M10 suppose an individual earns more than M15000 ina year and decide to put M10000 into retirementplan in one year (this year). Assume that he is in the28 percent marginal tax bracket and interest on thesaving is treated as normal income. If the moneysaved earns 10 percent annually for 20 years, whatwill be income available in period 2 (NB: after 20year assuming annual compounding, (1+r)^t)?

Amount grow with compounding of money and over the period of time grow to much larger due to…

suppose an individual earns more than M15000 a year and decide to put M10000 into retiremer plan in one year (this year). Assume that he is in 28 percent marginal tax bracket and interest on saving is treated as normal income. If the money saved earns 10 percent annually for 20 years, w

suppose an individual earns more than M15000 a year and decide to put M10000 into retiremer plan in one year (this year). Assume that he is in 28 percent marginal tax bracket and interest on saving is treated as normal income. If the money saved earns 10 percent annually for 20 years, w

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.

Question

M10

suppose an individual earns more than M15000 in
a year and decide to put M10000 into retirement
plan in one year (this year). Assume that he is in the
28 percent marginal tax bracket and interest on the
saving is treated as normal income. If the money
saved earns 10 percent annually for 20 years, what
will be income available in period 2 (NB: after 20
year assuming annual compounding, (1+r)^t)?

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