rfra asignment 2
.txt
keyboard_arrow_up
School
York University *
*We aren’t endorsed by this school
Course
FINANCIAL
Subject
Economics
Date
Apr 28, 2024
Type
txt
Pages
1
Uploaded by PresidentFrog3372
Reginald is retired and receives CPP and OAS benefits, as well as a pension from his former employer. His financial planner is
calculating his income from various sources. All of the following statements are true, EXCEPT:
Correct
The correct answer: Reginald's employment pension income must be indexed to the
CPI.
Your answer: Reginald's employment pension income must be indexed to the CPI.
Solution:
Reginald's employment pension may or may not be indexed. If it is indexed, it may be indexed to the CPI or to some other pre-determined
percentage.
2 Questions 2 to 5 are based on the Fred and Irene Buckley case study presented throughout this unit.
Through your discussions with the Buckleys, you have learned that Fred and Irene have been married for almost 40 years. Fred has had
a stable career throughout their marriage while Irene's career has been more sporadic as she has devoted most of her energies to raising
the children and maintaining the household.
After reviewing Schedule 2, you notice that this year (i.e. the year Fred is 66 years old and Irene is 63 years of age), Fred will be paying
much more in income taxes than Irene. Fred is on the right track to reduce his tax liability by making spousal RRSP contributions.
What else could Fred and Irene do to shift some of the tax burden to Irene to take advantage of her lower marginal rate?
Incorrect
The correct answer: They could assign their CPP pensions.
Your answer: Fred could give his portfolio assets to Irene.
Solution:
Schedule 2 currently shows that Fred receives more than 4 times the CPP retirement pension that Irene does, calculated as ($9,200 ÷ $2,100).
Because they have lived together for the bulk of their working lives, they have the
opportunity of assigning a significant portion of Fred's CPP credits
to Irene. This would increase Irene's taxable income, and decrease Fred's taxable income.
Even if Fred bases his RRIF on Irene's younger age, the withdrawals will still be taxed in his hands.
Fred can rollover his capital assets to Irene without incurring an immediate tax liability under the spousal rollover provisions. However, any income,
including capital gains, will still be attributed to him.
Discover more documents: Sign up today!
Unlock a world of knowledge! Explore tailored content for a richer learning experience. Here's what you'll get:
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
Related Questions
Based on surveys conducted by the BLS, the CPI basket assigns a weight of approximately 15% to transportation spending. Suppose you walk to your workplace every day and you do not use any other means of transportation.
With everything else the same, if the price of transportation services increases by 10%, by how much would the CPI increase?
Is the CPI measuring the true change in your cost of living?
arrow_forward
Which Professor Is Better Off? Suppose the starting
salary for a new assistant economics professor was
$20,000 in 1976 and $85,000 in 2014.
The value of the CPI for 2014 was 236.7, compared to
56.9 in 1976.
A newly-hired professor earned more in real terms in (
1976 or 2014), with a real salary of $___ enter your
response here. (Enter your response rounded to the
nearest integer.)
arrow_forward
Jenny earned a salary of $48,000 in 2010 and a salary of $60,000 in 2014. The consumer price index in 2010 was 220.5. The consumer price index was 236.2 in 2014. Jenny's 2010 salary in 2014 dollars is
arrow_forward
Last year you bought a house for $200,000, and you sell the house this year for $230.000. Unfortunately, the government makes you
pay taxes on your capital gains. Assume that the capital gains tax rate is 20%. Over the year, the CPl increased from 110 to 115.5.
Your after-tax real return is
%.
See Hit
Part 2 (1 point)
%
Suppose that the CPI increased from 110 to 121. What is your after tax real return now?
arrow_forward
Sally worked hard all year and put her savings into a mutual fund that paid a nominal interest rate of 4 percent a year. During the year, the CPI increased from 185 to 190. What was the real interest rate that Sally earned?
Note:-
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.
arrow_forward
Congratulations! Your boss has given you a raise.
However, you want to know whether your purchasing power has actually increased, since inflation is rising as well. The table below gives you data for wages and the Consumer Price Index (CPI) for
the last two years.
Year 1
Year 2
Wage ($/day)
$2,000
$2,100
The nominal percentage increase in your wage is%. (Round your answer to one decimal place.)
