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John was considering whether to place $10,000 in a tax-deferred annuity or a tax-free municipal bond. Assume the municipal returned 5% a year and the
John was considering whether to place $10,000 in a tax-deferred annuity or a tax-free municipal bond. Assume the municipal returned 5% a year and the tax-deferred annuity 6%. Calculate approximately how long he would have to hold the annuity so that, if he withdrew the money and paid taxes on it, he would come out ahead. His marginal tax rate is 20%.
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