Suppose an individual’s income for 2015 consisted of $42,000 in wages, $200 of qualified dividends, $500 in bank interest, and a $1,200 gain from the sale of stock purchased in 2010 and sold in 2015.
a. Calculate this person’s federal tax liability if their filing status is single.
b. If this person inherited $10,000 from a rich uncle, should he/she invest in a one-year bank certificate of deposit that pays 4 percent or a one year Massachussetts State bond that pays 3.2%?
c. Suppose the $10,000 inheritance was instead invested in a three year certificate of deposit that paid a 4.4% nominal annual yield, compounded quarterly. How much would this person’s $10,000 investment be worth in three years?