Reference no: EM13115167

A TSB (Tax Saver Benefit) plan allows you to put money into an account at the beginning of the calendar year that can be used for medical expenses. This amount is not subject to federal tax (hence the phrase TBS). As you pay medical expenses during the year, you are reimbursed by the administrator of the TBS until the TBS account is exhausted. From that point on, you must pay your medical expenses out of your own pocket. On the other hand, if you put more money into your TBS account than the medical expenses you incur, this extra money is lost to you. Your annual salary is $80,000 and your federal income tax rate is 30%.

Assume that your medical expenses in a year are normally distributed with mean $2000 and a standard deviation $500. Build a simulation model in @Risk in which the output is the amount of money left to you after paying taxes putting money into a TBS account and paying any medical expenses. Experiment with the amount of money put into a TBS account using RISKSIMTABLE. Vary the amounts in the TBS from $1000 to $3000 in increments of $250.