An individual living in Alberta with wage earnings of $65,000 has invested $25,000 for 1 year in corporate bonds yielding 6%.What is the after-tax return? The relevant federal and provincial tax rates are 22% and 10%.

Question

Quizplus · Accepted Answer

To calculate the after-tax return, we need to first calculate the amount of tax the individual will pay on the interest earned from the bond:

Interest earned = $25,000 x 6% = $1,500 
Federal tax = 22% x $1,500 = $330 
Provincial tax = 10% x $1,500 = $150

Total tax = $330 + $150 = $480

After-tax interest earned = $1,500 - $480 = $1,020

Therefore, the after-tax return is $1,020.

An Individual Living in Alberta with Wage Earnings of $65,000