Business, 13.07.2021 17:40 coggonp

You buy a certificate of deposit (CD) that pays a nominal rateof 12% annually. You have a tax rate of 25%, so if the interest on this CD is taxable(which it may not be) your after-tax nominal rate is (1 . 25%) • 12% = 9%. Since10% equals .1, we can rewrite the equation as: (1 . .25) • .12 = .09. For parts(A-C), the nominal rate if 12%, annually and the after-tax nominal rate is 9%. A. If the inflation rate is 6% and interest on thisCD is not taxable, what is the real interest rate on the CD? Hint: What is the relationship between the real rate of interest and the nominal rate of interest?
B. If the inflation rate is 6% and the interest onthis CD is taxable, what is the real interest rate on the CD?
C. How does taxation of interest affect the realreturn on the CD when the nominal rate is 12% and inflation is 6%?
D. Now, if the inflation rate is 18%, the nominalrate of interest on the CD is 24%, and the interest is not taxable, what is the realinterest rate on the CD?

Answers: 2

Show answers

Another question on Business

Business, 21.06.2019 22:50

He taylor company sells music systems. each music system costs the company $100 and will be sold to the public for $250. in year one, the company sells 100 gift cards to customers for $250 each ($25,000 in total). these cards are valid for just one year, and company officials expect them to all be redeemed. in year two, only 96 of the cards are returned. what amount of net income does the company report for year two in connection with these cards? a. $15,000b. $15,400c. $15,500d. $15,800

Answers: 1

Answer

Business, 22.06.2019 03:00

1) u.s. real gdp is substantially higher today than it was 60 years ago. what does this tell us, and what does it not tell us, about the well-being of u.s. residents? what are the limitations of the gdp as a measure of economic well-being? given the limitations, why is gdp usually regarded as the best single measure of a society’s economic well-being? 2) what is an intermediate good? how does an intermediate good differ from a final good? explain why it is the case that the value of intermediate goods produced and sold during the year is not included directly as part of gdp, but the value of intermediate goods produced and not sold is included directly as part of gdp.

Answers: 2

Answer

Business, 22.06.2019 10:20

Blue spruce corp. has the following transactions during august of the current year. aug. 1 issues shares of common stock to investors in exchange for $10,170. 4 pays insurance in advance for 3 months, $1,720. 16 receives $710 from clients for services rendered. 27 pays the secretary $740 salary. indicate the basic analysis and the debit-credit analysis.

Answers: 1

Answer

Business, 22.06.2019 10:30

Perez, inc., applies the equity method for its 25 percent investment in senior, inc. during 2018, perez sold goods with a 40 percent gross profit to senior, which sold all of these goods in 2018. how should perez report the effect of the intra-entity sale on its 2018 income statement?

Answers: 2

Answer

You know the right answer?

You buy a certificate of deposit (CD) that pays a nominal rateof 12% annually. You have a tax rate o...

Questions