Question

Matt recently deposited $24,500 in a savings account paying a guaranteed interest rate of 3 percent for the next

10 years.

Required:

If Matt expects his marginal tax rate to be 27.00 percent for the next 10 years, how much interest will he earn after-tax for the first year of his investment?

How much interest will he earn after-tax for the second year of his investment of he withdraws enough cash every year to pay the tax on the interest he earns?

How much will he have in the account after four years?

How much will he have in the account after seven years?

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