4. On January 1 Patti made a $90,000 interest-free loan to her son, Alex, who used the money to pay off the $40,000 mortgage on his personal residence and also to buy a $50,000 certificate of deposit. Alex's only income for the year is his salary of $45,000 and $8,100 Federal I- BOND interest income on the certificate of deposit (9% WOW!). The relevant Federal interest rate is 3% compounded semiannually. The loan is outstanding for the entire year. a. Based on the above information, what is the effect of this loan on Patti's gross income for the year?
4. On January 1 Patti made a $90,000 interest-free loan to her son, Alex, who used the money to pay off the $40,000 mortgage on his personal residence and also to buy a $50,000 certificate of deposit. Alex's only income for the year is his salary of $45,000 and $8,100 Federal I- BOND interest income on the certificate of deposit (9% WOW!). The relevant Federal interest rate is 3% compounded semiannually. The loan is outstanding for the entire year. a. Based on the above information, what is the effect of this loan on Patti's gross income for the year?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![4. On January 1 Patti made a $90,000 interest-free loan to her son, Alex, who used the
money to pay off the $40,000 mortgage on his personal residence and also to buy a
$50,000 certificate of deposit. Alex's only income for the year is his salary of $45,000
and $8,100 Federal I- BOND interest income on the certificate of deposit (9% WOW!).
The relevant Federal interest rate is 3% compounded semiannually. The loan is
outstanding for the entire year.
a.
Based on the above information, what is the effect of this loan on Patti's gross
income for the year?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F769282b7-875c-47fc-8775-139c9b8de1ae%2Fad34b2f7-d883-4161-a64f-94c443b18d3b%2Fsm56p4_processed.jpeg&w=3840&q=75)
Transcribed Image Text:4. On January 1 Patti made a $90,000 interest-free loan to her son, Alex, who used the
money to pay off the $40,000 mortgage on his personal residence and also to buy a
$50,000 certificate of deposit. Alex's only income for the year is his salary of $45,000
and $8,100 Federal I- BOND interest income on the certificate of deposit (9% WOW!).
The relevant Federal interest rate is 3% compounded semiannually. The loan is
outstanding for the entire year.
a.
Based on the above information, what is the effect of this loan on Patti's gross
income for the year?
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