After some discussion and completing questionnaire to determine Earnest’s risk tolerance for investments you agree on some assumptions;
Earnest expects a nominal return of 6.25% annually during the accumulation phase
Earnests expects a nominal rate of return of 5.5% annually during retirement
Inflation is expected to be 1.75%
His marginal tax rate is 32%
Note: Round all inflation adjusted rates to two decimal places (example 5.12)
Required: Complete the following questions:
Assuming Earnest has never contributed to a RRSP before what is the amount of the RRSP contribution he can make this year, including his salary up to the end of the current year? Show all calculations