The real percentage increase in your wage is%. (Round your answer to one decimal place.)
CPI
115
128.8
arrow_forward
Cody purchased one share of Microsoft for $100 in January 2000 and sold that share in January 2022 for $200. Suppose the CPI was 94.5 in January 2000 and 140.3 in January 2022 . If the capital gains tax is imposed at a rate of 50 percent, what is Cody's after-tax real capital gain?
Note:-
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.
arrow_forward
David earned a salary of $43,500$43,500 in 1994 and $89,000$89,000 in 2010. The consumer price index was 148.2 in 1994 and 215.3 in 2010. David's 1994 salary in 2010 dollars is _.
arrow_forward
Maddie's nominal income was $33,000 in 2012. In 2013, because of her excellent work ethic, she received a raise that increased her nominal income to $35,000. Maddie knew a lot about inflation so she decided to see how much of a raise she really received. After researching the consumer price index at the Bureau of Labor Statistics web site, she found that the CPI for 2012 was 110 and that it jumped to 125 in 2013. Calculate the percent change in Maddie's real income after she was given a raise. Was she hurt or helped by this unanticipated inflation? Explain.
arrow_forward
Suppose the nominal median household income for a family of four in the United States was $24,618.00 in 1985, $36,678.00 in 1995, $50,326.00 in 2005, and $53,276.00 in 2010.You will need to know that the CPI (multiplied by 100, 1982–1984 = 100) was 108.6 in 1985, 153.4 in 1995, 196.3 in 2005, and 219.1 in 2010.Instructions: Enter your responses rounded to two decimal places.
Year
Real Income
1985
$
1995
$
2005
$
2010
$
Between 1985 and 2005, the real median household income (Click to select) rose declined stayed constant .
Between 2005 and 2010, the real median household income (Click to select) rose declined stayed constant .
rev: 01_31_2019_QC_CS-155719
arrow_forward
Suppose the nominal median household income for a family of four in the United States was $24,618.00 in 1985, $36,678.00 in 1995, $50,326.00 in 2005, and $53,276.00 in 2010.You will need to know that the CPI (multiplied by 100, 1982–1984 = 100) was 108.6 in 1985, 153.4 in 1995, 196.3 in 2005, and 219.1 in 2010.Instructions: Enter your responses rounded to two decimal places.
Year
Real Income
1985
$
1995
$
2005
$
2010
$
Between 1985 and 2005, the real median household income (Click to select) rose declined stayed constant .
Between 2005 and 2010, the real median household income (Click to select) .
arrow_forward
Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then inflation turns out to be higher than they both expected.Is the real interest rate on this loan higher or lower than expected?Does the lender gain or lose from this unexpectedly high inflation? Does the borrower gain or lose?Inflation during the 1970s was much higher than most people had expected when the decade began. How did this affect homeowners who obtained fixed-rate mortgages during the 1960s? How did it affect the banks that lent the money?
arrow_forward
Suppose that over the past 10 years your yearly income has risen from $30,000 to $40,000. Over
the same period the price index has risen from 150 to 200. What has happened to your real
income over the same period?
It has decreased.
It has remained the same.
It has increased.
The correct answer cannot be determined because we don't know the
base year.
arrow_forward
Solve the following.Of the items listed in the table above, are there any items that cost more than one-and-one-half times as much in 2009 as they cost during the base years, but less than twice as much as they cost during the base period? If so, which ones? (Select all that apply.)
food and beverages
housing
apparel
transportation
medical care
recreation
education and communication
none of these
arrow_forward
The following table shows the average nominal interest rates on six-month Treasury bills between 1971 and 1975, which determined the nominal
interest rate that the U.S. government paid when it issued debt in those years. The table also shows the inflation rate for the years 1971 to 1975. (All
rates are rounded to the nearest tenth of a percent.)
Year
1971
1972
1973
1974
1975
INTEREST RATE (Percent)
Source: "Economic Report of the President (2007)," United States Government Printing Office, last modified February 1, 2007, accessed March 11, 2013,
http://www.gpo.gov/fdsys/pkg/ERP-2007/pdf/ERP-2007.pdf.
