What is today purchasing power equivalent

Reference no: EM132061442

Question: You purchase a $10,000 bond paying $400 per year in interest over the next 10 years. At the end of 10 years your initial investment will be returned to you. Your effective federal and state tax rate for each of the next 10 years is 33% per year. It is expected that inflation will average 1.2% per year over the next 10 years. Interest rate before taxes is 4%. On an after-tax basis, what is today's purchasing power equivalent of all future payments including the return of your initial investment?

Reference no: EM132061442

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