An investor receives $1,000 of corporate bond interest. He is in the 28% federal income tax bracket and the 6% state income tax bracket. His tax liability is

Question

Quizplus · Accepted Answer

First, calculate the amount of federal income tax the investor owes on the bond: $1,000 * 28% = $280.

Then, subtract the tax owed from the face value of the bond: $1,000 - $280 = $720.

Therefore, the investor's tax liability is $280 and they will receive $720 in after-tax return.

An Investor Receives $1,000 of Corporate Bond Interest