A taxpayer is in the 28 percent tax bracket and invests it in a San Diego City Bond paying 7 percent. What taxable interest rate will provide the after-tax return?

Question

I don't understand the formula, so can you show me how it's calculated,please.

Answer 1

You would pay 28% which means you will be able to keep 72% (100-28)

You will then have 72% of 7%

or .72 times .07 will give the correct answers.

(1-.28)(.07) is the specific formula. Can you come up with a general formula?