Question

Calculating the Real Investment Value

Amber invested in a new software company that has done very well. This year, she made a $10,000 profit before taxes. She also had to pay a $500 fee to her broker. This fee can be subtracted from her profits to lower her taxable income. Given Amber’s income, her federal tax on this investment is 20 percent, while the state tax is 5 percent. The rate of inflation is 2%. With all of this in mind, what is the real value of the profit Amber made?

Amber paid
in taxes to the federal government on her investment.

She also paid
in taxes to the state government.

The inflation on the amount remaining after taxes and fees is
.

The real value of the profit Amber made is
.

Answer 1

Amber paid $1,900.00 in taxes to the federal government on her investment.

She also paid $475.00 in taxes to the state government.

The inflation on the amount remaining after taxes and fees is $142.50.

The real value of the profit Amber made is $6,982.50.