# hw10-4 - FV = Example 1c \$65,575.49 x.75 = \$49,181.62(You...

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Math 1160 – Section 10.4 Answer Key 1. Interest earned in a traditional IRA is tax deferred . You will pay taxes on the contributions and interest upon withdrawal of the funds from the traditional IRA. 2. Interest earned in a Roth IRA is tax free . You pay taxes on the contributions to a Roth IRA, but never pay taxes on the interest at withdrawal. 3. 300,000 x .55 = \$165,000 If he pays taxes of 45% on the balance of dollars in his traditional IRA upon withdrawal, then he is left with 55% (.55) of the money after taxes. 4. For a Roth IRA, withdrawals are NOT taxed. He can withdraw all the money and not pay taxes on it. He receives \$300,000. 6. The Traditional IRA is more advantageous in this situation. Example 1a: \$4000 x .30 = \$1200 taxes saved Example 1b: \$65,575.49 N = 48 I% = 6 PV = -4000 PMT = 0

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Unformatted text preview: FV = ? Example 1c: \$65,575.49 x .75 = \$49,181.62 (You have 75% left after taxes.) Example 3a: None. Contributions to a Roth IRA will be taxed. Example 3b: \$45,902.84 N = 48 I% = 6 PV = -2800 (\$4000 – 30% taxes) PMT = 0 FV = ? Example 3c: You will not be taxed upon withdrawal, so you will receive the full \$45,902.84. 8. The Roth IRA is more advantageous in this situation. Example 1a: \$4000 x .30 = \$1200 taxes saved Example 1b: \$65,575.49 N = 48 I% = 6 PV = -4000 PMT = 0 FV = ? Example 1c: \$65,575.49 x .65 = \$42,624.07 (You have 65% left after taxes.) Example 3a: None. Contributions to a Roth IRA will be taxed. Example 3b: \$45,902.84 N = 48 I% = 6 PV = -2800 (\$4000 - 30% Taxes) PMT = 0 FV = ? Example 3c: You will not be taxed upon withdrawal, so you will receive the full \$45,902.84....
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hw10-4 - FV = Example 1c \$65,575.49 x.75 = \$49,181.62(You...

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