Kate is in the 27% bracket and has 21,000 dollars available for investment during her current tax year. Assume that she remains in the same tax bracket over the next 10 years, and determine the accumulated amount (in dollars) of her investment after taxes if she puts the $21,000 into the following. (Round your answers to two decimal places.)
a) Tax-deferred annuity that pays 6%/year, tax deferred for 10 years.
b) Taxable instrument that pays 6%/year for 10 years. (Hint: In this case, the yield is 4.38%/year.)
We thought using the compound interest formula would work, but the answer was incorrect. I'm lost on what to do. I'm not even sure of what this question is asking. If someone can help me with these two problems I'll be eternally grateful.