You are considering an MMMF.The fund is taxable and pays 8.5% interest.If your top federal tax bracket is 25% and you live in a state that doesn't impose income taxes,what after-tax return would you realize from this investment?

Question

Quizplus · Accepted Answer

The after-tax return can be calculated by taking the interest rate and subtracting the tax impact. With a 25% federal tax rate on an 8.5% interest rate, the calculation is 8.5% * (1 - 0.25) = 6.375%, which rounds to 6.38%.

You Are Considering an MMMF