At the Beginning of Year 1,Sandeep Invests $10,000 in a Money

question 27

Multiple Choice

At the beginning of year 1,Sandeep invests $10,000 in a money market fund that pays a 3% annual return before taxes.Sandeep's marginal tax rate is 25%,and he allows the after-tax earnings to remain in the money market fund.That is,he withdraws only enough cash to pay the taxes on the earnings.What is his after-tax accumulation at the end of year 2?

• A)$10,455
• B)$10,609
• C)$10,690
• D)None of the above