Tim and his spouse, Judy, both age 43, recently received an inheritance of $100,000. They would like to invest the inheritance and use it to supplement their retirement income in 15 years. Tim and Judy are currently in a 25% marginal income tax bracket and for planning purposes wish to assume the same marginal rate throughout retirement. Tim is an engineer who would like to run some sample calculations. He has asked you to run these calculations exactly as he has prescribed. If the investment is liquidated and taken as a lump-sum on their retirement date, which of the following investment alternatives produces the highest after-tax amount?

a) Investing $100,000 into a currently taxable investment earning 6.5% per year with taxes being paid from the account each year

b) Investing $100,000 into a tax-exempt investment earning 4.75% per year

c) Investing $100,000 into a tax-deferred annuity earning 6.5% per year

d) Dividing the inheritance into $10,000 contributions ($5,000 each) into Roth IRAs for 10 years and earning 7.5% per year