Essay
On March 1, 20x1, Notes Inc. purchased a two-year guaranteed investment certificate (GIC) for $15,000. The interest compounds annually at 8% and will be received at the end of the full term. Notes Inc. has a marginal tax rate of 30%, which will increase to 34% for 20x2 and 20x3. Notes Inc. uses the calendar year as its fiscal year. (These tax rates are used here for illustration purposes only.)
Angela Major also invested $15,000 in a GIC with an 8% annual return, on March 1, 20x1, with interest to be paid at the end of each annual period. Angela's marginal tax rate is 40%.
(Assume there are no leap years in this time period.)
Required:
Calculate the after-tax interest income for each year for Notes Inc. and for Angela. (Round all numbers.)
Correct Answer:
Verified
Correct Answer:
Verified