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Individual retirement accounts, or IRAs, were established by the U.S. government to encourage saving. An individual who deposits part of current earnings in an IRA does not have to pay income taxes on the earnings deposited, nor are any income taxes charged on the interest earned by the funds in the IRA. However, when the funds are withdrawn from the IRA, the full amount withdrawn is treated as income and is taxed at the individual's current income tax rate. In contrast, an individual depositing in a non-IRA account has to pay income taxes on the funds deposited and on interest earned in each year but does not have to pay taxes on withdrawals from the account. Another feature of IRAs that is different from a standard savings account is that funds deposited in an IRA cannot be withdrawn prior to retirement, except upon payment of a substantial penalty. a) Greg, who is five years from retirement, receives a $10,000 bonus at work. He is trying to decide whether to save this extra income in an IRA account or in a regular savings account. Both accounts earn 5 percent nominal interest, and Greg is in the 30 percent tax bracket in every year (including his retirement year). Compare the amounts that Greg will have in five years under each of the two saving strategies, net of all taxes. Is the IRA a good deal for Greg? (b) Would you expect the availability of IRAs to increase the amount that households save? Discuss in light of (1) the response of saving to changes in the real interest rate and (2) psychological theories of saving.
Identify and describe the effects of a change in money supply on the interest rate. Explain the money multiplier and the money creation process.
For Profit Labs, Inc. (FPL) is a private laboratory that does only routine blood count. With total assets of $8 million last year, FPL took in $3 million in revenue and had expenses of $2 million. The average firms in other industries make a retur..
The firm is considering a quantity discount. The first 400 units can be purchased at a price of $120, and further units can be purchased at a price of $80. How many units will the consumer buy in total?
Think a small open economy with a fixed exchange rate system. Assume there is a general expectation that central bank will revalue the domestic currency in the future
Use a graphical illustration to describe briefly what the influence on the market supply of labour
Company A plans to produce 300,000 units next year, the production budget is: Compute the total cost and cost per unit when the unit production is changed to 315,000 units.
Use the first order conditions for profit maximisation to show that a monopolist will never produce on the inelastic portion of his demand curve.
Discuss two situations in which you made a decision by weighing the marginal cost and marginal benefits. Explain your rationale in economic terms, such as the marginal principle and principle of diminishing returns.
What is the interrelationship between the four financial statements? Why is it important to make comparisons using ratio analysis? What are the different ways you can make comparisons?
What effect is the new diet likely to have on the number of apple orchards within 100 miles of New York City?
Despite strong sales and a low marginal cost of producing the product, your company has yet to show a profit from selling the drug.
Negative externalities that arise from the production of a good;a. cause an increase in the demand for the goodb. cause a decrease in the demand for the goodc. impose costs on third partiesd. bring private costs into equality with social costs.
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