Bender Borrows $200,000 from His Uncle's Bank and Invests the Proceeds

question 35

Multiple Choice

Bender borrows $200,000 from his uncle's bank and invests the proceeds in various common stocks.He pays $9,000 in interest on the loan during the current year.The stocks produce $7,200 of dividend income,all taxed at the rate of 15%.Bender reports adjusted gross income of $100,000 in the current year.If the dividend income is his only investment income,how much of the interest expense is deductible by Bender?

• A)$7,000
• B)$7,200
• C)$9,000
• D)None of this interest is deductible.

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Definitions:

Probability Distribution

A mathematical function that calculates the likelihood of various possible results in an experiment.

Uniformly Distributed

A distribution where all outcomes are equally likely across the range of the distribution.

Random Variable

A variable whose possible values are outcomes of a statistical experiment and which can vary randomly.

Probability

The measure of the likelihood that an event will occur, expressed as a number between 0 (impossible) and 1 (certain).