Reference no: EM132803227
John Jones, a 25-year-old university graduate, wishes to retire at age 65. To supplement other sources of retirement income, he plans to deposit $2,000 each year into a tax-free savings account (TFSA). The TFSA will be invested to earn an annual return of 10% per year, compounded annually, over the next 40 years.
Problem A. If John makes annual end-of-year $2,000 deposits into the TFSA, how much would he have accumulated by his 65th birthday.
Problem B. If John decides to wait until age 35 to begin making annual end-of-year $2,000 deposits into the TFSA, how much would he have accumulated by his 65th birthday.
Problem C. Using your findings in Part A & Part B, discuss the impact of delaying making deposits into the TFSA for 10 years, (Age 25 to Age 35) on the amount accumulated by John's 65th birthday
Problem D. Rework Parts A, Part B and Part C assuming John makes all deposits at the beginning rather than at the end of each year. Discuss the effect of beginning-of-year deposits on the future value accumulated by his 65th birthday.
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