crystalquick
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You made contributions to a traditional IRA over the course of 15 working years. Her contributions averaged $4000 annually. Yon was in a 29% tax bracket during her working years. The average annual rate of return on the account was 5%. Upon retirement, Yon stopped working and making IRA contributions. Instead, she started living on withdrawals from the retirement account. At this point, Yon dropped into the 15% tax bracket. Factoring in taxes, what is the effective value of Yon's Traditional IRA at retirement? Assume annual compounding.

A= $74,230.25
B= $25,031.13
C= $73,367.11
D= $141,367.11

Respuesta :

Aliwohaish12
4,000×((1+0.05)^(15)−1)÷0.05
=86,314.25
86,314.25−86,314.25×0.15
=73,367.11

Answer:

The answer is : C= $73,367.11

Step-by-step explanation:

We will first find the future value of the annuity.

The formula is :

Fv = pmt [(1+r)^(n)-1)÷(r)]

pmt = $4000

r = 5% or 0.05

n = 15 years

Putting these values in the formula, we get:

[tex]4000(\frac{(1+0.05)^{15}-1 }{0.05}[/tex]

= $86,314.25

Now we will deduct the 15% tax on 86314.25 from $86,314.25

[tex][(86314.25)-(86314.25*0.15)][/tex]

[tex]86314.25-12947.13=73367.12[/tex]  close to option C.

So, option C is the correct answer.

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