How much did your investment in the ira really cost you

Reference no: EM131130574

Traditional and Roth IRAs. With a traditional IRA, you get to deduct the amount you contribute from your current taxable income, invest the funds free from tax, but then pay taxes on the full amount you withdraw when you retire. Suppose your tax rate is 50 percent and you initially deposit $2,000 in an IRA. The proceeds double in seven years to $4,000. You then retire and pay taxes on the $4,000 at your 50 percent rate.

a. Taking into account your tax deduction for the IRA, how much did your investment in the IRA really cost you? What is your return after seven years?

b. With a Roth IRA, you do not get a deduction for your savings but the interest you earn is tax free. Is the outcome for a Roth IRA the same as for the traditional IRA if you invest $1,000 for seven years and double your initial investment?

c. Suppose you believed that in seven years tax rate

Reference no: EM131130574

Questions Cloud

A service facility according to a poisson process : Customers arrive at a service facility according to a Poisson process with rate λ. The (only) server is able to serve up to two customers at a time. However, an arbitrary customer is not served immediately if the server is busy upon his arrival.

General reflections on the novel : You will offer your general reflections on the novel and should be written with an eye to eye formality for public presentation.

Draw a histogram showing the sample means : Draw a histogram showing the 20 sample means. (Use classes -0.5 to 0.5, 0.5 to 1.5, 1.5 to 2.5 and so on). Describe the distribution of the x-bars that you see in part b (shape of distribution, center, and the amount of dispersion).

What is difference between molecular and structural formulas : What is the difference between molecular formulas and structural formulas of organic compounds? In the crystal structure of NaCI, what are the number and type of ions that are nearest neighbors to each Na+ ion?

How much did your investment in the ira really cost you : With a Roth IRA, you do not get a deduction for your savings but the interest you earn is tax free. Is the outcome for a Roth IRA the same as for the traditional IRA if you invest $1,000 for seven years and double your initial investment?

Write the balance equations of the process : Drivers arrive according to a Poisson process with rate λ to fill up their cars at a service station where there are two employees who serve at the exponential rates μ1 and 𝜇2, respectively. However, only one employee works at a time servi..

Tell me why this book is useful for business students : In this write-up, you will review the basic ideas in the book for 1000 words, and use the second 1000 words to reflect on it, i.e. tell me why this book is useful for business students.

Before-tax component cost of debt : Oberon, Inc., has a $40 million (face value) 8-year bond issue selling for 99 percent of par that pays an annual coupon of 8.40 percent. What would be Oberon’s before-tax component cost of debt?

Able to serve all the customers : We consider the queueing system M/M/1. However, the customers do not have to wait, because the server is able to serve all the customers at one time, at an exponential rate /i, regardless of the number of customers being served.

User Account

All Pages