An investor has an effective tax rate on all items of 33%, and he decides to put $9,000 into a 401k. The future value of the investment that results from the deferral of taxes over 30 years at an 8% return equals ________.

Question

Quizplus · Accepted Answer

Extra savings = $9,000 × 0.33 = $2,970 FV = ($2,970) × (1 + 0.08)³⁰ = $29,886 Calculator entries are N = 30, I/Y = 8, PV = −2,970, PMT = 0, CPT FV → 29,886.09.

An Investor Has an Effective Tax Rate on All Items