If t₀ is the tax rate in Year 0,t_n is the tax rate in Year n,and ATA is after-tax accumulation,then which one of the following does not hold true? A)if t₀ = t_n,ATA per Exempt Model = ATA per Pension Model B)if t₀ t_n,ATA per Exempt Model t_n,ATA per Exempt Model ATA per Pension Model

Question

If t₀ is the tax rate in Year 0,t_n is the tax rate in Year n,and ATA is after-tax accumulation,then which one of the following does not hold true? A)if t₀ = t_n,ATA per Exempt Model = ATA per Pension Model B)if t₀ > t_n,ATA per Exempt Model < ATA per Pension Model C)if t₀ < t_n,ATA per Exempt Model > ATA per Pension Model D)if t₀ > t_n,ATA per Exempt Model > ATA per Pension Model

Quizplus · Accepted Answer

If the tax rate in Year 0 is greater than the tax rate in Year n, then the after-tax accumulation in the Exempt Model will be less than in the Pension Model due to the tax savings from contributions being greater in Year 0. Therefore, if t₀ > t_n, ATA per Exempt Model < ATA per Pension Model cannot be true. Therefore, choices A, B, and C are all potentially true, and the correct answer is D.

If T0 Is the Tax Rate in Year 0,tn Is

If T₀ Is the Tax Rate in Year 0,t_n Is