Suppose an individual earns more than M15 000 in a year and decide to put M10...

 

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Suppose an individual earns more than M15 000 in a year and decide to put M10 000 into retirement plan in one year (this year). Assume that he is in the 28 percent marginal tax bracket and interest on the saving is treated as normal income. If the money saved earns eight percent annually for 20 years, what will be income available in period 2 (NB: after 20 year assuming annual compounding, (1 + r)')? Suppose an individual earns more than M15 000 in a year and decide to put M10 000 into retirement plan in one year (this year). Assume that he is in the 28 percent marginal tax bracket and interest on the saving is treated as normal income. If the money saved earns eight percent annually for 20 years, what will be income available in period 2 (NB: after 20 year assuming annual compounding, (1 + r)')?

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SOLUTION Assuming that the individual contributes M10000 to a retirement plan this year and earns 8 ... View the full answer