HalThomas, a 25 year old college graduate, wishes to retire at age 65.To supplement other sources of retirement income, he can deposit$2,000 each year into a tax-deferred individual retirementarrangement (IRA). The IRA will earn a return of 11% over the next40 years.
a. - If Hal makes end-of-year $2,000 deposits into the IRA,how much will he have accumulated in 40 years when he turns65?
b. - If Hal decides to wait until age 35 to begin makingend-of-year $2,000 deposits into the IRA, how much will he haveaccumulated when he retires 30 years later?
c. - Using your findings in parts A and B, discuss the impactof 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 alldeposits at the beginning, rather than the end, of each year.Discuss the effect of beginning-of-year deposits on the futurevalue accumulated by the end of Hal’s 65th year.
