Question

Matt recently deposited $31,250 in a savings account paying a guaranteed interest rate of 5.5 percent for the next 10 years. Required: 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

Answer 1

Matt will earn $1,340.63 after-tax for the first year of his investment.

Step-by-step explanation:

The interest to be received = amount of deposit * annual interest rate * (1 – tax rate)

= $31,250 * 5.5% * (1-22%)

= $1,340.63