Randolph Borrows $100,000 from His Uncle's Bank and Invests the Proceeds

question 109

Multiple Choice

Randolph borrows $100,000 from his uncle's bank and invests the proceeds in various corporate bonds.He pays $9,000 in interest on the loan during the current year.The bonds produce $7,200 of interest income.Randolph reports adjusted gross income of $100,000 in the current year.If the interest income is his only investment income,how much of the interest expense is deductible by Randolph?

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

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Definitions:

Pork-Barrel Politics

The allocation of government spending for localized projects secured primarily to bring money to a representative's district, with the implication of gaining the representative favor or votes.

Rent-Seeking Behavior

denotes efforts to increase one's share of existing wealth without creating new wealth, often through manipulation or exploitation of the political environment.

Principal-Agent Problem

A dilemma in which an agent, acting on behalf of a principal, may have incentives to act in their own interest rather than in the best interest of the principal.