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

---

Definitions:

Contingency Payment

A payment that depends on the occurrence of a specific condition or set of conditions in the future.

Discount Rate

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis, reflecting the time value of money and risk.

Financial Balances

Financial balances refer to the comparison and calculation of financial resources, often focusing on the discrepancies between income and expenses or assets and liabilities.

Consolidated Expenses

Expenses that are combined from all subsidiaries and the parent company when preparing consolidated financial statements, providing a holistic view of the entity's operational cost.