suppose you deposited $3000 of earned income into an IRA, you can earn an annual interest rate of 8%and you are in a 40% tax bracket (Note:interest rates and tax brackets are subject to change over time, but some assumptions must be made to evaluate the investment) Also, change over time, but some assumptions must be made to evaluate the investment) Also, suppose you deposit the $3000 at age 25 and withdraw it at age 60.

1. How much money will remain after you pay the taxes at the age 60?

2. Suppose that instead of depositing the money into the IRA, you pay taxes on the money and the annual interest. How much money will you have at age 60? ( note: You effectively start with 1800(60% 3000) and the money earns 4.8%(60%of 8%) interest after taxes.

3. To the nearest dollar, how much additional money will you earn with IRA?

4. Suppose you pay taxes on the original %3000, but then able to earn 8% in a tax-free investment. Compare your balance at age 60 with the IRA balance.

To answer these questions, we will make some assumptions and use some formulas.

1. To calculate how much money will remain after paying taxes at age 60, we need to calculate the tax on the earnings. Assuming the annual interest rate of 8% is compounded annually, the amount in the IRA at age 60 would be:

Amount in IRA at age 60 = Principal * (1 + Interest Rate) ^ Number of Years

Principal = $3000
Interest Rate = 8% = 0.08
Number of Years = 60 - 25 = 35

Amount in IRA at age 60 = $3000 * (1 + 0.08) ^ 35
Amount in IRA at age 60 = $3000 * (1.08) ^ 35

Now, to calculate the tax on the earnings, we use the tax bracket of 40%. The formula to calculate the after-tax amount is:

After-tax Amount = Amount in IRA at age 60 * (1 - Tax Rate)

Tax Rate = 40% = 0.40

After-tax Amount = $3000 * (1.08) ^ 35 * (1 - 0.40)

You can now calculate this value to determine the amount of money that will remain after paying taxes at age 60.

2. To calculate how much money you will have at age 60 if you paid taxes on the money and the annual interest instead of depositing it into the IRA, you effectively start with $1800 (60% of $3000) and earn 4.8% interest after taxes (60% of 8%). The formula to calculate the final amount is:

Final amount = Principal * (1 + Interest Rate) ^ Number of Years

Principal = $1800
Interest Rate = 4.8% = 0.048
Number of Years = 60 - 25 = 35

Final amount = $1800 * (1 + 0.048) ^ 35

Calculate this value to determine how much money you will have at age 60.

3. To calculate the additional money earned with an IRA, subtract the after-tax amount from the final amount without the IRA. The formula is:

Additional money earned = Final amount - After-tax amount

Calculate this value to determine the additional money earned with an IRA.

4. To compare the balance at age 60 with the IRA balance if you paid taxes on the original $3000 but then able to earn 8% in a tax-free investment, we need to calculate the final amount in the tax-free investment. The formula is:

Final amount in tax-free investment = Principal * (1 + Interest Rate) ^ Number of Years

Principal = $3000
Interest Rate = 8% = 0.08
Number of Years = 60 - 25 = 35

Final amount in tax-free investment = $3000 * (1 + 0.08) ^ 35

Calculate this value to determine the balance at age 60 in the tax-free investment. Finally, compare this value with the amount in the IRA at age 60 to see which investment option gives you a higher balance.