Example: Tax-Free Account. Consider opening an IRA account with a dividend rate of 8.175%. 1) If you invest $2,000 at the beginning of each year for 35 years, how much will you have at retirement? 2) How much will you have paid into the IRA? 3) How much interest will you have earned? 4) If your post-retirement tax rate is 15%, what is the after-tax future value of the account? Assume only the interest will be taxed. (Assume the principal was taxed before deposit.) 5) What is the purchasing power of that amount, in today’s dollars, assuming an 8% annual inflation rate?

Keys:



1

e

35

8.175

0

2000 &

R

v*R

v=

v+R

v=

Display:

Description:

Sets 1 payment per year

and Begin mode.

 

   

 



Stores number of payment

 

periods until retirement (1

 

⋅ 35).



Stores dividend rate.



Present value of account

 

(before first payment).

Annual payment



(deposit).



Calculates amount in

 

account at retirement.

Calculates total amount

paid into IRA by



retirement.

Calculates interest you



will earn.

14: Additional Examples 207

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