Author Question: Jan can invest $4,000 of after-tax dollars (AT$) directly in a taxable bond outside an IRA, or she ... (Read 140 times)

NClaborn · **on:** Sep 13, 2020

Jan can invest $4,000 of after-tax dollars (AT$) directly in a taxable bond outside an IRA, or she can contribute the $4,000 to a nondeductible IRA and invest in the same bond through the IRA vehicle. In either case the bond yields an annual 4% before-tax rate of return (BTROR). Jan's marginal tax rate is 15%, and she expects it to remain so for the entire investment horizon of 25 years. What is her annualized after-tax rate of return (annualized ATROR) for the "bond inside the IRA"?
◦ 3.6%
◦ 4.5%
◦ 4%
◦ None of these.

joanwhite · **Reply #1 on:** Sep 13, 2020

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