There Are Three Types Of Textbook-Based Homework Item 809187
There are three (3) types of textbook based homework items located at the end of each chapter. These include Discussion Questions (DQ), Exercises (E), and Problems (P). Some homework items have been custom created. Complete the following homework scenario: Bob and Lisa are both married, working adults. They both plan for retirement and consider the $2,000 annual contribution a must. First, consider Lisa’s savings. She began working at age 20 and began making an annual contribution of $2,000 at the first of the year beginning with her first year. She makes 13 contributions. She worked until she was 32 and then left full time work to have children and be a stay at home mom. She left her IRA invested and plans to begin drawing from her IRA when she is 65. Bob started his IRA at age 32. The first 12 years of his working career, he used his discretionary income to buy a home, upgrade the family cars, take vacations, and pursue his golfing hobby. At age 32, he made his first $2,000 contribution to an IRA, and contributed $2,000 every year up until age 65, a total of 33 years / contributions. He plans to retire at age 65 and make withdrawals from his IRA. Both IRA accounts grow at a 7% annual rate. Do not consider any tax effect. Write a two to three (2-3) paragraph summary in which you: Create a chart summarizing the details of the investment for both Bob and Lisa. Explain the results in terms of time value of money. The investment strategies of Bob and Lisa illustrate the profound impact of time on the value of money, especially in retirement planning. Lisa began her contributions early at age 20, but only for 13 years, resulting in a shorter accumulation period. Her contributions are made at the start of each year, allowing her savings to grow without interruption for over a decade. Since she stopped contributing at age 32 but plans to withdraw at age 65, her IRA’s growth depends entirely on the compounding of her initial contributions during her working years. Using the future value of an ordinary annuity formula, we see that her contributions, although fewer, benefit from compound interest over a lengthy period. Conversely, Bob started contributing later at age 32 but contributed for 33 years, benefiting from a longer accumulation horizon, which results in a significantly larger total accumulated wealth. His consistent annual contributions, coupled with compound interest, demonstrate the power of steady, sustained investing over time. Therefore, this scenario highlights the importance of early and continuous investment to maximize the compound growth of retirement savings, exemplifying the core principle of the time value of money that a dollar today is worth more than a dollar in the future due to its potential earning capacity. Both strategies, despite differences in timing, underscore how the age at which investments begin and the consistency of contributions influence the total future sum and the effective growth of retirement funds.There Are Three 3 Types Of Textbook Based Homework Items Located At
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