Question

A tax exempt money market fund has an annual return of 3.82 percent. What is your equivalent taxable rate if you are in a 32 percent marginal tax bracket?

A) 3.15 percent
B) 3.38 percent
C) 5.62 percent
D) 6.11 percent
E) 6.81 percent

Answer 1

C) 5.62 percent

Step-by-step explanation:

Tax exempt rate = Taxable Rate * (1 - tax rate)

3.82 = Taxable Rate * (1 - 0.32)

3.82 = Taxable Rate * 0.68

Taxable Rate = 3.82 / 0.68

Taxable Rate = 5.617647058823529

Taxable Rate = 5.62%