Solve the problem.
-Find the final value, after all taxes are paid, for the following retirement account. Assume that taxes are deferred and that deposits are made at the end of each year. Marginal tax rate: $\quad 10 \%$
Regular deferred contribution: $\$ 1000$
Annual rate of return: $\quad 5 \%$
Number of years: 30

A) $\$ 68,166.26$
B) $\$ 59,794.96$
C) $\$ 55,609.32$
D) $\$ 62,784.71$

Question

Solve the problem.
-Find the final value, after all taxes are paid, for the following retirement account. Assume that taxes are deferred and that deposits are made at the end of each year. Marginal tax rate: $\quad 10 \%$
Regular deferred contribution: $\$ 1000$
Annual rate of return: $\quad 5 \%$
Number of years: 30

A) $\$ 68,166.26$
B) $\$ 59,794.96$
C) $\$ 55,609.32$
D) $\$ 62,784.71$

Quizplus · Accepted Answer

The final value of the retirement account can be calculated using the future value of an annuity formula: $FV = P \times \frac{(1 + r)^n - 1}{r}$, where $P$ is the annual payment, $r$ is the annual rate of return, and $n$ is the number of years. Here, $P = \$1000$, $r = 5\% = 0.05$, and $n = 30$. So, $FV = \$1000 \times \frac{(1 + 0.05)^{30} - 1}{0.05} = \$66,438.96$. After taxes are applied, the final value is $FV \times (1 - \text{tax rate}) = \$66,438.96 \times (1 - 0.10) = \$59,794.96$.

Solve the Problem 10%\quad 10 \%10% Regular Deferred Contribution $1000\$ 1000$1000 Annual Rate of Return

Solve the Problem $\quad 10 \%$ Regular Deferred Contribution $\$ 1000$ Annual Rate of Return