What is the solution to this problem? In 2015, Nina contributes 8 percent of her

Question

What is the solution to this problem?

In 2015, Nina contributes 8 percent of her $187,000 annual salary to her 401(k) account. She expects to earn a 7 percent before-tax rate of return. Assuming she leaves this (and any employer contributions) in the account until she retires in 30 years, what is Nina’s after-tax accumulation from her 2015 contributions to her 401(k) account? (Round intermediate calculations to the nearest whole dollar amount. Round "Future value factor" to 4 decimal places.)

Assume Nina’s marginal tax rate at retirement is 30 percent.

b. Assume Nina’s marginal tax rate at retirement is 20 percent.

c. Assume Nina’s marginal tax rate at retirement is 40 percent.

Assume Nina’s marginal tax rate at retirement is 30 percent.

Explanation / Answer

ANSWER a

BEFORE TAX CONTRIBUTION => 187000 * 8% => $14960

TIME FUTURE VALUE FACTOR => 1.0730 => 7.6123

FUTURE VALUE OF CONTRIBUTION => 7.6123*14960 => $113880

TAX AT 30% => 34164

NINA'S AFTER TAX ACCULULATION FROM 2015 IS IF TAX RATE IS 30% => $79716

ANSWER b

TAX AT 20% => 113880*20% => 22776

NINA'S AFTER TAX ACCULULATION FROM 2015 IS IF TAX RATE IS 20% => $91104

ANSWER c

TAX AT 40% => 40%*113880 => $45552

NINA'S AFTER TAX ACCULULATION FROM 2015 IS IF TAX RATE IS 40% => $68328

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