Enrico and His Wife Have Combined Salaries of $85,000

question 60

Essay

Enrico and his wife have combined salaries of $85,000.They have interest and dividends on their investments of $1,000 and annually contribute $3,000 to a traditional IRA.The interest on their home mortgage is $2,500,they contributed $1,000 to their church,and incurred medical expenses not covered by insurance of $1,800.Assuming they can claim two personal exemptions of $3,200 each and file joint tax returns,compute their tax liability for the year.
(a)$11,606
(b)$10,056
(c)$11,131
(d)$9,981

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Definitions:

Yield to Maturity

Yield to Maturity (YTM) is the total return anticipated on a bond if the bond is held until it matures, considering all payments from now until maturity, including coupon payments and the difference between the purchase price and the par value.

Coupon Rate

The annual interest rate paid on a bond, expressed as a percentage of the face value, to the bondholders.

Face Value

Face value is the nominal value stated on a financial instrument such as a bond or a stock certificate, important in determining its maturity value or dividend payments.

Required Rate

The minimum expected rate of return on an investment, necessary to compensate for the risk taken.