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Matt recently deposited $31,250 in a savings account paying a guaranteed interest rate of 5.5 percent for the next 10 years. Required: If Matt expects his marginal tax rate to be 22.00 percent for the next 10 years, how much interest will he earn after-tax for the first year of his investment

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Answer:

Matt will earn $1,340.63  after-tax for the first year of his investment.

Explanation:

The interest to be received = amount of deposit * annual interest rate * (1 – tax rate)

= $31,250 * 5.5% * (1-22%)

= $1,340.63

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