Concept explainers
Individual Retirement Accounts The multiplier function
compares the growth of an Individual Retirement Account (IRA) with the growth of the same deposit in a regular savings account. The function M depends on the three variables n, i, and t, where n represents the number of years an amount is left at interest, i represents the interest rate in both types of accounts, and t represents the income tax rate. Values of M > 1 indicate that the IRA grows faster than the savings account. Let M = f(n, i, t) and find the following.
38. Find the multiplier when funds are left for 25 years at 5% interest and the income tax rate is 33%. Which account grows faster?
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