Question

A savings account earns 5 percent. If the saver is in a 25 percent tax bracket, the after-tax savings rate of return would be ____ percent. (Round your answer to 2 decimal places.)

Answer 1

3.75%

Step-by-step explanation:

Calculation for what the after-tax savings rate of return would be

Using this formula

After-tax savings rate of return=(1.0- Saver tax bracket)*Savings account percentage

Let plug in the formula

After-tax savings rate of return =(1.0 - 0.25)*0.05

After-tax savings rate of return = 0.75*0.05

After-tax savings rate of return =0.0375*100

After-tax savings rate of return =3.75%

Therefore the After-tax savings rate of return would be 3.75 percent

A savings account earns 5 percent. If the saver is in a 25 percent tax bracket, the after-tax savings rate of return would be ____ percent