9.214 8.142 10.08910.730 11.414 12.14212.916 8.892 9.549 9.897 10.637 13.233 1 14.240 15.327 16.499 9.755 10 10.462 10.950 11.464 12.006 12.57813.181 14.487 15.93717.54919.337 21.321 23.521 25.959 11.567 12.16912.808 13.486 14.20714.972 16.645 18.53120.65523.045 25.733 28.75532.150 12.68313.412 14.192 5.026 15.91716.870 18.977 21.384 24.133 27.271 30.850 34.93139.581 13.80914.680 15.618 16.627 17.71318.882 21.495 24.52328.02932.089 36.78642.21948.497 12 13 14 14.9475.974 17.08618.292 19.599 21.01524.215 27.975 32.39337.581 43.672 50.818 59.196 15 16.097 17.293 18.59920.024 21.57923.276 27.152 31.77237.28043.842 51.660 60.965 72.035 20 22.019 24.297 26.87029.778 33.066 36.786 45.762 57.27572.05291.025 115.380 146.628 186.688 25 28.24332.030 36.459 41.64647.72754.865 73.106 98.347133.334 181.871 249.214 342.603471.981 34.78540.56847.575 56.08566.43979.058 113.283164.494241.333 356.787530.312790.948 1,181.882 48.886 60.40275.401 95.026 120.800154.762259.057442.593 767.091 1,342.025 2,360.7574,163.2137,343.858 Present Value of Annuity of $1 Periods | 1% | 2% | 3% | 4% | 5% | 6% | 8% | 10% | 12% | 14% | 16% | 18% | 20% 1 0.9900.9800.9710.9620.9520.943 0.926 0.9090.893 0.8770.862 0.847 0.833 2 1.970 1.942 1.913 1.886 1.8591.833 1.7831.736 1.6901.647 1.605 1.5661.528 3 2.9412.884 2.8292.775 2.723 2.673 | 2.577 2.487 2.4022.3222.246 2.1742.106 43.9023.8083.7173.6303.5463.4653.3123.1703.037 2.9142.7982.6902.589 54.8534.713 4.5804.452 4.3294.2123.9933.7913.6053.4333.2743.1272.991 6 5.7955.601 5.417 5.2425.076 4.917 4.623 4.3554.111 3.8893.6853.4983.326 7 6.728 6.472 6.230 6.002 5.7865.5825.206 4.868 4.564 4.288 4.039 3.812 3.605 8 7.652 7.325 7.020 6.7336.4636.210 5.7475.335 4.9684.639 4.344 4.078 3.837 98.5668.162 7.786 7.4357.108 6.802 6.2475.7595.328 4.946 4.607 4.303 4.031 10 9.4718.9838.530 8.111 7.7227.360 6.710 6.145 5.6505.216 4.8334.4944.192 1110.3689.7879.2538.7608.306 7.887 7.1396.4955.9385.4535.0294.6564.327 12 11.255 10.5759.9549.3858.863 8.3847.5366.8146.1945.6605.1974.7934.439 13 12.134 11.348 10.635 9.9869.3948.8537.9047.103 6.4245.8425.3424.910 4.533 14 13.004 12.106 11.296 10.563 9.8999.2958.2447.3676.6286.002 5.4685.008 4.611 15 13.865 12.84911.938 11.118 10.380 9.712 8.5597.606 6.811 6.142 5.575 5.092 4.675 20 18.046 16.351 14.877 13.590 12.462 11.470 9.818 8.514 7.4696.623 5.9295.353 4.870 25 22.023 19.523 17.413 15.622 14.094 12.783 10.675 9.077 7.843 6.873 6.097 5.4674.948 30 25.808 22.39619.600 17.292 15.372 13.765 11.2589.427 8.055 7.0036.177 5.5174.979 4032.83527.355 23.115 19.79317.159 15.046 11.9259.7798.2447.1056.2335.548 4.997 997 86 8 0848 63 2 9 8 11122 23456 78 025 85 111 39 74 3948 7 02398 05954 689 % 80 5 3 01 72 3345 678 11 264 1 06110 66831 76686 488 111-12 22334 55679 905 76 148 00295 52327 68218 8 001 542 41636 96374 6 0 79 148 0 7599 2 10 17 5 114 009 74199 8072 18 7 2 2317 723 1369 7 80123 0 66 07 0112 445 7 2 7569 1 1631 01369 40754 46938 6472 25 9 00124 69259 38496 6118 0 24791 4 00011 223 5 67891 0289 0-2346 %123 0 12345 12345 6789 Present Value of $1 Periods 1% | 2% | 3% | 4% | 5% | 6% | 8% | 10% | 12% | 14% | 16% | 18% | 20% 10.990 0.9800.971 0.962 0.9520.9430.9260.9090.8930.877 0.8620.847 0.833 2 0.9800.961 0.943 0.9250.907 0.8900.857 0.826 0.7970.7690.743 0.718 0.694 3 0.9710.942 0.915 0.8890.8640.8400.7940.7510.7120.6750.6410.609 0.579 40.9610.9240.888 0.8550.8230.7920.735 0.6830.636 0.5920.552 0.516 0.482 5 0.951 0.906 0.8630.822 0.7840.7470.6810.621 0.5670.519 0.4760.4370.402 6 0.942 0.888 0.837 0.7900.746 0.705 0.630 0.5640.507 0.456 0.410 0.370 0.335 70.933 0.8710.8130.7600.7110.6650.5830.513 0.4520.4000.3540.3140.279 8 0.923 0.8530.7890.731 0.677 0.627 0.540 0.467 0.404 0.351 0.305 0.2660.233 90.9140.837 0.7660.7030.6450.5920.500 0.4240.3610.3080.263 0.225 0.194 10 0.9050.820 0.744 0.6760.614 0.5580.463 0.386 0.322 0.270 0.227 0.191 0.162 11 0.8960.8040.722 0.650 0.5850.527 0.4290.3500.287 0.2370.1950.162 0.135 12 0.887 0.7880.701 0.6250.557 0.4970.397 0.319 0.257 0.208 0.168 0.1370.112 13 0.8790.773 0.681 0.601 0.5300.4690.3680.2900.2290.182 0.145 0.116 0.093 14 0.870 0.7580.6610.577 0.5050.442 0.340 0.2630.205 0.160 0.1250.0990.078 15 0.8610.743 0.642 0.5550.4810.4170.315 0.2390.1830.1400.1080.0840.065 20 0.820 0.6730.5540.456 0.3770.3120.2150.1490.1040.073 0.050.0370.026 250.780 0.610 0.478 0.375 0.2950.233 0.146 0.092 0.0590.038 0.024 0.016 0.010 30 0.7420.5520.4120.3080.2310.1740.0990.0570.0330.020 0.0120.0070.004 400.6720.453 0.3070.2080.142 0.097 0.046 0.022 0.011 0.005 0.003 0.001 0.001 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 so time does the work. The strategy involving V grows substantially larger over time. This is due to the fact that the savings are invested 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:S grows substantially larger over time. This The strategy involving Requirement 4. If youearier savings ontinue to grow for ten more years Calculate the total amo with no further out-of-pocket inve later savings Option 1: S This is due to the fact that the savings are invested V|, so time does the work. ears (with no further out-of-pocket investments), un o, what will the inve: later tdollar amount.) investments, under each scenario. (Round the savir sooner