What is annualized hpr before-tax if reinvests the interest

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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%.

Problem 1. What is her annualized HPR before-tax if she does not reinvest the interest income?

Problem 2. What is her annualized HPR before-tax if she reinvests the interest income?

Reference no: EM133002635

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