On the following graph, use the orange points (square symbol) to plot the nominal interest rates for the years 1971 to 1975. Next, use the green
points (triangle symbol) to plot the real interest rates for those years.
8.0
7.0
6.0
5.0
4.0
1.0
-1.0
-2.0
-3.0
Nominal Interest Rate
(Percent)
4.5
4.5
7.2
7.9
6.1
-4.0
1970
1971
1972
1973
1974
1971
1975
Inflation Rate
(Percent)
4.4
3.2
6.2
11.0…
arrow_forward
Ten years ago, Ginny inherited $50,000 from her grandmother. She decided to invest all of this money in GE stock. Suppose she decides to sell the stock today so she can purchase her first home. The sale price of the stock is $64,500. Suppose that at the beginning of the ten year period the Consumer Price Index (CPI) was 125 and today the CPI is 215. Use this information to choose an answer that best desribes the impact inflation has on Ginny's tax liability
a)Inflation has decreased Ginny's tax burden.
b) Inflation has not impacted Ginny's tax burden.
c) Inflation has increased Ginny's tax burden.
arrow_forward
if the nominal interest rate is 18 percent and the real interest rate is 10 percent, the inflation rate is
arrow_forward
Explain how the Consumer Price Index (CPI) is calculated and critically evaluate its merits as a measure of inflation (approx 250 words)
arrow_forward
Not all groups in our society experience equal opportunity to work. The purpose of this discussion board is to allow you to research and explain the causes of disparity between current total U.S. unemployment and the unemployment rate for a demographic of your choice. Do not just list unemployment rates. Explain what causes the rates for the demographic of your choice to be different from the National average.
Visit the Bureau of Labor Statistics website. What is the current national unemployment rate? Find the unemployment rate for the demographic group that best fits a description of you (for example, based on age, sex, and race) or choose a demographic group of interest. Is the rate for that demographic higher or lower than the national average? What are some reasons for the differences? Do some research in support of what you present. What factors contribute to the differences?
Covid-19 caveat: The Pandemic did not necessarily impact all demographics in the same way.
arrow_forward
Susie is a 15-year-old who is looking to work as a babysitter. However, no one has hired her. How would the BLS classify Susie in the current population survey when measuring the unemployment rate?
A) Susie would be considered unemployed
B) Susie would not be considered part of the relevant population used to measure unemployment because only individuals who are 16 or older are included.
C) Susie would be considered employed
D) Susie would be considered as Not in the Labor Force
arrow_forward
Congratulations! Your boss has given you a raise.
However, you want to know whether your purchasing power has increased, since inflation is also rising. The table below gives you data for wages and the Consumer Price Index (CPI) for the last two years.
Wage ($/day)
CPI
Year 1
$ 2000 CPI 120
Year 2
$2200 CPI 129.6
The nominal percentage increase in your wage is
enter your response here%. (Round your answer to one decimal place.)
Part 2
The real percentage increase in your wage is
enter your response here%. (Round your answer to one decimal place.)
arrow_forward
Suppose that currently the consumer prices index (CPI) is 359.7 and that at the same time last year it
was 343.5.
If an index-linked pension was £503 per month this time last year, calculate how much it should be per
month now. (Give your answer to the nearest pound. Do NOT include the '£' sign. Assume the pension is
index linked using the CPI.)
Answer:
arrow_forward
Tamika is lending Juan $1,000 for one year. The CPI is 1.60 at the time the
loan is made, and they both expect it to be 1.68 in one year. If Tamika and
Juan agree that Tamika should earn a 3 percent real return for the year,
the nominal interest rate on this loan should be
percent.
arrow_forward
SEE MORE QUESTIONS
Recommended textbooks for you
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Related Questions
- Based on surveys conducted by the BLS, the CPI basket assigns a weight of approximately 15% to transportation spending. Suppose you walk to your workplace every day and you do not use any other means of transportation. With everything else the same, if the price of transportation services increases by 10%, by how much would the CPI increase? Is the CPI measuring the true change in your cost of living?arrow_forwardWhich Professor Is Better Off? Suppose the starting salary for a new assistant economics professor was $20,000 in 1976 and $85,000 in 2014. The value of the CPI for 2014 was 236.7, compared to 56.9 in 1976. A newly-hired professor earned more in real terms in ( 1976 or 2014), with a real salary of $___ enter your response here. (Enter your response rounded to the nearest integer.)arrow_forwardJenny earned a salary of $48,000 in 2010 and a salary of $60,000 in 2014. The consumer price index in 2010 was 220.5. The consumer price index was 236.2 in 2014. Jenny's 2010 salary in 2014 dollars isarrow_forward
- Last year you bought a house for $200,000, and you sell the house this year for $230.000. Unfortunately, the government makes you pay taxes on your capital gains. Assume that the capital gains tax rate is 20%. Over the year, the CPl increased from 110 to 115.5. Your after-tax real return is %. See Hit Part 2 (1 point) % Suppose that the CPI increased from 110 to 121. What is your after tax real return now?arrow_forwardSally worked hard all year and put her savings into a mutual fund that paid a nominal interest rate of 4 percent a year. During the year, the CPI increased from 185 to 190. What was the real interest rate that Sally earned? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardCongratulations! Your boss has given you a raise. However, you want to know whether your purchasing power has actually increased, since inflation is rising as well. The table below gives you data for wages and the Consumer Price Index (CPI) for the last two years. Year 1 Year 2 Wage ($/day) $2,000 $2,100 The nominal percentage increase in your wage is%. (Round your answer to one decimal place.) The real percentage increase in your wage is%. (Round your answer to one decimal place.) CPI 115 128.8arrow_forward
- Cody purchased one share of Microsoft for $100 in January 2000 and sold that share in January 2022 for $200. Suppose the CPI was 94.5 in January 2000 and 140.3 in January 2022 . If the capital gains tax is imposed at a rate of 50 percent, what is Cody's after-tax real capital gain? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardDavid earned a salary of $43,500$43,500 in 1994 and $89,000$89,000 in 2010. The consumer price index was 148.2 in 1994 and 215.3 in 2010. David's 1994 salary in 2010 dollars is _.arrow_forwardMaddie's nominal income was $33,000 in 2012. In 2013, because of her excellent work ethic, she received a raise that increased her nominal income to $35,000. Maddie knew a lot about inflation so she decided to see how much of a raise she really received. After researching the consumer price index at the Bureau of Labor Statistics web site, she found that the CPI for 2012 was 110 and that it jumped to 125 in 2013. Calculate the percent change in Maddie's real income after she was given a raise. Was she hurt or helped by this unanticipated inflation? Explain.arrow_forward
- Suppose the nominal median household income for a family of four in the United States was $24,618.00 in 1985, $36,678.00 in 1995, $50,326.00 in 2005, and $53,276.00 in 2010.You will need to know that the CPI (multiplied by 100, 1982–1984 = 100) was 108.6 in 1985, 153.4 in 1995, 196.3 in 2005, and 219.1 in 2010.Instructions: Enter your responses rounded to two decimal places. Year Real Income 1985 $ 1995 $ 2005 $ 2010 $ Between 1985 and 2005, the real median household income (Click to select) rose declined stayed constant . Between 2005 and 2010, the real median household income (Click to select) rose declined stayed constant . rev: 01_31_2019_QC_CS-155719arrow_forwardSuppose the nominal median household income for a family of four in the United States was $24,618.00 in 1985, $36,678.00 in 1995, $50,326.00 in 2005, and $53,276.00 in 2010.You will need to know that the CPI (multiplied by 100, 1982–1984 = 100) was 108.6 in 1985, 153.4 in 1995, 196.3 in 2005, and 219.1 in 2010.Instructions: Enter your responses rounded to two decimal places. Year Real Income 1985 $ 1995 $ 2005 $ 2010 $ Between 1985 and 2005, the real median household income (Click to select) rose declined stayed constant . Between 2005 and 2010, the real median household income (Click to select) .arrow_forwardSuppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then inflation turns out to be higher than they both expected.Is the real interest rate on this loan higher or lower than expected?Does the lender gain or lose from this unexpectedly high inflation? Does the borrower gain or lose?Inflation during the 1970s was much higher than most people had expected when the decade began. How did this affect homeowners who obtained fixed-rate mortgages during the 1960s? How did it affect the banks that lent the money?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning