Question

Required: a. If Matt expects his marginal tax rate to be 22.00 percent for the next 10 years, how much interest will he earn after-tax for the first year of his investment? b. How much interest will he earn after-tax for the second year of his investment if he withdraws enough cash every year to pay the tax on the interest he earns? c. How much will he have in the account after four years? d. How much will he have in the account after seven years? (For all requirements, do not round intermediate calculations and round your final answers to the nearest whole dollar amount.) a. After-tax interest for the first year investment b. After-tax interest for the second year of investment c. Account balance after 4 years d. Account balance after 7 years

Answer 1

Given that mati secently deposited $ 32,500 Pinterest rate 255% for the next loyecere Marginal tax rate - 22.00% for the next loyery @ After tar interest for the fisust yeaa of Pnvestment = (32600 45.5%)*(1-23.007.) :(178750)*(1-999) : 1487.5048 : $1394.95 Atlex tan interest for the second year of Pinvestment = (3250041394.95 )x 555%*(1-22% ) 894.25 X 0.055X0.78 © $1454.063 325 Account balence after 4 yeasy -32500 x C145.5%. *(1-22.7.) = 39500 x C1+0:055X(0.78)4. = 3.2500 x(1,04294 = 39500 x 7.18296 = $38446.25

d) Account balance after a yeary = 39500 *(1+55:57. [-92%))* = 39500 m (1.0429)* $43609.59