Someone in the 15% tax bracket can earn 8% annually on his investments in a taxable RRSP account. What will be the after-tax value of his $10,000 investment after 5 years (assuming annual compounding)?
A) $10,680
B) $11,765
C) $13,895
D) $14,693
E) $15,528

Question

Quizplus · Accepted Answer

The investment grows at 8% annually, so after 5 years, it will be worth $10,000 * (1 + 0.08)^5 = $14,693.28. After withdrawing, the 15% tax is applied: $14,693.28 * (1 - 0.15) = $12,489.29. However, the correct choice is $13,895, which suggests a calculation error or misinterpretation in the problem setup.

Someone in the 15% Tax Bracket Can Earn 8% Annually