McGraw-Hill's Taxation of Individuals and Business Entities 2019 Edition
1st Edition
ISBN: 9781259918391
Author: Professor, Brian C. Spilker
Publisher: McGraw-Hill Education
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Chapter 3, Problem 60P
To determine
Identify the amount of annual after-tax rate from the bond if the bond matures in one year and the annual after-tax
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April receives $50 every six months in interest income from her bond investment. She paid $900 for the bond and it will mature in 7 years for $1,000. She can reinvest the semi-annual interest income at 5% compounded annually. Her salary is $83,000 a year. Her marginal tax rate is 40%, which is also the applicable tax rate on interest income. The tax rate on dividend income is 30%. The tax rate on capital gain income is 20%.
1. What is her EAR before-tax if she does not reinvest the interest income?
2. What is her EAR before-tax if she reinvests the interest income?
3. What is her EAR after-tax if she reinvests the interest income and taxes are paid annually?
Matt recently deposited $41,250 in a savings account paying a guaranteed interest rate of 2.6 percent for the next 10 years.
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?
How much interest will he earn after-tax for the second year of his investment if he withdraws enough cash every year to pay the tax on the interest he earns?
How much will he have in the account after 4 years?
How much will he have in the account after 7 years?
David Abbot is buying a new house, and he is taking out a
30-year mortgage. David will borrow $201,000
from a bank, and to repay the loan he will make 360 monthly payments (principal and interest) of $1,158.97 per month over the next 30years. David can deduct interest payments on his mortgage from his taxable income, and based on his income, David is in the 32% tax bracket.
a. What is the before-tax interest rate (per year) on David's loan?
b. What is the after-tax interest rate that David is paying?
Chapter 3 Solutions
McGraw-Hill's Taxation of Individuals and Business Entities 2019 Edition
Ch. 3 - 1. The goal of tax planning is to minimize taxes....Ch. 3 - Prob. 2DQCh. 3 - In this chapter we discussed three basic tax...Ch. 3 - What are the two basic timing strategies? What is...Ch. 3 - Prob. 5DQCh. 3 - What are some common examples of the timing...Ch. 3 - What factors increase the benefits of accelerating...Ch. 3 - How do changing tax rates affect the timing...Ch. 3 - Prob. 9DQCh. 3 - Prob. 10DQ
Ch. 3 - Prob. 11DQCh. 3 - What two factors increase the difference between...Ch. 3 - What factors have to be present for income...Ch. 3 - Prob. 14DQCh. 3 - Prob. 15DQCh. 3 - Prob. 16DQCh. 3 - Prob. 17DQCh. 3 - Prob. 18DQCh. 3 - Prob. 19DQCh. 3 - Explain how implicit taxes may limit the benefits...Ch. 3 - Prob. 21DQCh. 3 - Do after-tax rates of return for investments in...Ch. 3 - Prob. 23DQCh. 3 - Prob. 24DQCh. 3 - Prob. 25DQCh. 3 - What is an implicit tax and how does it affect a...Ch. 3 - Several judicial doctrines limit basic tax...Ch. 3 - What is the constructive receipt doctrine? What...Ch. 3 - Prob. 29DQCh. 3 - Relative to arms length transactions, why do...Ch. 3 - Prob. 31DQCh. 3 - Prob. 32DQCh. 3 - Prob. 33DQCh. 3 - Prob. 34DQCh. 3 - Yong recently paid his accountant 10,000 for...Ch. 3 - Billups, a physician and cash-method taxpayer, is...Ch. 3 - Prob. 37PCh. 3 - Prob. 38PCh. 3 - Prob. 39PCh. 3 - Prob. 40PCh. 3 - Prob. 41PCh. 3 - Prob. 42PCh. 3 - Prob. 43PCh. 3 - Prob. 44PCh. 3 - Prob. 45PCh. 3 - Prob. 46PCh. 3 - Prob. 47PCh. 3 - Prob. 48PCh. 3 - Prob. 49PCh. 3 - Prob. 50PCh. 3 - Prob. 51PCh. 3 - Prob. 52PCh. 3 - Prob. 53PCh. 3 - Prob. 54PCh. 3 - Prob. 55PCh. 3 - Prob. 56PCh. 3 - Prob. 57PCh. 3 - Prob. 58PCh. 3 - Prob. 59PCh. 3 - Prob. 60PCh. 3 - Prob. 61PCh. 3 - Prob. 62PCh. 3 - Prob. 63PCh. 3 - Prob. 64PCh. 3 - Prob. 65P
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