MsLeik Has $50,000 in an Investment Paying 10% Annual Interest

question 27

Multiple Choice

Ms.Leik has $50,000 in an investment paying 10% annual interest.Each year,she incurs a $600 cash expense relating to the investment.If Ms.Leik's marginal tax rate is 20%,which of the following statements is true?

• A)Ms.Leik's annual after-tax cash flow from this investment is $3,520.
• B)If the interest is taxable but the expense is not deductible,Ms.Leik's annual after-tax cash flow from the investment is $3,400.
• C)If the interest is tax-exempt and the expense is not deductible,Ms.Leik's annual after-tax cash flow is $5,000.
• D)None of the above is true.

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Definitions:

Labour Union

An organized association of workers formed to protect and further their rights and interests.

Proportional Representation

An electoral system in which the number of seats held by a political party in the legislature is proportionate to the number of votes received by that party in an election.

Political Economy

The interactions of politics, government and governing, and the social and cultural constitution of markets, institutions, and actors.

State Apparatus

Structures and institutions through which a state exercises its power and authority, including the government, military, police, and judicial systems.