account be? Assume that only the interest is taxed (assume the principal was taxed before deposit). What is the purchasing power of that amount, in today’s dollars, assuming a 4% inflation rate?

Set to Begin mode. Press \¯if BEGIN annunciator is not displayed.

Table 13-23 Calculating the purchasing power of the amount

KeysDisplay Description

J\Í

1.00

Sets 1 payment per year.

 

 

 

 

DVÙ

35.00

Stores number of periods and

 

interest rate.

 

 

 

g7JjVÒ

8.18

 

 

 

 

 

 

:Ï

0.00

Stores amount you start with.

 

 

 

 

G:::yÌ

 

payment.

 

-2,000.00

Stores amount of annual

 

 

 

É

387,640.45

Calculates amount in account at

 

retirement.

 

 

 

vÌPvÙ4

 

paid into account by retirement.

 

-70,000.00

Calculates amount you have

 

 

 

1vÉ4

317,640.45

Calculates interest account has

 

earned by retirement.

 

 

 

PJV§4

 

interest.

 

47,646.07

Calculates taxes at 15% of

 

 

 

y1vÉ4

339,994.39

Calculates after-tax FV.

 

 

 

 

É

339,994.39

Stores after-tax future value in

 

FV.

 

 

 

YÒ:ÌÏ

-86,159.84

Calculates the present value

 

purchasing power of after-tax

FV, assuming a 4% inflation rate.

Value of a Taxable Retirement Account

This problem uses the TVM application to calculate the future value of a taxable retirement account that receives regular, annual payments beginning today (Begin mode). The annual tax on the interest is paid out of the account. (Assume the deposits have been taxed already.)

Additional Examples 151