If Tom invests $60,000 in a taxable corporate bond that provides a 5 percent before-tax return, how much will Tom's investment be worth in either 8 or 20 years from now when the bond matures? Assume Tom's marginal tax rate is 35 percent.

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Quizplus · Accepted Answer

ATRR = 0.0325 (0.05 × (1 − 0.35)); $60,000 × (1.0325)⁸ = $77,495; $60,000 × (1.0325)²⁰ = $113,750.

If Tom Invests $60,000 in a Taxable Corporate Bond That