Suppose the 8 percent investment of the previous problem is

Suppose the 8 percent investment of the previous problem is taxable rather than tax-deferred. What will be the after-tax value of his $10,000 investment after 5 years (assuming annual compounding)? a. $11,765 b. $13,895 c. $15,528 d. $10,680 e. $14,693

Solution

the after tax rate of return = 8%*(1 - tax rate)

assuming tax rate is 15%

after tax return = 8% *(1 - 0.15) = 6.80%

value after 5 years = 10,000*1.068^5 = 13,895.........please change the tax rate to the one given