4 Self-created tax shelter vs. RRSP (18 marks) Jill Heath has read about the concept of borrowing money to create her own tax shelter as per Ch.12 of the Ho, Robinson et.al textbook (6th edition), but wonders if she can benefit because her income is not that high. She is 25 and her marginal tax rate is 32%. She is planning to invest $4,000 per year into her RRSP until she retires at 65. Alternatively, she is willing to use the $4,000 per year to service the investment loan of her self-created tax shelter. The rate of interest on the loan is 7%. The expected rate of return on the mutual fund is 11% (all capital gains, no dividend). Assume that she will withdraw her RRSP in one lump sum at 65, or in the case of the tax shelter she will sell her investment at 65 and pay off the loan. Assume the marginal tax rate at 65 will be 50%, Required: (a) How much money will she have after taxes if she invests in the RRSP? (6 marks) (b) How much money will she have after taxes if she invests in the tax shelter? (6 marks) (c) (c) In (b), if the expected rate of return on the mutual fund is 7% (i.e., the same as the rate of interest on the loan), how much money after taxes will she have at 65? (6 marks)