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John earned $84 on $1200 invested in a high yield money market account. He is taxed...

John earned $84 on $1200 invested in a high yield money market account. He is taxed at 22% of his earnings. What is the after-tax yield on his investment?

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John earned $84 on $1200 invested in a high yield money market account. He is taxed at 22% of his earnings. What is the after-tax yield on his investment?

Answer: 5.46%

Working

Formula for calculating after-tax yield on his investment is as follows

After-tax yield on his investment    = (Earnings after tax ÷ Investment) * 100

                                                            = ($65.52 ÷ $1,200) * 100

                                                            = 5.46%

Where,

Earnings after tax       = Earing before tax * (1 – Tax rate)

                                    = $84 * (1 – 22%)

                                    =$65.52

Investment = $1,200 (provided in the question)

Tax rate = 22% (provided in the question)

Earning before tax = $84 (provided in the question)

jeff jeffy answered 2 years ago
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