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1.

A saving account earns 4%. If the saver is in a 28% tax bracker. The after tax rate of return on saving would be___percent.

  • A. 28.0
  • B. 28.0
  • C. 28.0
  • D. 28.0

Answer: Option D

Explanation:

Step 1: Calculate the after-tax rate of return 
To find the after-tax rate of return, you need to subtract the tax rate from 1 and then multiply that by the interest rate. 
The formula is:
  • After-tax rate of return=Interest rate X (1-Tax rate)
Plugging in the given values:
  • After-tax rate of return=0.04X(1-0.28)
  • After-tax rate of return=0.04X0.72
  • After-tax rate of return=0.0288
To express this as a percentage, multiply by 100:
  • 0.0288X100=2.88%

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