Homework: Time Value of Money Activity
For this activity, read the scenario and then use the provided Time Value of Money Excel Template and Time Value of Money Template templates to complete your activity before uploading them to the submission area.
Note: There are locked cells in the Excel template. The cells have been locked to prevent the formulas from being disturbed. The cells that you will need to use to complete this homework are not locked. You may create your own templates, however, it is recommended that you use the templates provided.
Note: Watch the Excel tutorial videos linked in this week to learn how to use Excel before attempting the homework. You can use the template provided or you may create your own template based on the one provided.
Scenario
Larry and Beth are both married, working adults. They both plan for retirement and consider the $6,000 annual contribution a must.
First, consider Beth's savings. She began working at age 20 and began making an annual contribution to her IRA of $6,000 each year until age 32 (12 contributions). She 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.
Larry started contributing to his IRA at age 32. In 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 $6,000 contribution to an IRA and contributed $6,000 every year up until age 65 (33 contributions). He plans to retire at age 65 and make withdrawals from his IRA.
Both IRA accounts grow at an 8 percent annual rate. Do not consider taxes or inflation.
Instructions
i. Create a chart summarizing the details of the investment for both Larry and Beth.
ii. Write a one-paragraph summary in which you explain the results in terms of the time value of money for both Larry and Beth. (Hint: discuss why one person was able to save a great deal more than the other.)
Format your homework according to the following formatting requirements:
i) The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.
ii) The response also includes a cover page containing the title of the homework, the student's name, the course title, and the date. The cover page is not included in the required page length.
iii) Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.