Question 3 Growing Annuities (20 marks) Daniel Richards has a new job as senior sheep herder and shearer on a large corporate sheep farm in New Zealand at a salary of NZ$50,000 p.a. He expects his salary to grow at 3% p.a. Inflation in New Zealand is 1.8%. He has a very strong saver personality. He will deposit 20% of his salary by automatic withdrawals: half into a TFSA; half into a taxable account. The income on the TFSA is never taxed. The income in the taxable account is taxed at 40% p.a. He is an aggressive investor who expects a nominal annual return of 7%. Calculate the following amounts after 10 years, all payments made at year end. a) The nominal value in the TFSA b) The real value in the TFSA c) The after-tax real value in the taxable account