Answer to Question #349697 in Financial Math for Angel

Question #349697

Both Maria and Firdaus are salaried individuals. They are saving for their retirement 20 years from now. Both of them are also in the 28% marginal tax bracket. Maria makes a $2000 contribution annually on December 31 into a savings account (subjected to tax) earning an effective rate of 8% per year. At the same time, Firdaus makes a $2000 annual payment to an insurance company (tax-sheltered) for an after-tax-deferred annuity. The annuity also earns interest at an effective rate of 8% per year. (Assume that both of them remain in the same tax bracket throughout this period, and disregard state income taxes.)


Calculate how much each of them will have in their investment account at the end of 20 years.


Compute the interest earned on each account.


Show that even if the interest on Firdaus’ investment were subjected to a tax of 28% upon withdrawal of his investment at the end of 20 years, the net accumulated amount of his investment would still be greater than the net accumulated amount of Maria’s investment.


0
Service report
It's been a while since this question is posted here. Still, the answer hasn't been got. Consider converting this question to a fully qualified assignment, and we will try to assist. Please click the link below to proceed: Submit order

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!

Leave a comment

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS