Hal Thomas, a 25-year old college graduate, wishes to retire at age 65. To suppl

Question

Hal Thomas, a 25-year old college graduate, wishes to retire at age 65. To supplement other sources of retirement income, he can deposit $2000 each year into a tax-deferred individual retirement arrangement (IRA). The IRA will be invested to earn an annual return of 10%, which is assumed to be attainable over the next 40 years. C. Using your findings in parts a and b, discuss the impact of delaying making deposits into the IRA for 10 years (age 25 to age 35) on the amount accumulated by the end of Hal's sixty-fifth year.

Explanation / Answer

FV=PV*(1+i)^n;where PV is the present value, t is the number of compounding periods (not necessarily an integer), and i is the interest rate for that period =>FV=2000(1+10/100)^40 =>FV=90518.511

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