Find purchasing power after income taxes into account

Reference no: EM131506651

Question: Your younger brother is very concerned about investment performance, but he is willing to tolerate some risk. He decides to invest $100,000 in a mutual fund that will earn 10% per year. The proceeds will be accumulated as a lump sum and paid out at the end of year 10. Based on the data given in Problem, what is today's purchasing power equivalent of your younger brother's investment?

Problem: Your older brother is concerned more about investment safety than about investment performance. For example, he has invested $100,000 in safe 10-year corporate AAA bonds yielding an average of 6% per year, payable each year. His effective income tax rate is 33%, and inflation will average 3% per year. How much will his $100,000 be worth in 10 years in today's purchasing power after income taxes and inflation are taken into account?

Reference no: EM131506651

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