Loose Leaf for McGraw-Hill's Taxation of Individuals and Business Entities 2019 Edition
Loose Leaf for McGraw-Hill's Taxation of Individuals and Business Entities 2019 Edition
10th Edition
ISBN: 9781260189728
Author: Brian C. Spilker Professor, Benjamin C. Ayers, John Robinson Professor, Edmund Outslay Professor, Ronald G. Worsham Associate Professor, John A. Barrick Assistant Professor, Connie Weaver
Publisher: McGraw-Hill Education
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Chapter 3, Problem 60P
To determine

Identify the amount of annual after-tax rate from the bond if the bond matures in one year and the annual after-tax rate of return if the bond matures in 10 years.

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April receives $50 every six months in interest income from her bond investment. She paid $900 for the bond and it will mature in 7 years for $1,000. She can reinvest the semi-annual interest income at 5% compounded annually. Her salary is $83,000 a year. Her marginal tax rate is 40%, which is also the applicable tax rate on interest income. The tax rate on dividend income is 30%. The tax rate on capital gain income is 20%. 1. What is her EAR before-tax if she does not reinvest the interest income? 2. What is her EAR before-tax if she reinvests the interest income? 3. What is her EAR after-tax if she reinvests the interest income and taxes are paid annually?
Matt recently deposited $41,250 in a savings account paying a guaranteed interest rate of 2.6 percent for the next 10 years.  If Matt expects his marginal tax rate to be 22.00 percent for the next 10 years, how much interest will he earn after-tax for the first year of his investment? How much interest will he earn after-tax for the second year of his investment if he withdraws enough cash every year to pay the tax on the interest he earns? How much will he have in the account after 4 years? How much will he have in the account after 7 years?
David Abbot is buying a new​ house, and he is taking out a 30​-year mortgage. David will borrow ​$201,000 from a​ bank, and to repay the loan he will make 360 monthly payments (principal and​ interest) of $1,158.97 per month over the next 30years. David can deduct interest payments on his mortgage from his taxable​ income, and based on his​ income, David is in the 32​% tax bracket.   a. What is the​ before-tax interest rate​ (per year) on​ David's loan? b. What is the​ after-tax interest rate that David is​ paying?

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Loose Leaf for McGraw-Hill's Taxation of Individuals and Business Entities 2019 Edition

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