Question

An individual in the 36 percent tax bracket has $20,000 invested in a tax-exempt account. If the individual earns 10 percent annually before taxes and inflation is 3.0 percent per year, what is the real value of the investment in 10 years?

Answer 1

the real value of the investment in 10 years is $38,614

Step-by-step explanation:

The computation of the real value of the investment is given below:

but before that the rate of return is

= (1.10) ÷ (1.03) - 1

= 6.8%.

Now the

Future value

= $20,000 × (1 + 0.068)^10

= $38,613.80

Hence, the real value of the investment in 10 years is $38,614

The same should be calculated