Assume that a person saves $50,000 and earns 7 percent annual interest. If the marginal tax rate is 36 percent, then the after-tax interest earning will be:
A) $2000
B) $2240
C) $2760
D) $3500

Question

Quizplus · Accepted Answer

First, we need to calculate the before-tax interest earning: 
$50,000 x 0.07 = $3,500
Then, we need to calculate the tax amount: 
$3,500 x 0.36 = $1,260
Finally, we subtract the tax amount from the before-tax interest earning to get the after-tax interest earning: 
$3,500 - $1,260 = $2,240. 
Therefore, the best choice is B.

Assume That a Person Saves $50,000 and Earns 7 Percent