Exhibit 2-2 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

Multiple Choice

Exhibit 2-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
As part of a retirement planning exercise, you are comparing a RRSP with a taxable investment fund. The RRSP contribution is tax deductible. In both cases the contribution amount is $3,000. Your time horizon is 30 years and you expect to earn 7% per year on both accounts. Your marginal provincial and federal tax rate is 25% but you expect your marginal tax rate at retirement to be 15%.
-Refer to Exhibit 2-2. Calculate the tax savings generated by the RRSP contribution at the time of investment.

A) $300
B) $750
C) $700
D) $100
E) $200