=+3.7†

Everyday Application: Investing for Retirement: Suppose you were just told that you will receive a year-end bonus of $15,000 from your company. Suppose further that your marginal income tax rate is 33.33%, which means that you will have to pay $5,000 in income tax on this bonus. And suppose that you expect the average rate of return on an investment account you have set up with your broker to be 10% annually (and, for purposes of this example, assume interest compounds annually).