![Personal Finance, Student Value Edition Plus MyLab Finance with Pearson eText -- Access Card Package (6th Edition)](https://www.bartleby.com/isbn_cover_images/9780134426839/9780134426839_largeCoverImage.gif)
Personal Finance, Student Value Edition Plus MyLab Finance with Pearson eText -- Access Card Package (6th Edition)
6th Edition
ISBN: 9780134426839
Author: Jeff Madura
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 16, Problem 4FPP
Tax Consequences. Katie paid $9,400 for a Ginnie Mae bond with a par value of $10,000 and a coupon rate of 6.5%. Two years later, after having received the annual interest payments on the bond, Katie sold the bond for $9,700. What are her total tax consequences if she is in a 25% marginal tax bracket?
Expert Solution & Answer
![Check Mark](/static/check-mark.png)
Want to see the full answer?
Check out a sample textbook solution![Blurred answer](/static/blurred-answer.jpg)
Students have asked these similar questions
David Abbot is buying a new house, and he is taking out a
30-year mortgage. David will borrow $201,000
from a bank, and to repay the loan he will make 360 monthly payments (principal and interest) of $1,158.97 per month over the next 30years. David can deduct interest payments on his mortgage from his taxable income, and based on his income, David is in the 32% tax bracket.
a. What is the before-tax interest rate (per year) on David's loan?
b. What is the after-tax interest rate that David is paying?
1. Ms. Finn Ance Major is now age 35 and has accumulated $50,000 in a savings account. She plans to
retire at age 60. She will be able to save $7,000 per year at the end of each year for the next twelve
years in the same account which pays 8 percent compounded annually. Thereafter, she will be able to
put $22,000 per year, until she retires. Assume that interest rates remain the same and ignore taxes.
How much will Finn Ance Major have on retirement?
me vodu R
Anne's marginal income tax rate is 32 percent. She purchases a corporate bond for $10,000 and the maturity. or face value, of the bond is $10,000. If the bond pays 5 percent per year before taxes, what is Anne's annual after-tax rate of return from the bond if the bond matures in 1 year? What is her annual after-tax rate of return if the bond matures in 10 years? NOTE: Round your answers to 1 decimal place. AFTER-TAX RATE: a) Bond matures in 1 year: ___________% b) Bond matures in 10 years: ____________%
Chapter 16 Solutions
Personal Finance, Student Value Edition Plus MyLab Finance with Pearson eText -- Access Card Package (6th Edition)
Ch. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - Prob. 3RQCh. 16 - Prob. 4RQCh. 16 - Prob. 5RQCh. 16 - Prob. 6RQCh. 16 - Prob. 7RQCh. 16 - Prob. 8RQCh. 16 - Corporate Bonds. What are corporate bonds? Are...Ch. 16 - Prob. 10RQ
Ch. 16 - Prob. 11RQCh. 16 - Prob. 12RQCh. 16 - Prob. 13RQCh. 16 - Prob. 14RQCh. 16 - Prob. 15RQCh. 16 - Prob. 16RQCh. 16 - Prob. 17RQCh. 16 - Prob. 18RQCh. 16 - Maturity Matching. Describe the maturity matching...Ch. 16 - Bond value. How is the value of a bond determined?...Ch. 16 - Prob. 21RQCh. 16 - Prob. 22RQCh. 16 - Prob. 23RQCh. 16 - Prob. 24RQCh. 16 - Prob. 25RQCh. 16 - Bond Values. Describe the process of valuing a...Ch. 16 - Prob. 27RQCh. 16 - Prob. 28RQCh. 16 - Bond Payments. Bernie purchased 20 bonds with par...Ch. 16 - Prob. 2FPPCh. 16 - Prob. 3FPPCh. 16 - Tax Consequences. Katie paid 9,400 for a Ginnie...Ch. 16 - Return on Bonds. Timothy has an opportunity to buy...Ch. 16 - Bond Valuation. Mia wants to invest in Treasury...Ch. 16 - Bond Valuation. Emma is considering purchasing...Ch. 16 - Bond Valuation. Mark has a Treasury bond with a...Ch. 16 - Prob. 9FPPCh. 16 - Risk Premium. Sandy has a choice between...Ch. 16 - Prob. 1FPOECh. 16 - Prob. 1PPF
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Ruth has asked for help in determining whether she should receive her $32,500 bonus check in the current year or next year. In the current year, her marginal tax rate is 24% and she anticipates she will be in the 32% marginal tax bracket next year. What advice can you give Ruth? Net revenue from bonus $ Current year Ruth should choose to receive her bonus in the ✓year. Next yeararrow_forwardNoah invests $600 at the end of each quarter for 30 years in an account paying 5.64% interest compounded quarterly and then he retires. Suppose that he was in the 15% bracket when the deposits were made and interest was earned. Suppose his tax bracket is now 33% in retirement. Find the current after-tax value of Noah's account if it was set-up as (i) a Traditional Individual Retirement Account (IRA): $ (ii)a Roth Individual Retirement Account (Roth-IRA): $arrow_forwardSuppose that Ramos contributes $5000/year into a traditional IRA earning interest at the rate of 5%/year compounded annually, every year after age 35 until his retirement at age 65. At the same time, his wife Vanessa deposits $3700/year into a Roth IRA earning interest at the same rate as that of Ramos and also for a period of 30 years. Suppose that the investments of both Ramos and Vanessa are in a marginal tax bracket of 30% at the time of their retirement and that they both wish to withdraw all of the money in their IRAs at that time. How much larger will Vanessa's amount be?arrow_forward
