If the before-tax interest rate is 10 percent and the marginal tax rate is 30 percent, the after-tax interest rate is _____ percent.

Question

Quizplus · Accepted Answer

The after-tax interest rate can be calculated by subtracting the tax paid on the interest from the before-tax interest rate. This is done by multiplying the before-tax rate (10%) by (1 - the marginal tax rate), which in this case is (1 - 0.30) or 0.70. Therefore, the after-tax interest rate is 10% * 0.70 = 7.0%.

If the Before-Tax Interest Rate Is 10 Percent and the Marginal