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Hal Thomas, a 25-year-old college graduate, wishes to retire at age 65. To supplement other sources of retirement income, he can deposit $2400 each year
Hal Thomas, a 25-year-old college graduate, wishes to retire at age 65. To supplement other sources of retirement income, he can deposit $2400 each year into a tax-deferred individual retirement arrangement (IRA). The IRA will earn a return of 12% over the next 40 years.
a.If Hal makes end-of-year $2400 deposits into the IRA, how much will he have accumulated in 40 years when he turns 65?
b.If Hal decides to wait until age 35 to begin making end-of-year $2400 deposits into the IRA, how much will he have accumulated when he retires 30 years later?
c.Using your findings in parts a and b, discuss the impact of delaying deposits into the IRA for 10 years (age 25 to age 35 ) on the amount accumulated by the end of Hal's 65th year.
d.Rework parts a, b, and c assuming that Hal makes all deposits at the beginning, rather than the end, of each year. Discuss the effect of beginning-of-year deposits on the future value accumulated by the end of Hal's 65th year.
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