Problem 2-04

1. Someone in the 36 percent tax bracket can earn 8 percent annually on her investments in a tax-exempt IRA account. What will be the real value of a one-time $15,000 investment in 5 years? 10 years? 20 years? Assume that the rate of inflation during all these periods was 2 percent a year. You may use Appendix C to answer the questions. Do not round intermediate calculations. Round your answers to the nearest dollar.

   in 5 years: $

   in 10 years: $

   in 20 years: $

2. Someone in the 15 percent tax bracket can earn 10 percent annually on his investments in a tax-exempt IRA account. What will be the real value of a one-time $15,000 investment in 5 years? 10 years? 20 years? Assume that the rate of inflation during all these periods was 2 percent a year. You may use Appendix C to answer the questions. Do not round intermediate calculations. Round your answers to the nearest dollar.

   in 5 years: $

   in 10 years: $

   in 20 years: $