Suppose Gary gets 5% return on his investment before tax. If his marginal tax rate is...

Question

Question

Answer 1

Answer #1

After-tax rate of return

After-tax rate of return = Pre-tax rate of return x (1 – Tax rate)

= 5.00% x (1 – 0.10)

= 5.00% x 0.90

= 4.50%

“Hence, the After-tax rate of return will be 4.50%”

Answer 2

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