Travis inherits $50,000 from his grandfather. He receives the $50,000 on January 2 and immediately invests $25,000 in General Motors bonds that pay 8% annual interest and $25,000 in West Lafayette City municipal bonds with a 6% annual interest rate. How much gross income does Travis report from these transactions?

Question

Quizplus · Accepted Answer

Travis receives $50,000 and invests $25,000 in General Motors bonds with an 8% interest rate. His annual income from those bonds would be:
$25,000 x 0.08 = $2,000

He also invests $25,000 in West Lafayette City municipal bonds with a 6% annual interest rate. His annual income from those bonds would be:
$25,000 x 0.06 = $1,500

Therefore, his gross income from these transactions is:
$2,000 + $1,500 = $3,500

However, the question asks for gross income from the transactions, not gross income from the $50,000 inheritance. Therefore, the answer is B) $2,000.

Travis Inherits $50,000 from His Grandfather