Answered: ne's marginal income tax rate is 32…

ne's marginal income tax rate is 32 percent. She purchases a corporate bond for $10,000 and the maturity. or face value, of t

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 13E

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Concept explainers

Fringe Benefit Tax

Fringe benefits are in addition to the compensation that companies give to their employees. It is an additional benefit above the stated salary. It helps to keep the employees of the firm motivated as sometimes the only salary is not enough to retain the quality employees of the firm. There are different types of fringe benefits. Fringe benefits are given in both private as well as public enterprises.

Question

Anne's marginal income tax rate is 32 percent. She purchases a corporate bond for $10,000 and the maturity. or face value, of the bond is $10,000. If the bond pays 5 percent per year before taxes, what is Anne's annual after-tax rate of return from the bond if the bond matures in 1 year? What is her annual after-tax rate of return if the bond matures in 10 years? NOTE: Round your answers to 1 decimal place. AFTER-TAX RATE: a) Bond matures in 1 year: ___________% b) Bond matures in 10 years: ____________%

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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