Jenny (35 Years Old)is Considering Making a One-Time Contribution to Either

question 94

Multiple Choice

Jenny (35 years old) is considering making a one-time contribution to either a traditional 401(k) plan or to a Roth 401(k) plan. She plans to withdraw the account balance when she retires in 40 years. Jenny expects to earn a 7 percent before-tax rate of return no matter which plan she contributes to. Which of the following statements is true?

• A)If Jenny's marginal tax rate in the year of contribution is higher than her marginal tax rate in the year of distribution, she will earn a higher after-tax rate of return on the traditional 401(k)plan than on the Roth 401(k)plan.
• B)If Jenny's marginal tax rate in the year of contribution is lower than her marginal tax rate in the year of distribution, she will earn a higher after-tax rate of return on the traditional 401(k)plan than on the Roth 401(k)plan.
• C)Jenny will earn the same after-tax rate of return no matter which plan she contributes to.
• D)Jenny is not allowed to make a one-time contribution to either plan.

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Definitions:

Electron Transport Chain

A series of protein complexes and other molecules that transfer electrons from donors to acceptors via redox reactions, coupled with the transfer of protons across a membrane, to generate ATP.

Glycolysis

A metabolic pathway that breaks down glucose to pyruvate, producing ATP and NADH, occurring in the cytoplasm of cells.

Glycolysis

The metabolic pathway that converts glucose into pyruvate, releasing energy and pyruvic acid as by-products.

Carbon Dioxide

Carbon dioxide is a colorless, odorless gas produced by burning carbon and organic compounds and by respiration. It is naturally present in air and is absorbed by plants in photosynthesis.