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You areconsidering depositing $5000 now (i.e. at time t=0) into an IRAaccount that you plan on taking out 40 years from today. Given anincome tax rate of 25% and guaranteed rate of return of 5% compounded annually:
(A)Roth IRA: Compute the Amount that you would beable to withdrawal at the end of the 40 years if you invested the$5000 in a Roth IRA Account today:
(B)Traditional IRA: If you assume that the $5000 istax deductible (i.e. you claim it on your 1040 income tax formtoday), assume that you will invest (today) the $1250 you saved intaxes in a taxable account (where any interest income is taxed at25% per year). If you take into account the $5000 you put in thetraditional IRA and the $1250 you invested in the account that issubject to interest income being taxes at 25% per year, compute thetotal amount that you would be able to withdrawal at the end of the40 years (assume that the IRA account withdrawals are taxed at 25%while the taxable account withdrawals are not taxable):
(C) Which investment would you choose to make today (A or B)?
(D) If the income tax rate dropped to 20% (instead of25%) after 10 years from today, which investment would bethe better investment?
Compare to units, A and B. A has a new cost of $42,000, at life expectancy of 14 years, a salvage value of $4,000, and an annual operating cost of $3,000. B has a new cost of $21,000, a life expectancy of 7 years, a salvage value of $2,000.
Mary's credit card situation is out of control because she cannot afford to make her monthly payments. She has three credit cards with the following• 1 loan balances and APRs: Card 1, $4,500, 21%; Card 2, $5,700, 24%
In particular, you love vanilla ice cream, and you love chocolate ice cream, but you love vanilla just a little bit more. Your ice cream utility function is given by U(V,C)=1.5V+C. Assume vanilla ice cream costs $2/gallon.
One of your professors has made you an offer you can't refuse. You are getting a four year research assistantship to earn your PhD after you receive your BS degree. The assistantship will pay you $2,600 per month starting in June, immediately afte..
A $200,000 gift has been received by Harvard to support in perpetuity an annual professional ethics lecture series from its earnings. The administration says they should expect to earn 6% for the first 10 years, but being conservative.
The supply is simply the sum of the marginal cost curves of all the firms in the industry. Suppose that all the competitive firms collude to form one single monopoly firm. (Collusion changes neither the demand nor the cost conditions in the indust..
Suppose a consumer has an income of $1000 and faces prices Px = $5 and Py = $10. (a). Write the equation for this consumer's budget constraint. (b). Draw the budget constraint, placing Good X on the horizontal axis. Label it BC.
Assume that an investor is risk-neutral (i.e. assume that the investor always chooses the investment with the higher expected rate of return even if it is riskier). If the yield on 1-year marketable CD's is 6% while the yield on 2-year marketable ..
if nominal output rises from $13.5 billion to $14 billion and the GDP deflator rises from 100 to 105, a)what is the percetage increase in nominal output b)what is the percentage increase in the price index
maria and emmanuel need to cut logs for shelter or gather food to stay alive per day. maria produces 10 cut logs of shelter and 10 baskets of food. emmanuel produces 5 cut logs of shelter and 8 baskets of food. a) what is the opportunity cost for m..
The Eimac tubes in a linear amplifier for radio transmission are estimated to provide 18,000 hours of operation before requiring replacement. A pair of tubes cost $20,000 and has no salvage value. Their use, expressed in hours over a 4-year period
A producer currently hires 20 units of labor and 6 units of capital. The price per unit of labor is $10, the price per unit of capital is $2, and the marginal products of labor and capital are both equal to 20. If the producer increases labor by o..
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