Nicholas earned 11.5% in his savings account. If he is in the 27% tax bracket, what is his after-tax savings rate of return?

Question

Dinky

Business

9 March, 11:26

Nicholas earned 11.5% in his savings account. If he is in the 27% tax bracket, what is his after-tax savings rate of return?

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Answers (1)

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Vega · Answer 1

Nicholas's after-tax savings rate of return is 8.40%

Explanation:

Saving rate before tax = 11.50%

Tax Bracket applicable = 27%

After tax saving rate of return = ?

Use following formula to calculate After tax saving rate of return

After tax saving rate of return = Saving rate before tax x (1 - tax rate)

After tax saving rate of return = 11.50% x (1 - 27%)

After tax saving rate of return = 11.5% x (1 - 0.27)

After tax saving rate of return = 11.5% x 0.73

After tax saving rate of return = 8.395% = 8.40% (Rounded off to 2 decimals)

So, Nicholas's after-tax savings rate of return is 8.40%