Margaret Is Trying to Decide Whether to Place Funds in a Qualified

question 51

Essay

Margaret is trying to decide whether to place funds in a qualified tuition program. Her son will be attending college in 4 years. She is in the 35% marginal tax bracket and she believes she can earn an 7% before tax return on alternative investments. Thus, $10,000 will accumulate to $11,948 (after-tax) in 4 years. Margaret expects tuition to increase at the rate of 5% each year to $12,155 in 4 years. Her son will be in the 15% marginal tax bracket in all relevant years. Given these assumptions, should Margaret participate in the qualified tuition program?

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Definitions:

Inference Forms

Logical sequences in which the conclusion is a direct result of the premises presented.

MP

Short for Member of Parliament, an individual elected to serve as a representative of the citizens in the parliamentary government.

Conj

An abbreviation often used for "conjunction," a logical operation that combines two conditions or statements, resulting in truth only if both elements are true.

Inference Forms

Standardized patterns of reasoning, where specific premises lead to a certain conclusion.