question archive David saves $3,000 of his Year 1 income to spend in Year 2
David saves $3,000 of his Year 1 income to spend in Year 2
Subject:BusinessPrice: Bought3
David saves $3,000 of his Year 1 income to spend in Year 2. The interest rate is 12 percent, the tax rate that applies to interest income is 25 percent, and the sales tax rate is 10 percent. David spends all of his available funds in Year 2.
a) :-How much will David pay in taxes on his interest income in Year 2? [Please present your answer in Year 2 dollars, not present value/Year 1 dollars.] Rounded to the nearest dollar,
b) :-how much will David pay in sales taxes inYear2? [Please present your answer in Year 2 dollars, not present value/Year 1 dollars.](the correct answer is 297)
c) :- If David increases his consumption in Year1 and therefore decreases his saving for Year 2, what will happen to his present value lifetime tax burden? a) It will increase. b) It will decrease. c) It will stay the same.
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