Kent Has $200,000 in an Investment Paying 8% Annual Interest

question 43

Multiple Choice

Kent has $200,000 in an investment paying 8% annual interest. Her marginal tax rate is 40%. Which of the following statements is false?  

• A) Ms. Kent's annual before-tax cash flow from this investment is $16,000.
• B) If the interest is tax-exempt, Ms. Kent's annual after-tax cash flow is $16,000.
• C) If the interest is taxable, Ms. Kent's annual after-tax cash flow is $6,400.
• D) None of the above is false.

---

Definitions:

American Products

Goods and services that are produced within the United States.

Flexible Exchange-rate

A currency system where the value of a currency is allowed to fluctuate according to the foreign exchange market without direct intervention by the country's government.

European Euro

The official currency of the eurozone, which is used by many of the European Union's member states as their primary currency.