An individual in the 15% tax bracket has $10,000 invested in a tax-exempt IRA account.If the individual earns 8% annually before taxes and inflation is 2.5% per year,what is the real value of the investment in 20 years?
A) $23,211
B) $28,467
C) $29,178
D) $37,276
E) $46,610

Question

Quizplus · Accepted Answer

The annual real return adjusted for inflation is computed as follows:
(1.08)/(1.025)-1 = 5.37%.
FV = $10,000(1 + 0.0537)²? = $28,466.86

An Individual in the 15% Tax Bracket Has $10,000 Invested