Reading 70: Taxes and Private Wealth Management in a Global C face, equivalent, currently, investor, position

youzizhang

 

LOS d: Calculate accrual equivalent tax rates.

Q1. An investor deposited $54,000 in a zero coupon bond position 10 years ago. It consisted of 100 zero coupon bonds each with a face value of $1,000 and 10 years to maturity. Over the years he has sold portions of the position to pay income taxes on the position. The investor’s average marginal tax rate is currently 20%. At maturity, the value of the position is $92,000. Compute the accrual equivalent tax rate.

A)   14.00%.

B)   12.18%.

C)   16.27%.

 

Q2. Given an accrual equivalent after-tax return equal 6% and a pre-tax return equal to 7.2%, what is the accrual equivalent tax rate?

A)   16.67%.

B)   12.93%.

C)   20.00%.

leeleeking

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tomathome

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duo1115

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saint_zhu

accrual equivalent tax rate

maxsimax

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