Matt recently deposited $35,250 in a savings account paying a guaranteed interes
ID: 2541562 • Letter: M
Question
Matt recently deposited $35,250 in a savings account paying a guaranteed interest rate of 4.2 percent for the next 10 years. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) Required: a. 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? b. How much interest will he earn after-tax for the second year of his investment if he withdraws enough cash every year to pay the tax on the interest he earns? c. How much will he have in the account after four years? d. How much will he have in the account after seven years? Answer is complete but not entirely correct After-tax interest for the first year of investment After-tax interest for the second year of $ 1,155 $ 36,405 $ 40,101 $ 44,173 a. nvestment Account balance after 4 years Account balance after 7 years c.Explanation / Answer
b. After-tax interest for the second year of investment = $ 1,193
In the second year, Matt will earn $ 1,193 [($ 35,250 + $ 1,155) x 4.2% x (1-0.22)], after tax.