Finance Homework Scenario

Bottomline: What is Bob's IRA contributions like after continually contributing $2K annually for 33 yrs? What is Lisa's contributions like after stopping at a certain point, then let whatever the current balance is accrue @ 7% a year?  Check the Coffee House Chatroom for samples….Make sure you check out the accompanying IRA Help Video in your Week 6 Course Shell..

Regarding the IRA homework samples – many of you are going to ask yourself – are we all going to have the same answers? The answer is – you will have similar ones, however I want you to understand the concept behind it. You are using a retirement financial product – IRA and see how it is applied in a real life exercise. Before you handle this problem – it is a good idea to understand how an IRA works. 

Here are a couple of websites you can use…   – Just copy and paste – This gives you an introduction on IRAs… – Just copy and paste – This gives you an IRA calculator to help you with your exercise…

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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 beginning of the first year with her first year. She makes 13 contributions. She worked until she was 32 and then left full time to have children and 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, I used his discretionary income to buy a home, take vacations, and pursue his golfing hobby. At age 32, I made his first $ 2,000 contribution to an IRA, and contributed $ 2,000 every year up to 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) 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.

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