- Anita and Jim are considering a home equity loan to build a nice deck and patio in their back yard. They want to borrow $35,000 and are quoted an APR of 10%. If their marginal tax bracket is 24%, how much money can they save in taxes each year if capitalize on the tax-deductibility of interest paid on the home equity loan?arrow_forwardOne year ago, Irlene purchased some bonds at a value of $2,876 and received two semi- annual interest payments of $76.60 each. Today the bonds are valued at $2,784.50. What is Irlene's income yield? What is Irlene's capital gain yield? What is Irlene's investment total rate of return?arrow_forward2. Jimmy and Mickey are interested to purchase their first boat. They have decided to borrow the boat's purchase price of $100,000. The income tax bracket is 28%. There are two choices: They can borrow money from the boat dealer at an interest rate of 8% or they could take a second mortgage of $100,000 on their home. The home loan rate is 9.2%. If they borrow from the boat dealer the interest will not be tax deductible, but the mortgage will be tax deductible. a) Calculate the after-tax cost of borrowing from the boat dealer. b) Calculate the after-tax cost of borrowing through the second mortgage. c) Which source is less costly for the family?arrow_forward
- Solve the problem using a calculator. In Canada, 50% of an individual's capital gains or losses are taxed or deducted respectively at the individual’s current tax rate. Tammy has a tax rate of 12.76%. She just purchased a $120,000 face value bond carrying a 9.89% coupon with six years remaining until maturity. Current market yields are posted at 6.14% compounded semi-annually. Calculate her taxes owing or deducted on the capital gain or loss in the fourth year. Plz help...arrow_forwardHolly Homeowner bought a bungalow for $50,000 twenty years ago with a $20,000 down payment. The monthly payments on her $30,000 loan (30-year mortgage) have been $200 at a 7% nominal interest rate compounded monthly. Holly has just sold the dwelling for $100,000 and paid off the remaining balance of her loan. What is her before-tax rate of return expressed as an annual effective percentage rate?arrow_forwardYou will need a calculator for this problem. Sanchez earns $4,000, and she wants to save it for retirement, which is 10 years away. She can either save it in a taxable account or put it into a Roth IRA. Suppose that Sanchez can receive an annual rate of return of 8 percent and her marginal tax rate is 25 percent. By the time she reaches retirement, how much money would she have in either option? [Note: Sanchez has to pay tax on the $4,000, so she cannot put the full amount either into the taxable account or the Roth IRA.]arrow_forward
- Suppose you return to college and earn an MBA, after which you get a middle-management position with General Mills, the firm that makes Lucky Charms and other breakfast cereals. If the tax rates are the same as in 2018 and your starting salary is $90,000, how much will General Mills pay on your behalf in federal social insurance taxes? between $7,000 and $8,000 less than $7,000 O between $9,000 and $10,000 between $8,000 and $9,000 more than $10,000arrow_forwardIf Tom invests $45,000 in a taxable corporate bond that provides a 9 percent before-tax return, how much will Tom's investment be worth in either 8 or 20 years from now when the bond matures? Assume Tom's marginal tax rate is 35 percent.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
- Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning
![Text book image](https://www.bartleby.com/isbn_cover_images/9780357109731/9780357109731_smallCoverImage.gif)
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
![Text book image](https://www.bartleby.com/isbn_cover_images/9780357033609/9780357033609_smallCoverImage.jpg)
Pfin (with Mindtap, 1 Term Printed Access Card) (...
Finance
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Cengage Learning
How to (Legally) Never Pay Taxes Again; Author: Next Level Life;https://www.youtube.com/watch?v=q63F1pBrUHA;License: Standard Youtube License