Solution-Applicable tax rate on interest income

Applicable tax rate on interest income

Reference no: EM132776011

Alice received $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 $1000. she can reinvest the semi-annual interest income at 5% compounding annually. Her salary is $83000 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?

Reference no: EM132776011

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Applicable tax rate on interest income

Reference no: EM132776011

Reference no: EM132776011

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