Question

Antonio would like to replace his golf clubs with a custom measured set. A local sporting goods megastore is advertising custom clubs for ​$690​, including a new bag.​ In-store financing is available at 5.23 percent or he can choose not to renew his ​$600 certificate of deposit​ (CD), which just matured

Answer 1

Answer:

The below statements in quote are missing from the question.

“The advertised CD renewal rate is 6.13 percent. Antonio knows the in-store financing costs would not affect his taxes but he knows he’ll pay taxes (25% federal and 5.75% state) on the CD interest earnings. Should he cash the CD or use in-store financing? Why?”

Antonio  should cash in the CD to pay for the golf clubs rather  than opt for in-store financing arrangement,because after tax rate of CD is 4.25%  which less than the cost of in-store financing at 5.23%

Explanation:

The interest on CD before tax deductions is 6.13%

Total tax percentage due Federal and State governments  = 25% + 5.75% = 30.75%

After tax rate of CD = 6.13%(1 - .3075) = 4.25%