One year ago Sam purchased bonds for $100,000. He just sold them for $120,000. During the...
One year ago Sam purchased bonds for $100,000. He just sold them for $120,000. During the year the price level rose by 5%. If the tax rate on capital gains is 20%, how much did Sam gain in real terms?
Homework Answers
Capital Gain=Sale price-Purchase price=120000-100000=$20000
Capital gain tax=20000*20%=$4000
After tax sale value=120000-4000=$116,000
Value of $116,000 in real terms=116000/(1+5%)=$110476.19
Real gain in absolute terms=110476.19-100000=$10476.19
Real Gain=(110476.19-100000)/100000=10.48%
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