tax deferred account

In CFAI book 2 page 238, Example 10

Why the answer of 2 and 3 are different, why invested in taxable account earning 7 percent deferred captial gains need to account for the cost basis, but when invested in a tax deferred account earning 7 percent the FVIF is just 1000(1+0.07)^20(1-0.2) without concerning the cost basis?

tax deferred account means that the basis has not been taxed . You need to deduct tax on the basis when you withdraw the money

In the taxable the tax was already paid before the investment too place . The way the calculation is written it decucts tax on the basis as 1*(1-0.2) .

So you need to add it back since it was already paid

thanks for the answer

if T0 higher than Tn, would you prefer TDA or TEA

Tn naturally . But could you predict that taxes will fall in 20 years ?