Question

Nicholas earned 8% in his savings account. if he is in the 28% tax bracket, what is his after-tax savings rate of return?

Answer 1

If Nicholas is going to pay 28% in taxes of the 8% interest he is earning, then his net percentage would be 72% of the 8%.

To determine this overall rate of return multiply 0.72 x 0.08.

0.72 x 0.08 = 0.0576 or 5.76 % rate of return.