Question

Wesley decided to invest in the Bank of America in a $ 10,000 certificate of deposit...

Wesley decided to invest in the Bank of America in a $ 10,000 certificate of deposit for 5 years that pays an interest rate of 3.5% annually (simple interest). Suppose that the interest payment is sent annually to your home by check and that this money is taxable. When the certificate matures, he will receive his $ 10,000 back (non-taxable amount). Wesley's marginal tax rate is 24% and headline inflation is expected to be 2% per year.

Determine for this investment instrument:

(a) The rate of return before tax, ignoring inflation.

(b) The rate of return after tax, ignoring inflation

(c) The rate of return after taxes, considering inflation

You must use Excel to solve these problems and display all your computations. Include comments and annotations when you deem it necessary (for example, to make a presumption).

Please help me. Thanks a lot!

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer:

Working Excel with 'show formula' is as below:

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A man decided to invest at his local bank, in a $10,000 5-year deposit certificate that...
A man decided to invest at his local bank, in a $10,000 5-year deposit certificate that pays an interest rate of 3.5% annually (single interest). Suppose the interest payment is sent annually in a check to his home and that this money is taxable. When the certificate matures, he will receive his $10,000 return (non-taxable amount). The marginal tax rate for this man is 24% and overall inflation is expected to be 2% per year. Determine for this investment instrument:...
Steve "The Chef" Smith decided to invest in LittleGive Bank in a $10,000 certificate of deposit...
Steve "The Chef" Smith decided to invest in LittleGive Bank in a $10,000 certificate of deposit for 5 year that pays an interest rate of 3.5% annually (single interest). Suppose that the interest payment they send it annually in a check to your home and that this money is taxable. When the certificate, he will receive his $10,000 return (non-taxable amount). The marginal tax rate of "The Chef" is 24% and overall inflation is expected to be 2% per year....
A Certificate Deposit will be worth $60,000 in five years when it matures. If your required...
A Certificate Deposit will be worth $60,000 in five years when it matures. If your required rate of return is 12%, how much you are willing to pay for this CD? Assuming compounding annually. a. 35,584.13 b. 34,045.61 c. 33,740.97 d. 32,354.26 A company has just received a huge donation. It would like to make payments for its insurance for two years in advance. Previously, it has paid $91.5 in premiums every week. Assuming interest rate of 12%, what single...
Ms. Z has decided to invest $75,000 in state bonds. She could invest in State A...
Ms. Z has decided to invest $75,000 in state bonds. She could invest in State A bonds paying 5 percent annual interest or in State R bonds paying 5.4 percent annual interest. The bonds have the same risk, and the interest from both is exempt from federal income tax. Because Ms. Z is a resident of State A, she wouldn’t pay State A’s 8.5 percent personal income tax on the State A bond interest, but she would pay this tax...
Sarah has $2,500 that she wants to invest in a European certificate of deposit (CD). The...
Sarah has $2,500 that she wants to invest in a European certificate of deposit (CD). The spot exchange rate (dollars per euro) ise$/€=1.13 If the minimum investment required in the CD is €2,000, does Sarah have sufficient funds? If not, what is the shortfall (in Euros)? If so, how much surplus does Sarah have (in euros)? NOTE: This is not a multiple-choice problem. Show your work to receive credit for the problem. Suppose the euro/Australian dollar exchange rate increases from...
For an individual with a net income of $50,000, a tax liability of $10,704.50 and a...
For an individual with a net income of $50,000, a tax liability of $10,704.50 and a 29% marginal tax rate? ____ The average tax rate is 21.41% The average tax rate is 29.00% The average tax rate is undetermined, but less than the marginal tax rate The average tax rate is undetermined, but greater than the marginal tax rate A firm had an accounts receivable balance of $150 and $170 at the beginning and the end of the week, respectively....
1. For the next 6 years, you pan to make equal quarterly deposits of $600.00 into...
1. For the next 6 years, you pan to make equal quarterly deposits of $600.00 into an account paying 8% compounded quarterly. How much will be the total you have at the end of the time? 2. How much money will you have to deposit now if you wish to have $5,000 at the end of 8 years. Interest is to be at the rate of 6% compounded semiannually? 3. In the California “Million Dollar Lottery” a winner is paid...
Bob, Chad and Dylan had been dreaming of this day for the past six years; ever...
Bob, Chad and Dylan had been dreaming of this day for the past six years; ever since they first met in an introductory economics course in college. For several years they had been pooling their money and buying Arizona Lottery tickets dreaming that one day they would win big. They realized that the lottery was considered by many to be a voluntary tax on the statistically challenged. But miraculously they now sat at their favorite local �watering hole� holding the...
CASE FACTS Mike and Jane Cool are married and file a joint Federal income tax return....
CASE FACTS Mike and Jane Cool are married and file a joint Federal income tax return. Both are under 50 years old. Mike’s social security number is 999-88-7777. Jane’s is 888-77-6666. They live at 234 Freedom Boulevard, Cedar City, UT 84720. Neither is interested in contributing to the Presidential Election Campaign. Mike is a city engineer. His W-2 showed wages of $85,000, Federal income tax withheld of $7,500 and state income tax withheld of $3,000. Mike does not participate in...
Argentina and Ecuador: Understanding the Currency Crisis While fiscal policy is never far from the mind...
Argentina and Ecuador: Understanding the Currency Crisis While fiscal policy is never far from the mind of your average Argentine, who remembers the tough times and hyperinflation of the 1980s, the events of 2001 and 2002 have brought fiscal policy back to the forefront of public concern. Though the early 1990s may have been characterized by financial optimism, Argentina has been in a recession since Brazil's 1998 monetary crisis sent shockwaves across the regional and global markets. In early 2002,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT