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2 January, 11:09

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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  1. 2 January, 11:46
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    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%
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