Matt recently deposited $27,000 in a savings account paying a guaranteed interes
ID: 2568919 • Letter: M
Question
Matt recently deposited $27,000 in a savings account paying a guaranteed interest rate of 5.5 percent for the next 10 years. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)
Required:
If Matt expects his marginal tax rate to be 24.00 percent for the next 10 years, how much interest will he earn after-tax for the first year of his investment?
How much will he have in the account after four years?
How much will he have in the account after four years?
How much will he have in the account after seven years?
Explanation / Answer
After one year, Matt will have earned 27,000 × 0.055(1 – 0.24) after-tax $1129 After four years, Matt will have 27,000 × (1 + 0.055(1 – 0.24))4 in the savings account $31805 After Seven years, Matt will have 27,000 × (1 + 0.055(1 – 0.24))7 in the savings account $35963