Question content area top Part 1 Assuming a 1-year, money market account investment at 2.282.28 percent (APY), a 1.391.39 percent inflation rate, a 2525 percent marginal tax bracket, and a constant $50 comma 00050,000 balance, calculate the after-tax rate of return, the real rate of return, and the total monetary return. What are the implications of this result for cash management decisions? Question content area bottom Part 1 Assuming a 1-year, money market account investment at 2.282.28% (APY), a 2525% marginal tax bracket, and a constant $ 50 comma 000$50,000 balance, the after-tax rate of return is 1.711.71%. (Round to two decimal places.) Part 2 Assuming a 1-year, money market account investment at 2.282.28% (APY), a 2525% marginal tax bracket, and a constant $ 50 comma 000$50,000 balance, the after-tax monetary return is $855855. (Round to the nearest dollar.) Part 3 Given an after-tax return of 1.711.71% and an inflation rate of 1.391.39%, the after-tax real rate of return is 0.320.32%. (Round to two decimal places.) Part 4 Given an after-tax return of 1.711.71% and an inflation rate of 1.391.39%, the after-tax real monetary return is $160160. (Round to the nearest dollar.) Part 5 What is the implication of this result for cash management decisions? (Select the best answer below.) A. The implication is that it is easy keep up with taxes and inflation with liquid assets. Therefore, not only should the amount needed for financial emergencies and short-term goals be placed in liquid cash assets but additional funds should also be invested here. B. The implication is that it is difficult to do any more than keep up with taxes and inflation with liquid assets. Therefore, only the amount needed for financial emergencies and short-term goals should be placed in assets with such a low risk-return ratio. Additional funds should be invested elsewhere for a higher return. C. No implication can be drawn from this information. D. The implication is that it is difficult to do any more than keep up with taxes and inflation with money market account investments so these funds should be put in higher-yielding investments like stocks and long-term bonds.
Question content area top Part 1 Assuming a 1-year, money market account investment at 2.282.28 percent (APY), a 1.391.39 percent inflation rate, a 2525 percent marginal tax bracket, and a constant $50 comma 00050,000 balance, calculate the after-tax rate of return, the real rate of return, and the total monetary return. What are the implications of this result for cash management decisions? Question content area bottom Part 1 Assuming a 1-year, money market account investment at 2.282.28% (APY), a 2525% marginal tax bracket, and a constant $ 50 comma 000$50,000 balance, the after-tax rate of return is 1.711.71%. (Round to two decimal places.) Part 2 Assuming a 1-year, money market account investment at 2.282.28% (APY), a 2525% marginal tax bracket, and a constant $ 50 comma 000$50,000 balance, the after-tax monetary return is $855855. (Round to the nearest dollar.) Part 3 Given an after-tax return of 1.711.71% and an inflation rate of 1.391.39%, the after-tax real rate of return is 0.320.32%. (Round to two decimal places.) Part 4 Given an after-tax return of 1.711.71% and an inflation rate of 1.391.39%, the after-tax real monetary return is $160160. (Round to the nearest dollar.) Part 5 What is the implication of this result for cash management decisions? (Select the best answer below.) A. The implication is that it is easy keep up with taxes and inflation with liquid assets. Therefore, not only should the amount needed for financial emergencies and short-term goals be placed in liquid cash assets but additional funds should also be invested here. B. The implication is that it is difficult to do any more than keep up with taxes and inflation with liquid assets. Therefore, only the amount needed for financial emergencies and short-term goals should be placed in assets with such a low risk-return ratio. Additional funds should be invested elsewhere for a higher return. C. No implication can be drawn from this information. D. The implication is that it is difficult to do any more than keep up with taxes and inflation with money market account investments so these funds should be put in higher-yielding investments like stocks and long-term bonds.
Chapter7: Valuation Of Stocks And Corporations
Section: Chapter Questions
Problem 23SP
Related questions
Question
Question content area top
Part 1
Assuming a 1-year, money market account investment at
2.282.28
percent (APY), a
1.391.39
percent inflation rate, a
2525
percent marginal tax bracket, and a constant
$50 comma 00050,000
balance, calculate the after-tax rate of return, the real rate of return, and the total monetary return. What are the implications of this result for cash management decisions?Question content area bottom
Part 1
Assuming a 1-year, money market account investment at
rate of return is
2.282.28%
(APY), a
2525%
marginal tax bracket, and a constant
$ 50 comma 000$50,000
balance, the after-tax 1.711.71%.
(Round to two decimal places.)Part 2
Assuming a 1-year, money market account investment at
2.282.28%
(APY), a
2525%
marginal tax bracket, and a constant
$ 50 comma 000$50,000
balance, the after-tax monetary return is
$855855.
(Round to the nearest dollar.)Part 3
Given an after-tax return of
1.711.71%
and an inflation rate of
1.391.39%,
the after-tax real rate of return is
0.320.32%.
(Round to two decimal places.)Part 4
Given an after-tax return of
1.711.71%
and an inflation rate of
1.391.39%,
the after-tax real monetary return is
$160160.
(Round to the nearest dollar.)Part 5
What is the implication of this result for cash management decisions? (Select the best answer below.)
The implication is that it is easy keep up with taxes and inflation with liquid assets. Therefore, not only should the amount needed for financial emergencies and short-term goals be placed in liquid cash assets but additional funds should also be invested here.
The implication is that it is difficult to do any more than keep up with taxes and inflation with liquid assets. Therefore, only the amount needed for financial emergencies and short-term goals should be placed in assets with such a low risk-return ratio. Additional funds should be invested elsewhere for a higher return.
No implication can be drawn from this information.
The implication is that it is difficult to do any more than keep up with taxes and inflation with money market account investments so these funds should be put in higher-yielding investments like stocks and long-term bonds.
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