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An individual buys $100,000 in financial assets and holds them for 2 years. The financial assets earn 12% interest each year. The tax rate is 25%. Consider a tax system in which half of realized and unrealized capital gains are taxed. What is the annual net (of taxes) rate of return on these assets?

An individual buys $100,000 in financial assets and holds them for 2 years. The financial assets earn 12% interest each year. The tax rate is 25%. Consider a tax system in which half of realized and unrealized capital gains are taxed. What is the annual net (of taxes) rate of return on these assets?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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An individual buys $100,000 in financial assets and holds them for 2 years. The financial assets earn 12% interest each year. The tax rate is 25%. Consider a tax system in which half of realized and unrealized capital gains are taxed. What is the annual net (of taxes) rate of return on these assets?
Transcribed Image Text:An individual buys $100,000 in financial assets and holds them for 2 years. The financial assets earn 12% interest each year. The tax rate is 25%. Consider a tax system in which half of realized and unrealized capital gains are taxed. What is the annual net (of taxes) rate of return on these assets?
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