Engineering Board Exam Reviewer · Income Taxes and After-Tax Analysis · easy
A bond pays 12% interest and the investor pays a 30% tax on the interest. Find the after-tax rate of return.
- 3.6%
- 12%
- 9%
- 8.4%
Answer
D. 8.4%
Solution
After-tax rate =12%(1-0.30)=8.4%.
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