How was the interest determined

Reference no: EM131969089

Problem

For all questions assume the relevant tax rate is 30 percent and all annuities begin at the end of year 1.

A. The $30,000 of excess liquidity is earning 5 percent compounded monthly in a money market fund. This is 5.12 percent annualized return. How was this determined?

B. This annualized return of 5.12 percent results in an after-tax return of 3.58 percent since taxes on any interest must be paid each year. How was this determined?

Reference no: EM131969089

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