An individual has the option to receive a $1000 annual bonus and invest the after-tax amount for 25 years, or receive $1000 per annum in a registered
pension plan for the next 25 years. Assuming a constant rate of return of 8% and a tax rate of 40%, what will be the total after-tax difference between the two
plans? Show all of your work.

Question

Quizplus · Accepted Answer

The Answer is Salary
Salary RPP The RPP nets an increase of $16,005 under the ordinary annuity method, and $18,176 under the annuity due method.

RPP

The RPP nets an increase of $16,005 under the ordinary annuity method, and $18,176 under the annuity due method.

An Individual Has the Option to Receive a $1000 Annual