Calculating the after-tax rate of return

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Reference no: EM132171306

Question: Tom Ward put $10,000 in a 5-year certificate of deposit that pays 12% interest per year. At maturity he will receive his $10,000 back. Tom's marginal income tax rate is 42%. If the inflation rate is 7% per year, find his

(a) before-tax rate of return, ignoring inflation

(b) after-tax rate of return, ignoring inflation

Reference no: EM132171306

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