Final answer:
To calculate Alan Grey's state income tax of 2.5% on his federal taxable income of $31,500, we multiply the income by the tax rate, resulting in $787.50.
Step-by-step explanation:
The student is asking how to calculate the state income tax based on a given federal taxable income and a state income tax rate. To find Alan Grey's state income tax for a federal taxable income of $31,500, we simply multiply his taxable income by the state income tax rate of 2.5%. The calculation is as follows:
State income tax = Federal taxable income × State income tax rate
State income tax = $31,500 × 0.025
The result is $787.50, which means the correct answer to the question is option C.