Nicholas earned 8% in his savings account. If he is in the 28% tax bracket, what is his after-tax savings rate of return?

Question

Quizplus · Accepted Answer

Nicholas's after-tax savings rate of return is calculated by subtracting the taxes paid on the interest from the original interest rate. Since he is in the 28% tax bracket, he pays 28% of the 8% interest in taxes. The calculation is 8% * (1 - 0.28) = 8% * 0.72 = 5.76%.

Nicholas Earned 8% in His Savings Account