What is the impact on the demand curve of lending

Assignment Help Financial Accounting
Reference no: EM132996264

In the U.S., interest income is taxed. For simplicity, let's assume the tax rate to be 30%. Therefore, if you lend $100,000 to someone and get paid back $100,000 plus $10,000 interest (10% interest rate), you need to pay 30% × $10, 000 = $3, 000 to the IRS (you end up with $7,000 take-home interest income).

Problem 1: Suppose interest income tax rate suddenly increases (e.g. to 50%). What is the impact on the demand curve of lending? What is the impact on supply curve?

Problem 2: What do you expect to happen to the overall quantity of lending and the (pretax) interest rate in the market?

Reference no: EM132996264

Questions Cloud

Ratio and percentage in using fractions : Can you give an example of using ratio and percentage in using fractions
How much cash can KAYE collect from receivables during July : KAYE 's average markup on its products is 20% of the sales price. How much cash can KAYE collect from receivables during July
Auditing residential and community resilience : Auditing residential and community resilience to an emergency: conduct an audit of your own and your community's resilience readiness to a hypothetical emergenc
What does the capm predict about expected return on an asset : Is it possible that a risky asset could have a negative beta? What does the CAPM predict about the expected return on an asset? Give an explanation
What is the impact on the demand curve of lending : Suppose interest income tax rate suddenly increases (e.g. to 50%). What is the impact on the demand curve of lending? What is the impact on supply curve?
Describe a time when understanding someone perspective : Describe a time when understanding someone else's perspective helped you accomplish a task or resolve an issue.
Evaluate strategic plan : Evaluate strategic plan - Evaluate performance of strategic plan and strategic planning process
What is the overhead application rate per direct work hour : Agustin pays its workers $8.50 every hour and applies overhead on a prompt work hour premise. What is the overhead application rate per direct work hour
What are the volatility and beta of investor a portfolio : Investor A with $180,000 has a target expected return of 9 percent. How should he invest his $180,000? What are the volatility and beta of investor A portfolio?

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd