John is trying to decide

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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John is trying to decide whether to contribute to a Roth IRA or a traditional IRA. He plans on making a $5,000 contribution to whichever plan he decides to fund. He currently pays tax at a 32 percent marginal income tax rate, but he believes that his marginal tax rate in the future will be 28 percent. He intends to leave the money in the Roth IRA or traditional IRA for 30 years, and he expects to earn a 6 percent before-tax rate of return on the account. (Use Table 1.)

Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.

 

Problem 13-78 Part b (Static)

b. How much will John accumulate after taxes if he contributes to a traditional IRA (consider only the funds contributed to the traditional IRA)?

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Why is it 6000 instead of 5000 as the prensent contribution?

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