How much do andy and ben each accumulate

Reference no: EM13204631

Some people have the opportunity to invest in stocks in a tax-advantaged retirement plan, such as a 401(k) plan. Consider the difference between Andy, who is able to save in a tax-advantaged plan, and Ben, who must pay taxes on his return each year. Both invest 100,000 in the same mutual fund at the same time and always reinvest their earnings in the fund. Suppose that the return on the mutual fund is 7% each year and that the tax rate is 15%. (note that ben must pay taxes each year on his earnings, so he can only reinvest his after-tax earnings; Andy, however, pays 15% tax rate when he retires and withdraws his funds.)

A - How much do Andy and Ben each accumulate over 10 years?

B - How much do Andy and Ben each accumulate over 30 years?

Reference no: EM13204631

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