A taxpayer in the 25% marginal tax bracket invests $1,000 at 10% interest before taxes.At the end of year one,the taxpayer will have accumulated after-tax dollars of $1,075.

Question

Quizplus · Accepted Answer

At a 10% interest rate, the investment will grow to $1,100 before taxes. The taxpayer will owe taxes on this amount, which will be 25% of $100, or $25. Therefore, the after-tax balance will be $1,075 ($1,100 - $25).

A Taxpayer in the 25% Marginal Tax Bracket Invests $1,000