question archive Silvia made a $70,000 interest-free loan to her son, Alex, who used the money to start a new business
Silvia made a $70,000 interest-free loan to her son, Alex, who used the money to start a new business
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Silvia made a $70,000 interest-free loan to her son, Alex, who used the money to start a new business. Alex's only sources of income were $20,000 from the business and $390 of interest on his checking account. The relevant Federal interest rate was 4%. Based on the above information:
a)Alex's business net profit will be reduced by $2,800 (.04 × $70,000) of interest expense.
b)Silvia must recognize $2,800 (.04 × $70,000) of imputed interest income on the below-market loan.
c)Alex's gross income must be increased by the $2,800 (.04 × $70,000) imputed interest income on the below market loan.
d)Silvia does not recognize any imputed interest income and Alex does not recognize any imputed interest expense.
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a.Alex's business net profit will be reduced by $2,800 (.04 × $70,000) of interest expense.
Savers profit by rate climbs and endure a hit when the Fed chooses to cut them. That is on the grounds that banks ordinarily decide to bring down the annual percentage yields (APYs) that they offer on their customer products —, for example, savings accounts — when the Fed cuts interest rates.
Step-by-step explanation
Savers profit by rate climbs and endure a hit when the Fed chooses to cut them. That is on the grounds that banks ordinarily decide to bring down the annual percentage yields (APYs) that they offer on their customer products —, for example, savings accounts — when the Fed cuts interest rates.
