If "R" equals the before-tax rate of return and "t" equals the investor's marginal tax rate,then the after-tax rate of return represented by "r" can be expressed as A)r = R(1 - t). B)r = R(1 + t). C)r = (1 + t)^R. D)r = R - t.

Question

Quizplus · Accepted Answer

The formula for calculating after-tax rate of return is r = R(1 - t). This formula takes into account the investor's marginal tax rate (t) by subtracting it from 1 and multiplying it by the before-tax rate of return (R). Therefore, choice A is the correct answer. Choice B is incorrect because adding the tax rate to the before-tax rate of return would result in a higher after-tax rate of return, which is not the case. Choice C is incorrect because it does not involve the variables R (before-tax rate of return) and t (marginal tax rate). Choice D is incorrect because subtracting the marginal tax rate from the before-tax rate of return only calculates the tax liability, not the after-tax rate of return.

If "R" Equals the Before-Tax Rate of Return and "T